Zen and the Art of Asset Protection
"What does Zen have to do with asset protection?" the young acolyte asked the senior monk. The old man paused and then replied, "one such as I, possessing nothing to protect, cannot know of such matters. Having no possessions, I cannot be possessed by others."
Asset protection is typically viewed, promoted, and sold as a commodity, a cluster of legal structures, or a bundle of subscription services. This mental view of asset protection is not entirely wrong, but it can still set people up for failure and disappointment. The inadequacy of this approach is like believing that because one purchased a sharp knife and has it hidden in a drawer at home, one is prepared for a gun battle on the street. Mere possession of a particular tool is not the same as having the right tool for the occasion, or being skilled in its use, or being ready and able to deploy it in the moment of need.
Asset protection will require certain structures. At the same time, to be effective the structures must be accompanied with a change both in how we think and in what we do. This commentary on Zen and the Art of Asset Protection focuses on the intimate relationship between mind set and action in designing and using an effective asset protection plan. This playful approach to asset protection will be insightful and helpful for those who have eyes to see and ears to hear. Others may find their time better spent reading something else.
Only those who are truly alive need protection and have the capacity to protect the living. The warrior who fears not death, cannot be defeated.
Breathe
Breath is the defining marker between life and death. Living things breathe. When breathing stops, so does life. Breathing is the first form of virtually all meditation disciplines. It is in the breathe that all that the benefits meditation has to offer are revealed. Both Zen and asset protection begin with breathing.
An effective asset protection plan must breathe. It must have life. It cannot be a static lifeless thing that we put on a shelf. Resources must flow in and out. It must be a dynamic system that changes over time or it fails. Such flows must include some contribution or acquisition of value: revenue, resources, intellect. The flows must adhere to the laws of nature and the universe. Such flows have a natural and regenerative life cycle that either works for us or against us based the degree to which we are in harmony with the way or Tao (我) of things. The dance only works when it matches the music.
To state the matter plainly in less esoteric terms, there is no point in protecting nothing. There must be an asset to protect, and the asset must be profitable, active, money making, and/or increasing in beneficial interest over time. You have to lawfully report and pay all applicable taxes, and do the underlying accounting for this to happen. You must comply with the law of the land. And, the assets being protected don't just stand still in idle stasis. They move. They come and go. One must "attack like water." Asset protection works best when getting rid of the old and acquiring the new is planned and deliberate.
The absence of life, death, is its own protection. Although death is arguably an effective asset protection strategy, it is not an attractive or advisable approach. The price is higher than most are willing to pay, and the benefits suffer extreme depreciation. It is living things that merit and need protection. It is the living that benefit from protection.
Sit
In English, the word "zen" is used to refer to many things that have no direct connection with meditation (such as asset protection). Historically, the word "zen" (禅) is the Japanese pronunciation of the Chinese word "chan", and is an abbreviated form of "zazen" (座禅) which means "to sit" in meditation.
When one sits in meditation, the mind is focused on the object of meditation. When the mind is not focused, it jumps from one thing to another. This undisciplined thought process is sometimes called "monkey mind." Meditation help us focus. No sitting, no focus. No focus, no awareness. No awareness, no mind.
Good asset protection planning requires focus on a few key factors: What are we trying to protect? What are we protecting it from? Who are we protecting it for? Focus on these questions. The type of planning needed is entirely a function of the answers to these specific questions.
Focused and effective asset protection does not jump around. Although attending seminars and learning about ways in which assets may be protected is a very good idea, the point of such learning is to discern what will work best for your particular situation and what will not. Too often, anxious consumers eager to have some kind of protection, try to implement every idea that they encounter with little or no thought to filtering out the distracting and ineffective. This makes them vulnerable to salespeople who have a fixed package for a price, but do not tailor fit effective solutions to specific needs. It also adds unnecessary complexity.
The surroundings in which one meditates can shape the quality of the meditation. Select such surroundings carefully, then sit and focus. Do likewise in adopting asset protection strategies. Filter out the noise and chatter of promotors to identify what is right for what you are trying to protect, and what you are protecting it from. Then focus on just that.
Be Where You Are
One of the best attributes of meditation is that it is location agnostic. One can mediate anywhere, any time. It does not require a mountain top, or a chapel, or sacred space of any kind. It just requires you and your mind. Good asset protection is like meditation. It works anywhere.
Today, business entities can be formed and operated virtually anywhere in the world. Where it the best place? Is one place better than another for asset protection? Sometimes, but not always, and not as often as it may appear. Often, the best place to protect what you have is where you are. In fact, no matter what entities you may setup in places where you don't live or own property, asset protection will never be complete without structures formed where you and your property are at.
For example, if you own a rental property, most of the time the best place to establish the entity that owns such a rental is the state where the property is situated. If rental real estate is owned by an entity from a different state, it can trigger unintended taxes, limit access to courts for protection, increase the cost of compliance, and trigger other unwanted consequences. To mitigate these issues, it will be necessary for the foreign entity to register in the state where it owns real estate. This results in paying two states for the privilege of forming the same LLC, and the LLC ends up being in the state where the real estate is situated anyway. Most of the time, the best place to form an LLC to own real estate is simply in the state where the real estate is located.
Advertisers work hard to make their products feel sexy and cool, even when such products are in fact deadly and will kill you. The tobacco industry figured this out long ago. Asset protection venues use the same tactics. And in fairness, sometimes they are right. But often, the sporty and stylish off-shore trust and LLC may give you bragging rights to your friends, but the cost can be far greater than the protection benefits they afford.
The best asset protection happens where you are at with what you have. Be there.
Transcend Boundaries
Being where you are does not mean staying there. Asset protection often requires you to move. How do you move?
"Attack like water" counseled Sun Tsu in the Art of War. Lao Tsu (as paraphrased by Bruce Lee) said "be like water". Water moves. It runs through cracks and crevices. It surrounds, contains and wears away the seemingly hard and immovable. It can be as hard as ice or ethereal as steam. It flows when not contained, and yet takes the shape of its container. It is by its very nature just what it needs to be in the moment.
The meditative mind occupies the universe like water. It goes everywhere and sees everything. The Zen asset protection plan can call upon the entire range of potential locations and is not restricted to just one.
Effective asset protection will be based on carefully selected jurisdictions that make sense. However, it is crucial not to get stuck there. Even though some business entities arise by statute under state charter, other entities like trusts arise by contract, and do not require "permission" or authorization or license from the state. Effective asset protection will include structures that are jurisdiction independent and able to move when appropriate.
See Things as They Really Are
**assess the real risk, determine what you are protecting, what you are protecting it from, and who you are protecting it for
Less if More
**enough planning, not too little and not too much
On the one hand, asset protection requires a certain level of complexity. Like a series of nested fortifications, protection derives from layered barriers.
Protection comes at a cost. There are at least three costs: 1) the set up cost, 2) the maintenance cost, and 3) the complexity cost. There is a cost benefit analysis embedded into every asset protection plan. Is the protection you are getting worth the cost?
At the same time,
Over time, goals and needs change -- simplify with age
Be the Sword
One of the insights that derives from meditation is that the mind can be located anywhere. The ancient warrior/priest through discipline of the mind and body was able to locate consciousness at the tip or on the edge of the sword. This is called "being the sword". When the samurai warrior is the sword, the two act as one. The sword master does not have to think about what to do with the sword. They simply act together.
**a well structured asset plan can be turned face up in front of hostile parties with the affect of completely defeating them.
**control, not ownership
Mindfulness - No Mind to Know Mind
**Engage professional to worry for you so that you don't have to worry
My Karma ran over my Dogma.
Zen and the Art of Asset Protection