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TRUMP UNIVERSITY WEALTH BUILDING 101

Layering an Asset Protection Plan

Now that you understand some of the asset protection benefits of individual
business entities, you might be anxious to put all of your assets into one
entity—but hold on. In my experience, using multiple entities is the smart way
to go. To put a sound asset protection strategy into place, it’s smart to “layer”
your entities to afford your assets maximum security.
What does layering mean? Whenever I explain this concept, I like to use
an analogy you’ve probably heard. It’s not smart to put all your eggs in one
basket because, if you lose that one basket, you lose all your eggs. The process
of layering your business entities to maximize asset protection is roughly the
same. If you set up a legal business entity and are sued, the judgment holder
won’t be able to touch your personal assets. They will, however, be able to
reach the entity’s assets, so if you put all your “eggs” into that one entity, you
will have a huge hole in your asset protection fortress.
How many entities should you use? That depends on these considerations:

• How much of your total net worth is the asset or assets do you want to
protect?
• How much equity do you have invested in the asset? As an example,
say you have three rental properties, and all three are fully mortgaged.
In this case, there would be little harm in placing all three in the same
entity because, if the entity is sued, you haven’t lost that much (except
for rental income). If, however, one property has a lot of equity, then
it’s smart to put that property into a separate entity.
• How do you use your assets? Are one, or more, high risk? Say you
have three businesses: an ice cream stand, a flower shop, and a dynamite

factory. Which business do you think has the greatest chance of being
sued? Of course, the dynamite factory. That asset should be held in a
separate entity.

To summarize at this point: You can create multiple entities to hold your
assets. In addition, there are these strategies:

• Use more than one entity to own a single business . Say for tax reasons that
your accountant suggests that your business should be a limited part-
nership. As you’ll recall from our earlier discussion, in every limited
partnership there is at least one general partner who is personally

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