Category Archives: Asset Protection

Strategies to Protect Your Assets Against a Lawsuit

Medical malpractice insurance is something you’ll need as a doctor, whether it comes from your employer or you buy a policy yourself. When it comes to the specifics of which approach to take, there are multiple factors to consider.

One such consideration is something called “damage caps.” There are a few select states that have place a cap on all forms of damages in medical malpractice cases, including compensation for the costs of long-term medical care and disability. So it would make sense to only cover yourself up to the cap amount with your policy, right?

Not necessarily. Most states that have caps in place only cap non-economic damages, such as pain and suffering. There is rarely a cap on economic damages, so you’ll still likely want to cover yourself for more than the cap amount.

In terms of policy, there are two main forms: Occurrence and Claims Made policies. Both have advantages in different situations.

Claims Made policies are terrific for situations where there is a lot of turnover, or uncertainty as to how long the policy will be needed. Occurrence policies can be beneficial with long-term employees.

You have a vested interest in your medical malpractice coverage and you should know the carrier and coverage limits that are in place, regardless of who pays the premiums for the policy (you or your employer). To figure out what levels of coverage you need, talk to your insurance broker to create a plan that fits your needs.

Lastly, there are ways to protect yourself outside of medical malpractice insurance. Continually work to improve your communication skills and bedside manner. A healthy relationship between providers and patients and managing expectations go a long way to reduce blame when something goes wrong.

Is your medical malpractice coverage in a good spot? We can talk through your strategy together.

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.
Professional liability services offered through MedInsure Group, LLC, a Larson Financial Group affiliated company.

The Importance of a Sound Asset Protection Strategy

Let’s say you’ve got your retirement strategy down. You have an idea of how much you’re saving, the ideal age you’re retiring, everything is planned out. Suddenly, you are involved in a fender-bender and suddenly you’re looking at a lawsuit. Are your assets protected, or is there a gap in your insurance coverage?

Accidents can start as small as swerving to avoid a squirrel crossing the road and quickly build to a lot of damage if other cars or pedestrians are involved. In these cases, insurance companies and attorneys could target you, as doctors typically have a variety of assets, whether it’s a savings account, equity in your home or future earning ability.

Regardless of whether you’re covered or not, don’t fall victim to a common mistake: letting your coverage lapse or not updating your plan. As you go through changes in income growth as you progress in your career, make sure you make it a priority to re-evaluate your coverage as you go.

Another good idea is to talk to an agent to discuss total coverage, rather than shopping for coverage at a policy level. Consolidating your coverage with one company can help keep your support consistent and could even save you money.

If you’re worried about your coverage, or need a place to start, consider having a chat with your insurance agent. Talking through your lifestyle and assets can help your agent find the right coverage for you to keep you protected from a broader range of threats. You can also talk to your agent to easily change or update your policies, should your needs change.

Are there gaps in your insurance coverage?

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.

Professional liability services offered through MedInsure Group, LLC, a Larson Financial Group affiliated company.

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.

Have Questions?

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.

Beat a Lawsuit Before It Begins

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.