In this article, I want to share with you a quick story that helped me to understand the value of proper, as well as customized planning. Hopefully, you’ll see the same points that I was able to see and learn some valuable lessons.
A several years ago, I successfully completed the Las Vegas Marathon. Shortly after the event, I returned to teach the case study section of the Wealth Structuring Institute seminar that we were conducting that afternoon. As you can probably imagine, I was in a fair deal of pain.
You may not be surprised to hear that someone might be in pain immediately following the running of a marathon. In fact, you may be thinking to yourself, “What kind of idiot goes out and runs 26.2 miles and then decides to come teach a seminar thinking that he won’t be in pain?” Well, let me address that point and illustrate a mistake that I made that I see people make far too often when it comes to implementing their financial plans.
Over the past several years, I have run in and completed a total of seven marathons. For the first several events, I ran faster and faster and continually improved my time. Over the last two, however, that has not been the case. In fact, my times in the last two events have been my slowest overall times since my first marathon. Needless to say, this is not something I am overly pleased about.
In an effort to try to improve, I decided that one of the things that might be holding me back was my shoes. As the commercial used to say, “It’s gotta be the shoes.” To try to overcome the perceived hindrance of my shoes, I went to a sporting goods store and purchased a pair of shoes that I had always heard good things about. I thought to myself, “If so many people seem to like these shoes, they must be good.” So I purchased the shoes, ran in them during training runs, ran in them in the Las Vegas Marathon, and posted my worst finishing time since my first marathon.
As you can probably imagine, I was a bit perplexed. How could this have happened when I bought the shoes
that everyone talked about being so good? The answer to that question is something that I want to focus on and use to illustrate a major mistake that I see clients and students making when it comes to structuring their wealth.
When I purchased my new shoes, I didn’t go in to see a specialty store to determine what type of shoes might work best for me and my individual situation. I skipped that part. I had simply heard other people talk about what they thought was good and I decided to adopt their plan rather than a plan that was customized for my needs.
In my running, the shoes that I bought were not designed to fit my particular foot structure which caused severe blisters to form on my foot. This in turn caused me to alter the way I ran thereby causing soreness in my illiotibial band.
This soreness continued from mile 10 on which had the effect of slowing me down significantly. The overall result was a disappointing finish time which caused the overall event to be less enjoyable than I had planned.
After having time to reflect upon the race and what may have gone wrong, I realized that I had made the same mistake that I have seen made by countless individuals who I have worked with as clients and students. Far too often, I will encounter folks who have heard from someone that they really need to set up this or that type of legal entity since it’s the best.
If you’ve paid any attention at all to my teachings, you will know that I always say that there is no such thing as the best legal entity. What you need is a blending of legal entities structured in a way to help you accomplish the three key objectives of asset protection, estate planning, and tax reduction. While these three goals are paramount for anyone serious about structuring their wealth, different people will find themselves with different levels of need in each of these areas. As such, it is crucial that you take the proper steps to correctly structure yourself.
The key is to have yourself fitted for the plan that best fits your individual needs rather than trying to find a plan based upon what others have told you about. When someone comes to me and says that they would like to establish a Nevada corporation, I always ask them why they want one. Seldom do I hear the correct answer as to why the entity is desired. Even when I hear the correct answers as to what the entity might do for them, it is often not the appropriate entity for their particular situation.
This is not to say that a Nevada corporation or an LLC are not good entity choices. As you know, I am quite fond of Nevada corporations and LLCs when used properly. However, it all goes back to determining the proper fit for your particular structure. Just as with my running shoes, some entities may be wonderful for other people but not a good fit for you.
The bottom line is to work with professionals to determine the proper structure rather than getting caught up in the hype of other people’s recommendations. This is something that is easily overcome but can certainly pose a stumbling block, even to those who ought to know better.
