Asset Protection for Physicians. A Simple Primer.
In most states, asset protection can be provided through pension plans and, in many cases, IRAs as well. However it is important to check the current statutes as many states have amended their laws regarding asset protection. Remember after the Simpson trial, the Goldman family received a $38 million judgment against O.J. Simpson? Even though OJ had nowhere near that money he did have $3MMin a oenione plan. However, due to the fact that it was INSIDE a pension plan, access was unavailable to them or any other creditors. Yet, O.J. was still able to provide for his standard of living. (Of course now being in prison the point loses some of its oomph.)
It’s important to note that there are multiple levels of asset protection planning, from simple to complex, from domestic to off-shore. O.J. chose the easiest without realizing it. The qualified plan. Most states protect the balances of qualified plans from all forms of creditors.
Asset protection planning may start with simple steps. Life insurance and annuities are effective vehicles for the savvy physician who wants to combine asset protection and have assets “warehoused”, or stowed away for a rainy day, with virtually no limit on the amount that can be protected.
The next step up is to create Family Limited Partnerships or LLC’s where a doctor can place assets he wishes to protect out of his or his spouses name into an entity which will add a significant increase in protection.
Again, the LLC or partnership serves as a “warehouse” for the assets, and is protected in the face of a judgment. The doctor cannot withdraw the assets without them being made available to creditors, but family members may be able to make protected withdrawals, depending on the structure.
At a higher level still, a doctor may use a domestic self-settled trust. This is typically set up when asset protection is very important to the physician but he or she does not want to move assets offshore.
The highest level of asset protection is realized by using an offshore trust. However, most people prefer not to expatriate assets and allow them to be “run” solely by an offshore trustee. One complex plan makes use of a foreign “venue” but still keeps assets “domestic” creating a 99.99% effective protection plan.
There is a lot more to this asset protection game. Physicians should consult with an asset protection attorney if they are concerned with the potential for runaway litigation, or would just like to learn about the available options regarding asset protection for their particular situation.