The Most Common Asset Protection Mistakes I See Physicians Make
As a successful physician, you’ve spent thousands of hours learning how to do your job well and create a business that benefits the patients you serve—as well as your family and yourself. While it’s easy to focus on the great income your profession affords you and your ability to contribute to your investment accounts, you also need to consider the perils that come with your career. The sad reality is that as a doctor, you are at a heightened risk of being sued. I frequently tell my physician families that it’s not a matter of if you will get sued, but when! Current surveys of physicians suggest that one in three physicians will be sued during their careers. Under the new change of venue laws and the profitability of medical malpractice suit advertising, I believe that each physician has a more than 75% chance of being sued. This situation is even after physicians practice CYA with EMR documentation and referrals.
While we can’t change society to become less litigious, we can implement some protective measures so that the fruits of your labor aren’t lost or lessened because you neglected these essential asset protection measures. Here are four key mistakes I often see physicians make when it comes to shielding their assets.
Failing to Plan
Just like you need to plan for your retirement, you also need to create a proactive asset protection plan that covers various aspects of your financial life. Simply having an emergency fund, a great income, and some money set aside in investment accounts isn’t enough in your situation.
How should your investments, real estate, vehicles, and other assets be titled? Should your business be structured as an LLC or a Sub-S? How do you erect multiple barriers to mitigate the damage of a potential lawsuit or judgment against you or your business? With the help of a qualified lawyer, a CFO, and maybe a financial advisor, you can devise a comprehensive asset protection plan that takes into account these questions and more.
Not Having Adequate Insurance
Insurance is a key part of protecting yourself, your business, and your family. Without the proper type of insurance, you could face a dramatic loss of income or assets that would make your financial life much more difficult and stressful. The specific type of insurance that is best for you will depend on your circumstances, but it’s wise to at least consider some type of disability insurance if you can’t work, life insurance if you or a key employee passes away, and the maximum comprehensive malpractice insurance to help shield against claims on you.
Additionally, umbrella insurance can be a useful tool to add additional coverage that can limit significant financial losses. Lastly, as your business grows, your insurance needs grow with it. Once you address your insurance needs for your present business, you should review the coverages regularly so you can make adjustments as necessary.
Not Segregating Assets
Even though you might be the owner of a small business, that business is still a separate and distinct entity from your personal assets, and it needs to be treated as such. Not only will that help you with your accounting and preparing your taxes, but it will also safeguard your personal assets should a claim be made against your business. If you forget to keep business and personal assets separate, or commingle, it could put them in jeopardy if a judgment goes against you.
In the same vein, you must correctly title your assets so they aren’t at risk of an unjust seizure. For instance, having your car titled in both names (if married), could increase the risk of having your car being included in a potential judgment if you are in an accident. Almost all the families I meet with have their accounts registered as JTWROS. That registration allows creditors to take up to ½ of your assets. Your IRAs can also help you shield your assets, but they need to be correctly titled as well.
THE most important asset protection you can have for your assets is an ERISA backed 401k, 403b, or defined benefit plan. Setting up an investment LLC could also provide a significant barrier to unjust seizure.
Ignoring Estate Planning
Estate planning typically involves considering whether and how to create a trust, will, and powers of attorney for healthcare and financial decisions if you aren’t able to make those decisions on your own. However, in the case of a business owner who is at a higher risk of being sued, there are additional components that arise in crafting your estate plan.
For instance, should you put your life insurance in your trust? Doing so would shield it as well as avoid having to pay estate taxes on it. How should you structure your personal bank accounts, investment accounts, and retirement accounts? Who should be the primary beneficiary and the contingent beneficiary? Again, we can’t answer these questions in a blog post, but they are important questions to ask if you want to protect your assets and your family’s interest in the case of an unfair lawsuit.
Are Your Assets Protected?
If you’d like to avoid these same mistakes so you can look to the future with peace and confidence, we think we may be able to help. We can work with you to create a comprehensive asset protection plan that takes proactive steps to preserve your hard-earned assets. To schedule a complimentary consultation, call us at 215-393-0700 or email us at email@example.com to get started.
Derrick Handwerk is Family Chief Financial Officer at Handwerk Consulting. His firm offers a variety of financial planning services for physicians and senior medical professionals in the state of Pennsylvania. With 25 years of experience owning, managing, and consulting for privately held businesses and helping medical professionals successfully work toward financial security, Derrick prides himself on maintaining the highest level of client service and approaches his families with integrity. He loves providing clients confidence knowing he’s watching over their financial life like a hawk and is gratified knowing he’s helping change their lives for the better.
Derrick received his MBA from Lehigh University in Bethlehem, PA, and was nominated as a Martindale Business Scholar. He has also been certified as a Certified Wealth Strategist® and received his Wealth Preservation and Asset Protection certification from the Wealth Preservation Institute. He has written hundreds of articles, spoken at numerous conferences and has appeared on several TV shows. Outside of the office, Derrick enjoys spending time with his family at his vacation homes, playing golf, and dining out. To learn more about Derrick, connect with him on LinkedIn.
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