The cultural perceptions surrounding physicians tend to make them especially vulnerable to litigation. There’s no time like the present to ensure you have a proper asset protection strategy in place. In this year’s edition of Curi RMB Capital’s INVESTED Magazine , Jason Largey, Wealth Strategist, outlines six asset protection strategies for physicians and medical professionals to use as a starting point.
In a litigious society, wealth can invite risk. When a creditor or potential plaintiff knows their adversary is wealthy, the prospect of seizing those assets can be a strong motivator.
This risk is particularly acute for professionals in high-liability fields, such as medical practitioners. However, you don’t need to be a professional to be at risk; anyone who accumulates significant assets can become a target for those seeking to recover financial or emotional damages.
Ideally, individuals should begin protecting assets when they start accumulating wealth. This typically occurs after they complete their education and training, at which point, a professional such as a physician might join a medical practice. When valuable assets begin to accumulate, it is crucial to ensure that they are correctly titled, and to consider what types of entities might limit liability from potential creditors.
These six strategies are common starting points for at-risk individuals:
Asset protection is one component of risk management within a financial plan. What works for one person may not work for another. Each financial plan developed by our advisors is tailored to the individual, a process that involves understanding the goals and motivations of the individual or couple, executing tasks in a timely manner, and regularly reviewing and updating the plan.
Safeguarding assets can come with trade-offs. One concern we often hear regarding certain asset protection strategies is that the asset owner is hesitant to give up full control of the account, as may be required when establishing multi-member LLCs or irrevocable trusts. These arrangements often involve registered agents or trustees who act as gatekeepers to potential creditors. Additionally, there are costs associated with hiring attorneys to create and implement these entities and tax professionals to comply with reporting requirements.
Implementing strategies for personal asset protection requires regular review of your financial plan and a comprehensive understanding of state and federal laws and regulations. Your Curi RMB Capital advisor can help you assess your risk level and make a plan that’s right for you. If you have questions, I encourage you to reach out to a member of our team to start a discussion today.
Key Considerations
Fraudulent Transfer Doctrine
Don’t wait to protect your assets until legal action is taken. Attempting to transfer or restructure assets after a claim has been made is known as the “fraudulent transfer doctrine.” In most states, if someone transfers assets as a gift or to an entity for protection purposes after a lawsuit claim is made, the plaintiff has the right to reclaim those assets. It’s vital to develop and enact an asset protection plan before any potential creditors emerge.
Federal and State Exemptions
The most powerful forms of asset protection are often federal or state exemptions. For instance, 401(k) or 403(b) accounts governed by federal ERISA laws offer absolute protection from creditors. Another example is the homestead exemption, which shields equity in one’s primary residence from creditors. The extent of this protection varies by state; in some states, it is absolute, while in others, it only covers a limited amount of home equity.
Afterword: Interested in reading more pieces like this from the Curi RMB Capital team? Check out the full edition of INVESTED Magazine here, for other timely and relevant content for investors and business leaders.
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