Monthly Archives: September 2015

Doctor Asset Protection

Protect Your Assets With a ‘Family Bank’

One of the biggest drains on your account may not be the market but rather family requests for money that may never be repaid. Preserve assets—and emotional health—by setting up a “family bank” where loan requests are reviewed, approved of, and monitored.

Left with a sizable portfolio, Doctor Smith thinks her financial future is secure. Little does she realize that one of the biggest threats to her assets is not the markets and not her health, but her own loving children, who think she has cash to spare. One by one, they quietly approach her for loans that will never be repaid. The guilt she feels from turning them down is worse than the fear created by the draining of her assets, but what’s a mother to do?

One possible solution in this familiar—and for most people, it is familiar— scenario might be for Doctor Smith to informally set aside a reasonable portion of her portfolio in a separate account and consider it the family bank. Although the amount she uses to seed this account will depend on her financial situation, she should remain cautious regardless. This account will always be registered in her name, just as her portfolio is now, but the expectation will be that these funds will be available to help her family from time to time. Her children may request a loan from the family bank at any time, using a more formalized process; a bit different than hitting up mom for cash while she’s cradling her first grandson in her arms. By adopting a few basic ground rules, you can forestall years of emotionally taxing personal and family stress.

Written loan request

Anyone desiring to borrow money from the family bank must draft a written request for the loan. The request should identify the following items:

  • The amount of the loan requested.
  • The repayment schedule desired. Hopefully, this will be expressed as a specific amount over a fixed period of time. In some cases this might be a bit more vague, such as, “I’ll repay it as soon as my house/boat/car is sold,” or “Once I get a new job, I’ll begin to make payments.”
  • The intended purpose for the loan proceeds. This needs to specify what the money will be used for (debts, education, acquiring a house or car, etc.).
  • A summary of any other outstanding loans from the family bank. This should include any existing loans made directly by Mom before the family bank was established. In fact, it is a good idea to address any existing loans to family members, whether current or in default.

Tough love

It can be emotionally difficult to request a signed promissory note from a family member, especially a child. It may be even harder to enforce such a note if the child defaults. The signed promissory note creates a needed formality, with the expectation for repayment that often does not exist with family loans. Another asset protection strategy may be to request that if the borrower is married, the spouse must sign the note as well. It is amazing how this stipulation can cut down on frivolous requests.

Don’t be afraid to ask for help

Make sure you keep an open line of communication with your financial advisor. As in most financial relationships, the benefits of transparency and accountability should never be underestimated. While you should feel comfortable making decisions as the director of your own family bank, there is real value to keeping your financial advisor well in the loop. If you choose to do so, you can even appoint your financial advisor as chief executive, while still retaining full veto power. By handing over the burden of loan approval to your financial advisor, you can keep emotional and transactional relationships with each child exclusive, while still creating a mechanism to help out. If the directors approve any loan that you don’t care to make, you have the choice not to distribute the funds from your account.

In many cases, the children will simply choose not to request a loan from the family bank when it involves this level of disclosure. And in the case of younger members who have not yet been able to establish a credit rating, or a sister just emerging from a divorce, access to funds via the family bank may be a tremendous advantage for getting on sound financial footing. After all, isn’t this what families are for?

Fairness is key

As a doctor, there is usually no real fear that the money might run out; rather, the issue is one of maintaining a sense of fairness for those members who would be eligible to request a loan. Another benefit is that the family bank as a practice offers valuable lessons to children of all ages.

The family bank essentially puts the pressure appropriately on the borrower and removes you from the process of approving or monitoring the status of a family loan. It also forces a level of accountability among siblings or other family members that might be uncomfortable for you alone. This accountability often leads to a more professional level of interaction among siblings. Coupled with the fact that you retain full control over your accounts at all times and have the right to ignore any recommendation for making a loan, a family bank could be a real win-win for you and your family.

Copyright © 2012 by Horsesmouth, LLC. All Rights Reserved.

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Advisory services offered through Larson Financial Group, LLC, a Registered Investment Advisor.
Securities offered through Larson Financial Securities, LLC, member FINRA/SIPC.
Larson Financial Group, LLC, Larson Financial Securities, LLC and their representatives do not provide legal or tax advice or services.  Please consult the appropriate professional regarding your legal or tax planning needs.
The views and opinions expressed in this article are those of the author, are for educational purposes only and do not necessarily reflect the official policy or position of Larson Financial Group, LLC or any of its affiliates.


Asset Protection for PhysiciansWhile estate planning focuses on preventing many different wealth-eroding factors (taxes, prodigal spenders, poor trust structure, divorce, and others), for this article’s purpose, asset protection is specific to wealth erosion caused by a liability claim or bankruptcy.

With the advent of Internet research, asset protection has become a major concern for physicians. Today it is possible that for less than $1,000, others can easily uncover the following information about you: (68)

  • Your annual income and the income of your spouse
  • Your assets
  • Your social security number
  • The balance in your accounts
  • The location of your accounts, including account numbers and safe deposit boxes
  • The investment positions you own, and the trades you have placed in your accounts
  • The equity in your home
  • Your mother’s maiden name

Based on the above information, a plaintiff’s attorney can quickly tell if you are a good candidate to be a defendant in his lawsuit. If you have deep pockets, great income, and a lot of assets, it is far more likely you will find yourself on the wrong end of a lawsuit. On the other hand, if a little research uncovers that you only own a home with little equity and few other assets in your name, you are much more likely to avoid the unpleasantness and expense of a lawsuit. We are frequently asked about asset protection in specific relationship to medical malpractice insurance issues. As a result, we have compiled the following data to show the trends and breakdown of near-term malpractice claims history by state. (61)

Unfortunately, some physicians erroneously consider the need for asset protection only in the context of medical malpractice. Although malpractice claims are a legitimate concern in several high-risk states, our experience is that malpractice should not be the sole focus or main concern. Anecdotally, we have witnessed several physicians sued for frivolous malpractice issues, but we have yet to personally see one lose a dime of their own money to a malpractice claim. However, we have seen several examples where physicians had their personal assets successfully attacked as a result of a claim outside of their medical practice.

We became even more passionate about this issue after a good friend of one of our advisors lost his multimillion-dollar nest egg due to a frivolous injury lawsuit caused by someone else. He was the only one with deep pockets in the vicinity of the event, so the attorneys went after him–and won. This entire family was hit hard emotionally, and his net worth was decimated from $8 million to $350,000. This cemented our opinion that this is an important area of comprehensive wealth management that doctors and dentists simply cannot afford to ignore. (62)

When it comes to asset protection, timing is everything. In fact there are only two time frames: before and after a hint of trouble. Carefully constructed asset protection strategies that are fully implemented before any hint of trouble are much more likely to succeed, and can save you hundreds of thousands, or even millions, of dollars. By “hint of trouble,” we mean before an event occurs that could trigger a lawsuit, or long before it appears that your creditors may push you into bankruptcy. Unfortunately, the same is not true for asset protection strategies initiated after a hint of trouble. Moving assets to avoid existing plaintiffs or creditors could cause major problems, and leave you subject to a claim of fraudulent conveyance. This could cause you to automatically lose your suit; in the worst-case scenario, you could go to jail. This is the key message: the sooner you get started, the more likely you will be able to protect you and your family from losing your assets to litigation.

Larson Financial Group believes the best strategy for physicians who want to protect their assets is to take a two-pronged approach:

Step One:

Avoid situations that put you at risk. In other words, avoid lawsuits in the first place. This could mean avoiding dangerous situations and minimizing risk.

Step Two:

Make it so difficult for plaintiffs to sue you and recover that they don’t bother to go after you in the first place, even if an event does occur. The result: Your assets and your business are protected and prevented from claims if you are sued. In other words, with a carefully drafted plan, your plaintiffs will not have an economic incentive to sue you.

It is estimated that over 19 million lawsuits will be filed in the U.S. this year. (68) The focus of asset-protection planning is to establish appropriate measures ahead of time so that when a lawsuit comes your way, you are already prepared to defend yourself. Many different strategies exist to attempt to protect assets, but the finest are those that do so aboveboard, without trying to hide anything.

We are amazed by some of the verdicts that have been handed out by juries and judges in our own communities, and even more amazed by some of the judgments handed out around the country. Randy Cassingham gives out The True Stella Awards® (64) each year for the most wild, outrageous, or ridiculous lawsuits. He states in his book, The True Stella Awards, (69) “Other times, people view doctors and hospitals more as deep pockets full of money than as partners in responsible health care.”

Ridiculous cases demonstrate that asset protection is important for any physician with substantial assets or income. Asset protection attorney Robert Mintz warns, “Every day in court a sympathetic plaintiff prevails against a wealthy or comparatively wealthy defendant–even in those cases which appear to be absurd, illogical, and utterly without merit.” (68)

You have worked way too hard to see your efforts go up in smoke because they were not properly protected. The biggest problem with asset protection: It is an ever-evolving discipline. Once a strategy is used frequently, an attorney somewhere finds a way to beat it. What works, and does not work, is also different on a state-by-state basis, as every state has different laws to circumvent. To ensure your assets are as safe as possible, it is important to work with an expert attorney who specializes in asset protection to make sure that your plan is up to date with the most recent case law.

Are your assets properly protected?

(61) 2007 Medical Malpractice Crisis States, as determined by the American Medical Association, cross-referenced with information from the 2007 Kaiser Family Foundation analysis of data from the National Practitioner Data Bank (NPDB). States are listed in order of highest average claims first. For further information on the current state of medical reforms: http://www.ama-assn.org/resources/doc/arc/mlr-now.pdf (62) Particulars are altered to protect the friend’s privacy but the story is still very much on point with what happened. (64) Stella Awards® is a registered trademark of This is True, Inc. (68) Mintz, Esq., Robert J. Asset Protection for Physicians and High-Risk Business Owners. Fallbrook, CA: Francis O’Brien & Sons Publishing Company, Inc., 2007. (69) Cassingham, Randy. The True Stella Awards: Honoring Real Cases of Greedy Opportunists, Frivolous Lawsuits, and the Law Run Amok. New York, NY: Penguin Group, 2006.

Larson Financial Group, LLC, Larson Financial Securities, LLC and their representatives do not provide legal services. Please consult the appropriate professional regarding your legal needs.

An Overview of Asset Transfer Strategies

A physician may need to transfer assets for all sorts of reasons. A working knowledge of various transfer techniques can help them determine when it’s appropriate to move money around, and how to manage the tax and legal implications of the process.

Asset transfers are an important part of financial planning. As a physician moves through life, they are constantly acquiring and disposing of assets until that final transfer takes place—the one they’re not around to see.

Tax Deductions for Doctors

Some asset transfers are initiated as a result of a life event or other major decision. Others are suggested by attorneys or financial advisors as a way to better arrange a physician’s financial affairs. Some asset transfers are as easy as handing a tangible item over to another individual. Others are fraught with legalities and should not be attempted without counsel.

Here is an overview of asset transfers—the tip of the iceberg, if you will. Many of the regulations governing asset transfers are state laws, so your best bet is to check with your financial advisor and a good attorney—several of them, actually, in different specialties—who can guide you through the transfer process.

Why assets move

There are lots of reasons why people transfer assets. Here are some of them.

  • Marriage or cohabitation. You want to put a new spouse or partner’s name on the title.
  • Divorce. A couple wants to divide joint property between the two spouses and re-title it in separate names.
  • Buyout (or sale to) co-owner. One of two co-owners wants to own full rights to the asset.
  • Anticipation of incapacity or death. An elderly person wants to put a son or daughter on the title for ease of transfer.
  • Establishment of a trust. There are many reasons for forming a trust; assets must be retitled in order to be transferred into the trust.
  • Establishment of a private annuity. You need income and want to keep assets in the family; assets are sold to family members in exchange for regular payments.
  • Reduction of estate taxes. You may want to remove assets from your estate in order to reduce the amount subject to estate tax.
  • Reduction of income taxes. You may want to transfer assets to a low-bracket family member so investment earnings will be taxed at a lower rate.
  • Medicaid eligibility. You may want to reduce the amount of “countable assets” so that Medicaid will pay for nursing home care.
  • Bankruptcy. You may need to meet the state’s asset requirement laws in order to discharge debts or other obligations.
  • Anticipation of lawsuits. You might need to protect assets from judgments (applicable to people in high-risk occupations, such as surgeons).
  • Gifting. You may want to gift securities or other property to an individual or to charity.
  • Cash or asset exchange. You may want to sell an asset for cash and/or buy a different asset.

Tax and legal considerations

It would seem that if an individual wants to get rid of an asset or if two individuals want to enter into a private transaction, they ought to be able to do it without tripping over a bunch of laws. For smaller transactions, they can. For instance, gift giving at birthdays and holidays would normally be exempt from asset-transfer laws.

In some transfer situations, however, there’s opportunity for tax evasion, taking advantage of people, or exploiting laws that are designed to help the needy. In those cases, certain procedures must be followed. And to make sure they are, the transfer process itself—the physical transfer of title to another person—may be extremely complex and not possible to complete without the help of an attorney, escrow officer, transfer agent, or other intermediary.

Even so, the intermediary arranging for the transfer may not be obligated to warn clients of the various tax and legal ramifications— in some cases he or she may simply be following instructions to transfer title—so it is up to you to know the law—or obtain legal counsel.

Here are a few of the common considerations involved in asset transfers:

Gift tax

If you are thinking about transferring assets to family members to save income or estate taxes or to facilitate transfer later on should be aware of gift tax rules. In 2013, any gift to an individual that exceeds $14,000 for the year ($28,000 for joint gifts by married couples) applies against the lifetime gift tax exclusion and requires the filing of Form 709  for the year in which the gift was made. The gift tax does not need to be paid at the time Form 709 is filed, however, unless the client has exceeded the lifetime gift tax exclusion of $5.25 million in 2013 (adjusted annually for inflation).

The annual gift tax exclusion—the amount that may be given away without eating into the lifetime exclusion—is adjusted for inflation in $1,000 increments. Transfers to spouses who are U.S. citizens and to charitable organizations are exempt from gift tax. Payments made directly to an educational or health care institution are also exempt from gift tax. Property exchanged for equivalent value (as in a sale to another party) is not subject to gift tax. However, low-interest loans to family members may be subject to gift tax. Complicated transactions like these require the advice of an attorney or tax advisor.

Kiddie tax

The practice of transferring assets to children to avoid income tax on investment earnings is less popular now, because for 2013 investment income exceeding $1,900 earned by qualified children is taxed at the parents’ rate. The first $950 is tax free, the next $950 is taxed at the child’s rate, and the remaining income is taxable to the parents. The kiddie tax is also subject to inflation adjustments in $50 increments. It’s certainly possible to get  around the kiddie tax by investing in assets that don’t pay current income—but then what’s the point of transferring assets to children, especially when parents must think about funding college.

Financial aid

The formula that determines need-based aid factors is a much higher percentage of assets when they belong to children (35%) as opposed to parents (5.6%). So the classic financial aid strategy is to keep assets away from children and stash parents’ assets in retirement plans, home equity, and other exempt assets.

What if a child already has significant assets—say, in an UGMA or UTMA account? Is there any way to get them out of the child’s name? Probably not (check with an attorney to be sure), at least not until the child turns 18 or 21 and has the legal authority to transfer property. But by then it may be too late for financial aid, since schools look at the family’s financial picture as early as the student’s junior year of high school. Any parent who wants to maintain maximum financial aid flexibility (and this includes need-based scholarships, not just loans) should think twice before transferring assets to children.


Medicaid is designed for people with few assets who can’t afford to pay for custodial care. In the past, people had to “spend down” to such small amounts that often the healthy spouse was left nearly destitute. This led to rampant asset transfers and big business in “Medicaid planning.” However, the laws have been liberalized in recent years to better protect the healthy spouse, so asset-transfer gimmicks have waned somewhat. In any case, clients contemplating asset transfers in anticipation of applying for Medicaid need to be aware of “look back” laws—60 months for transfers to individuals (with some exceptions if the transfer is to a child under 21 or a child of any age who is blind or disabled) and trusts.


Each state has its own laws relating to how much property a client can keep and still  discharge debts in bankruptcy. These laws also address property transfers in which it appears that the debtor is trying to pull a fast one.

Popular asset-transfer strategies

The main point to understand is that asset transfers may not be as straightforward as you think, and some transfers may have unintended consequences. At the same time, strategies you may not have considered could provide the perfect financial planning tools.

Popular alternatives include:

  • Annual gifting. Every year, give cash or property equal to that year’s gift tax exclusion to each child, grandchild, or any prospective heir to remove assets from the estate.
  • Transferring assets to parents. If you are supporting elderly parents you may want to transfer assets to low-bracket parents who would pay taxes on the income being used for their support.
  • Writing checks directly to educational institutions. Grandparents who are paying for their grandchildren’s education should pay the school directly; during the accumulation phase they should contribute to a 529 plan rather than an UGMA.
  • Trusts and other advanced strategies. There’s no substitute for consulting with an estate planning attorney and tax advisor for individual advice regarding asset transfers that can accomplish specific objectives.

Have Questions?

Larson Financial Group, LLC, Larson Financial Securities, LLC and their representatives do not provide legal or tax advice or services. Please consult the appropriate professional regarding your legal or tax planning needs.

Leveraging Asset Location Strategies for Your Retirement

Provided By Matt Harlow, CFA, Chief Investment Officer at Larson Financial Group

As seen in the Georgia Medical Group Management Association’s Newsletter

Whether your retirement is right around the corner or several years away, it’s important to recognize how the assets in your portfolio are allocated to maximize tax efficiency. Tax efficiency is one of the more controllable aspects of investing, however it should not be the sole consideration when making decisions regarding your investments. A balanced portfolio will allow you to forecast your post-practice income with a greater degree of certainty.

There are 3 types of accounts that you can invest your money in from a retirement standpoint which are classified by how and when they are taxed. Understanding the different rules that apply for these types of accounts will allow you to develop a retirement plan that is commensurate with the desired level of risk that you are comfortable with undertaking.

Physician Retirement Planning

Taxable: Examples of this would be bank/brokerage accounts, trust accounts and holdings in stocks and bonds. Funds would be taxable based on interest, short-term gains, long-term gains and dividends. These type of accounts are preferable for short-term investments because of the liquidity that they offer.

Tax-Deferred: IRAs, 401(k)s and other pension plans are a few examples of tax-deferred accounts. Money in these accounts will grow tax-free but is taxed as ordinary income when withdrawn for retirement. Your tax bracket upon reaching retirement will largely be decided by the current tax rates set by the federal government if you hold the majority of your savings in a tax-deferred account.

Tax-Advantaged: Some examples of tax-advantaged accounts would be Roth IRAs, Roth 401(k)s and investment life insurance policies. Money in these accounts will grow tax free and can be withdrawn tax free during retirement as long as the guidelines for these accounts are followed.

Generally, we advocate that our physician clients keep no more than 50% of their retirement savings in tax-deferred accounts. There are a few different ways you can shift money from a tax-deferred account to a tax-advantaged account. One example is a Roth conversion, also known as backdoor Roth IRA, which allows you to fund a Roth IRA using money that is held in a traditional Roth account. However, in the case of a Roth 401(k), opening one of these accounts will disqualify you from having a traditional 401(k).

Research has shown that tax-efficient distribution of assets can add up to 0.75% to annual net returns. The primary objective of Larson physician financial advisors is to boost the after-tax returns of their physician clients by strategically investing specific asset classes in these different account types. Generally, we recommend holding broad-market equity investments in taxable accounts while holding taxable bonds within tax-advantaged accounts. Doing this generates higher and more certain returns by spreading the yield between taxable and municipal bonds.

Striking the right balance between assets in taxable, tax-deferred and tax-advantaged buckets should allow you to determine what tax bracket you want to fall in when you retire from practicing medicine. Several factors such as inflation, longer life spans and the rising cost of care lead to uncertainty when assessing options for physician retirement planning. However, maximizing the tax efficiency of your investments will allow you remove a major variable from the equation so that you can calculate your post-practice income with more certainty. Minimizing the total taxes paid will ultimately increase the longevity of a portfolio and allow you to keep a greater share of the wealth.


Have Questions?

Larson Financial Group, LLC, Larson Financial Securities, LLC and their representatives do not provide tax advice or services. Please consult the appropriate professional regarding your tax planning needs.

5 Ways to Boost Your Security Against ID and Credit Card Theft

By Bryan Mills

A week hardly passes without news of credit card and identity theft. Here are some security measures you can take, including some you’ve not likely heard of before now. About a year ago, I was sitting down to dinner with my family when I got a phone call from a department store inquiring about my new credit card and recent purchases. I knew right away I had a problem because I’d never shopped at that store. I left my dinner and started my own investigation. I spent dozens of hours tracking the frauds and thefts. I soon learned that five different credit cards had been opened in my name; new debit cards had been issued from my bank; and money had been transferred from my savings and checking accounts. Naturally, I was completely appalled. Now I’m on a mission to make sure people learn from my experiences and consider putting into place new security measures, many of which I’d never known about—and I’m in the financial services business. Here are five ways you can improve your protection against fraud:

1. Create secret “verbal passwords” on your bank and credit card accounts

Verbal passwords on all your bank and credit card accounts will save you time, money, sanity, and future chaos. Everyone enters a numbers-based key-code password when withdrawing money from a bank account at the ATM. Some, though not all, retail stores request an ID when you make a credit card purchase at the register. So why don’t banks require a password when you make a transaction at the teller? Most banks won’t tell you to request a verbal password or phrase to be placed on your bank accounts. This is the most important thing you can do to protect yourself from the fraudsters lurking out there. Here’s how to do it: Walk into your local bank and ask to speak with the branch manager. When you meet with the branch manager, request to speak about your accounts in a private office. Once you are in a closed office, instruct the branch manager to place a “verbal passcode” on all over-the-counter and phone request withdrawals, newly issued bank cards, and even transfers. If the verbal password or phrase is not given, no information or transactions may proceed. I had this type of protection on one of my personal bank accounts. Unfortunately, I didn’t do this on the other one that was scammed for thousands of dollars in cash with a teller at a bank in a completely different state. Most bankers don’t even check the signature card when given an over-the-counter withdrawal request. The verbal passcode or phrase will be your guardian and savior. One last thing: when you are asked to give your verbal password, never say your passcode or phrase out loud at the bank. Ask the teller for a piece of paper when asked for your passcode. Write it down, pass it to the teller and then take the paper back, tear it up, and put it in the trash.

2. Shield yourself from the “magic wand” with an RFID-protected wallet.

While shopping in crowds at the mall can be fun, you can also unknowingly expose yourself to a fraud device known as the “magic wand.” “Wanding” is the process by which all your credit card information can be stolen by a $20 device that is able to read, record, and save it all in an instant. This information is then illegally used to create multiple cards that will be sold without your knowledge and permission. You can stop this scam from happening by shielding your credit cards with an RFID-protected wallet (that stands for radio frequency identification device). These wallets can cost from $30 to $200. These wallets have a built in shield that deflects any credit card reading/skimming devices. Another cheap, quick and useful fix is to wrap your credit cards in tin foil. Yes, tin foil. This may sound crazy but it works. I happen to like a product called the Flipside Wallet. You may check them out at www.flipsidewallet.com

3. Protect your credit file like a pro

If you really want to control you credit file, open an Equifax account at www.equifax.com. Equifax is the best way to examine the accuracies of your credit history and manage your credit future. This service costs approximately $17.95/month. Equifax gives you the power to lock or unlock your credit file. It’s your virtual credit file switch. Once you lock your credit file, no one can open a new credit card account–not even you. If you want to open a new credit card account or receive a bank loan, you have to login to your Equifax account and unlock your file with one flick of a virtual switch. This service also notifies you via email or text when key changes occur to your credit profile and if there is suspicious activity on any of your important financial accounts.

4. Never let your credit card leave your sight

When you’re shopping or eating at a restaurant, think twice before you hand over your credit card for payment. When your card leaves your hands and is out of your field of vision, this is when it can have its information stolen via a smartphone camera or mini card-reader called a skimmer. This type of fraud can happen in the moments you are waiting to get your card back. The best defense is to be present when your card is swiped (funny word, huh?).

5. Avoid making in-store credit card applications

I love to save money, especially during the special promotions and the holidays. Most stores will offer immediate credit and an attractive discount on all new purchases with a new on-the-spot application and approval. Who is handling your paper application once it has been given to the store clerk? This information can be exposed to many unsavory people. If you really want the credit and a special discount, you can call the company’s credit department or fill out an application online ahead of time. This protects you in several ways: The information you have given is with the headquarters representative. The conversation is usually recorded and stored. Once your application is approved and processed, it’s mailed to your home address. This will help keep your information safer. You may have to call a company representative for any in-store or online promotions that may be used with your newly minted cards.

Copyright © 2014 by Horsesmouth, LLC. All Rights Reserved