Where Ultimate Asset Protection is And How To Get It

Where Ultimate Asset Protection is And How To Get It

Being an entrepreneur is such a weird thing.  It’s a blessing and a curse all at once. 

It’s a curse because it is a lot of hard work. It’s all about hustle. 

It’s a blessing because it pushes you to become someone that I have never thought possible.

We were at Grant Cardone’s 10x Growth Conference in Miami this past weekend. Yep, even though I don’t agree with his concept of spending on a jet so that he doesn’t have to pay IRS, this growth conference stretches our view and horizon for our businesses to a new different level.

Making the most out of our 10x growth conference – learning and hanging out with clients and liked minded entrepreneurs 

We’re always able to achieve a lot more than what we think we can, whether you believe it or not.

Growing is not for everyone.  Growing requires a lot of hard work.  Growing requires a lot of planning. Growing also requires system process and implementation.  Growing your businesses and portfolio also requires personal growth. 

Some people read one book a month. Some people read one book a week.  Then there are those who read one book a day. 

At Christmas, I ordered 4 books for myself to read.  It’s the beginning of February, I finished reading 2 of those books and I also completed one book on my Audible program. I thought I was doing great, but there were so many people ahead of me.  😉

It’s hanging out with these people that inspire you to move forward, achieve something bigger, far bigger than what you think you can. 

It’s those moments I realize that I’m playing too small. 

2019 will be a big year in our businesses – I have no doubt.  

If you are not doing something to challenge yourself, let me play a little game with you. 

In my son’s pre-school, at the beginning of the school year, parents would be handed a long piece of silk rope.  We, as parents, are supposed to write down what we want our kids to achieve at the end of the year.  The teachers would then hang up these silk rope in the middle of the classroom and we only got to see them at the end of the year. 

Last year when Bruce was 2 years old, I wrote down – “Put on his clothes all by himself without help”. 

I completely forgot about this incident. 

It wasn’t until the end of the year, we got this piece silk back.  Sure enough, he was able to put on his clothes mostly by himself. 

Let’s play this same game with you. Let’s all set ONE goal for ourselves this year.  Whether it is from reading one book a month, to taking a walk everyday to exercise, write something down on this silk, or a piece of paper, hang it up somewhere, and at the end of this year, we will open it up at the end of the year!

Let’s move onto this week’s topic – asset protection.

Many people setup corporations for asset protection purpose. Presumably, a corporation is a separate legal entity.  A separate legal entity can be sued on its own.

But what if you already own some properties and/or businesses in your personal name?  When you buy your future properties in the corporation, would the corporate owned properties be protected if you get sued personally?

Unfortunately, the answer is no.

This is why some people choose to set up a family trust to own the corporations that hold the properties.

Family trust means you do not own the corporations and properties personally.

Family trust means the beneficiaries will eventually own everything within the family trust.

Family trust means …if you get sued personally, your creditors will not have hands on these assets owned in the trust because assets don’t belong to you.

Like anything else in this world, there’re pros and cons.

Here’re a high-level analysis of having a family trust.

Benefits of setting up a family trust:

  • Ultimate protection:  if you get sued personally, assets held in family trust are protected.
  • You can pass your portfolio to your children in a tax efficient way.
  • If you own a qualified small business within a family trust, you may be able to save more taxes by taking advantage of the life time capital gain exemption of the beneficiaries.

Downside of setting up a family trust:

  • Annual filing cost applies and starts from $1K and up
  • Setup cost can be high, ranging from $2K plus HST and up (can be as high as $10K) depending on how complicated your situation is
  • It has a 21-year life.  This means that by the end of the 21st year, you will have to distribute the asset to the beneficiaries.  If your kids or your beneficiaries or you are not ready to give everything away yet, this can be a problem.
  • No immediate tax savings.  You’re doing it for asset protection and passing your portfolio to future generation purpose.
  • Potential problem in getting financing:  some lenders may not want to

So… is this for you?

If you are interested in finding out more about corporation and family trust in real estate, I’m going to speak at the February iWin monthly member event. January event was sold out in 2 days with 70 people on the waitlist. 

Until next time, happy Canadian Real Estate Investing.

Cherry Chan, CPA, CA

Your Real Estate Accountant

P.S.   I have not spoken about corporation setup outside of Rock Star membership in the last two years.  If you’re a Rock Star member, register at the Rock Star class on your member site.  I’ll be speaking there to members in February, March and April.  😊

P.S.S.  I have been sharing some tax tips via videos on my business Facebook page. Give us a like using this link so you can see all our tax tips videos on our site.

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