Three Ways Physicians Can Shield Personal Assets From Lawsuits

Three Ways Physicians Can Shield Personal Assets From Lawsuits

Commentary on MD Magazine article by Trey Smith

Lawsuits against medical professionals are commonplace, and if physicians haven’t taken steps to protect their personal assets before a claim is filed, they could be at great financial risk, Trey Smith, a private financial advisor at SunTrust Investment Services, writes in MD Magazine.

Protecting Assets While Saving on Taxes and Estate-Planning

There’s an assumption among physicians that setting up a corporation can protect their personal assets from creditors or judgements, but this isn’t always the case, according to Smith.

It is far better for doctors to structure their assets in other ways that will not only provide some protection, but save on taxes and provide some estate-planning, he writes.

Getting local advice by state is key, however, since state asset protection laws vary, according to Smith. But there are three general categories that can help provide a protective structure regardless of where a doctor practices, he writes.

Retirement accounts can shield assets from creditors and lawsuits in the form of 401(k)s and IRAs, and have the added benefit of offering a tax advantage as funds in these accounts grow, according to Smith.

IRA assets can be exempt for up to $1 million depending on the state, while ERISA-qualified 401(k)s have limitless protection from claims, he writes.

There are limits to yearly contributions and, to avoid a 10% penalty, withdrawals can’t be made until the age of 59.5, according to Smith.

It’s worth investigating how a particular state treats SEP IRAs, designed for small business owners such as doctors, he writes. Likewise, state laws vary on Roth IRAs and IRA rollovers, so it’s prudent to seek advice from an expert, according to Smith.

Then there’s asset-protection trusts. States like Alaska, Delaware, Rhode Island, Nevada and at least 12 others allow even out-of-state residents to open such trusts, which can be used for assets like real estate, life insurance policies, cash and securities he writes. Unless there’s proven fraud, claims can’t touch them, according to Smith.

Annuities and life insurance policies, especially in Texas and Florida, are another way to protect assets, but they must be set up far in advance of a claim, he writes.

There are fixed and variable annuities that require a lump sum at the time of setup and then provide a steady flow of income, while longevity annuities start these payments later in life to supplement long-term care if needed, according to Smith.

There are fees and provisions that can make annuities expensive, however, and they are not exempt from income tax, so it is best to speak to a professional, he writes.

Source: MD Magazine

Posted by: The Trust Advisor

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