The Problem with Joint Bank Accounts

Here’s an idea that sounds better than it is: Put children’s names on the parent’s bank account. That way, children can sign checks if parents can’t pay bills when they become ill. When the parents pass, the money goes directly to the children with no court involved. Simple.

Simple does not mean good, however. Joint bank accounts are owned equally by all who are named on the account. All can spend without question. You may not believe that your children would take your money without permission – but what if that child might be going bankrupt, is in a bitter divorce, or is sued in court?

In one bad case, mom went into the hospital and a son on mom’s account saw his chance to go on a spending spree. It took six years of hard-fought litigation, and many thousands in legal fees, for his siblings to recover just a small portion of the misappropriated money. The rest was gone for good.

It is smart to designate a person to pay your bills when you can’t, so get a lawyer to draft a good power of attorney for you. This is much safer. Good power of attorney also permits your agent to stand in your shoes if you plan to qualify for Medicaid, or to file your taxes, or to sell a property if need be. With a power of attorney, you can designate only people whom you trust to take care of your finances responsibly when you can’t.

Then, for a very simple and no-cost way to give money after you pass, you can choose your beneficiaries with a “payable on death” (POD) designation at the bank. This keeps your name, only, on your account while you are alive, and it instructs the bank to convey your money to your beneficiaries only on your passing.

The best way to resist temptation is to avoid the opportunity in the first place.

If you have any questions on sharing financial information with your loved ones, please contact us for a consultation.

Estate Planning for Military Families

Estate Planning for Military Families

No matter the time of year, it is always a good opportunity for members of the military and their loved ones to consider setting up — or revising an existing —estate plan. Military families need to consider special estate-planning issues that others do not. This is particularly true when one or more family members are deployed overseas. Beyond this, members of the military have access to special benefits and resources. This can become complicated and, for this reason, it is important to seek special help if you are a military family.

Whether you are just starting your service in the military or have been serving for some time, consider the following common factors that may be important in your estate planning.

Factors to Consider

Estate plans should be customized to each person’s particular circumstances. In your estate planning, you should consider whether:

  • You own real property and, if so, if it is located in different states;
  • You are married;
  • You have minor children, or children with special needs;
  • You have money set aside in 401(k), IRAs, or thrift savings plans;
  • You plan to give to charity; and
  • You are moving multiple times across states or to different countries.

Estate Planning Necessities

There are many benefits offered to military families that can help with estate planning. These include:

Life insurance – Life insurance is an important part of an estate plan intended for those who are financially dependent upon you, especially if you are facing deployment. Active-duty members have access to low-cost life insurance for themselves and their loved ones from Service Members’ Life Insurance Group. More information can be found on the Department of Veterans Affairs website. When examining your life insurance, work with us to make sure that the beneficiary designation works the way you expect.

Will – A will is a crucial document outlining to whom and how you want your property distributed at your death. It also allows you to name who will administer your estate and specify who will care for a minor or special needs children.

Trust – A trust is a separate legal entity that can hold property and assets for the benefit of one or more people or entities. Similar to a will, a trust allows you to dictate who will receive your property at your death and how it is to be administered. The added benefit of a trust is that it also provides instructions on how to handle the assets during any period of your incapacity. For most families, a trust-centered estate plan is a better fit, but a will can work for some families.

Other benefits for survivors – Survivor benefit plans (SBP) are pension-type plans in the form of an annuity that will pay your surviving spouse and children a monthly benefit at your death. Likewise, dependency and indemnity compensation (D&IC) provides a monthly benefit to eligible survivors of servicemembers or veterans (1) who die while on active duty, (2) whose death is due to a service-related disease or injury, or (3) who are receiving or entitled to receive VA compensation for a service-related disability and are totally disabled. When you are examining any financial service or insurance product, it’s a good idea to work with an estate planning attorney to make sure any beneficiary designations work the way you expect and provide the maximum benefit to your family.

You Need Special Help

Members of the military often experience frequent moves, have access to several forms of government benefits after service, and can be subject to some unusual tax rules. For these reasons, estate planning for military families is more complicated than most.

You can expect an estate planning professional to assist you in setting up the following:

  • Powers of attorney for financial matters, as well as health care decisions (they are very helpful when a spouse is deployed);
  • Funeral and burial arrangements;
  • Wills and living wills;
  • Organ donation;
  • Family care plans;
  • Life insurance;
  • Trusts;
  • Estate taxes;
  • Survivor benefits; and
  • Estate administration and/or probate.

An estate plan has multiple objectives: to provide for your family’s financial security, ensure your property is preserved and passed on to your beneficiaries, and determine who will manage your assets upon your death, among others. We are here to guide you through the best options available to you and your family. Give us a call today.

Top 5 Budgeting Tips for Seniors

Money is one of life’s biggest concerns. People of all ages struggle to stretch their dollars to meet their needs and wants. Many seniors live on a fixed income and are presented with more challenges in making ends meet. Creating a budget can help seniors plan how to use the money they have to pay their bills and to save for the unexpected.

First, write down all income sources from retirement to social security. Next, make a list of all bills and expenses. After you have a list of bills and expenses, prioritize those from what is necessary to those that can be lived without. Now it is time to make a plan. There are many budget planning worksheets, websites, and apps that can help with this part. An example can be found on the AARP website, Budgeting Worksheet. Then begin inputting the information for your income and expenses into the correct places. More than likely, the budget will not balance on the first try and adjustments will be needed.

Balancing Your Budget

  • Shop Smart

    • Advertisements can be a great way to find lower prices on items. Another great way to save when shopping is to use coupons and discounts offered through many stores via e-mail. Many companies offer senior discounts. Do your research and use these discounts to shop and save money.
  • Sell Your Car

    • If you are no longer able to drive or if other forms of public transportation are available, selling your car may be a way to cut expenses in the budget. Even if the car is paid off, there are still maintenance and fuel expenses.
  • Rent or Downsize

    • Some may want to rent instead of owning their home. This is helpful if home maintenance is too much and is too great a drain on the budget. When renting, maintenance is taken care of by the owner of the property. Downsizing is also a great way to save money. It can cut housing costs, as well as utility costs.
  • Cut Unnecessary Spending

    • This is a pitfall of many people who attempt to live on a budget. Look at every purchase decision and decide if it is necessary. If the answer is no, then avoid spending money on the purchase until you have excess money.
  • Get Help

    • Help is always available. If you need help, a trusted family member is a good resource. There are also many financial advisers out there that can help create a budget that works for you.

Budgeting also helps when figuring out how to save money. Unexpected events always occur and it is important to be ready when they do. It is often recommended to have an emergency fund. This should be somewhere around $1000, depending on what your monthly expenses are.

Be careful of scams. There are many scammers that use phone calls, emails, letters, or show up on your doorstep to try to take your money. They love to prey on seniors. Be well aware of who you are giving your money to. Use internet resources or check with someone you trust to help figure out whether companies or opportunities are legitimate. Don’t give money to people who don’t want to give you time to check things out on your own. Use your instincts. If it doesn’t feel right, trust yourself.

Budgeting can seem like a daunting task, but taking one step at a time can make it manageable. It can take away the stress that money can create. Instead of letting your money control you, it is time to control your money.

If you have any questions about something you have read or would like additional information, please feel free to contact us for a consultation.

Preserving Quality in End-of-Life Planning

We, lawyers, prepare powers-of-attorney documents so that when our clients can no longer act for themselves, the documents will convey on other trusted people the authority to act on our clients’ behalf.

But when it comes to the actual use of those documents at the time of a health-care crisis, clear and powerful documents are just the beginning. The decision-points can (and must) be put down on paper in advance, but when it comes to end-of-life situations, the clarity on which we lawyers thrive can be very hard to find.

Sitting in her lawyer’s office, the client may have been quite certain about health-care decisions. She does not want her life prolonged by a battery of aggressive treatments, where these would not preserve her quality of life. She does not want blood transfusions, dialysis, repeated courses of antibiotics and chemotherapy, cardiopulmonary resuscitation, or breathing and feeding tubes. She does not want to die inert in the ICU, surrounded by machines and strangers. She wants to die at home, surrounded by loved ones, at a time when she retains the presence of mind to make her peace.

But that goal doesn’t just happen from wishing it and stating it. It happens with additional careful preparation for the realities. As the end of life approaches, the clarity we lawyers enjoy can be elusive. When a person gets a prognosis of two to five years (maybe), where, along that continuum, would be the time to start declining aggressive treatment? When there’s always one more intervention that may (or may not) produce a good result? When one decision could create an ever-widening array of complications? When, step by step, the patient becomes less and less able to exercise autonomy, and where treatment decisions by caregivers are not in line with the care the patient was clear about when she was sitting in the lawyer’s office?

No matter how clear the powers-of-attorney documents, with all these imponderables, the patient can end up in a situation many miles away from what she wanted. And there’s no possible do-over.

Powerful and clear power-of-attorney documents are an essential first step and us lawyers are glad to take care of that part. Beyond that, though, thorough preparation is essential.

Consider that the best result may be one that cares for comfort right now, at the moment.

The question is not necessarily about how long life can be prolonged. The question may be, rather, how comfort can be maintained – at this moment, and then the next moment, and the next. The question is how life can be made better right now. Watch a video by palliative-care physician B.J. Miller, on why this is so important, here.

Make concrete plans

These include specifying what you want to happen if you’re no longer able to live independently; choosing wisely whom you want to act for you, to make sure your plans will be followed; being ready with your health-care documents before you find yourself deposited in the emergency room or ICU; and seeking the reassurance that your loved ones will be cared for when you’re no longer there. Judy MacDonald Johnson speaks about this in this moving video.

There is no doubt that the process in safeguarding the quality of life at the end of it is possibly the most challenging of all. But if that process can create as much pleasure as possible through an extremely difficult time of life, and if forthrightly engaging in that process would facilitate a passing more in line with what we would envision, the worth of the process will be felt. The transition will be smoother and more meaningful for the dying person, and a kinder legacy will be left behind for those who accompany us on this journey.

Please don’t hesitate to schedule a consultation if we can help you or a loved one with a health care plan.

How Seniors Can Avoid Medicare Scams

By far the largest types of insurance fraud are scams against government and private health care insurers. Scammers frequently target government insurance like Medicare by stealing newly issued medical ID cards and then stealing identities. The Coalition Against Insurance Fraud estimates that tens of billions of dollars are lost annually to these types of fraud. Additionally, medical identity theft is now a top complaint received by the Federal Trade Commission. Billing fraud is also responsible for huge losses to Medicare funds and is difficult to assess as it can be a billing error or intentional fraud.

How does this affect a senior on an individual level? Scammers typically pose as Medicare officials and ask people to pay for their new cards which in reality are free. Or they phone a potential victim with false news of a refund and ask for the person’s ID number and bank account number to deposit the refund. “Right now … everyone is being inundated with TV commercials, brochures and other official-looking documents in the mail about all the Medicare Advantage plans. It’s so confusing, and in an environment like that, fraud is rampant,” says Micki Nozaki of the California Senior Medicare Patrol. There are more than 50 million Medicare beneficiaries who can annually opt to swap Medicare Advantage and Part D prescription drug plans which provide scammers with the opportunity to prey on vast numbers of seniors.

The Centers for Medicare and Medicaid Services have a list of tips to help prevent fraud. The first and foremost is to protect your Medicare and Social Security numbers vigilantly. It suggests treating your Medicare card like you would a credit card and do not provide the number to anyone other than your doctor, or people you know should have it. Become educated about Medicare with regards to your rights and what a provider can and cannot bill to Medicare. Review your doctor bills carefully, looking for services billed for but not provided to you.

Remember that nothing is free with regards to medical care; never accept offers of money or gifts of free services. Be suspicious of your provider if they tell you they know how to “bill Medicare” to pay for a procedure or a service that is not typically covered. Before leaving your pharmacy check to be sure your medication is correct, including the full amount prescribed and whether or not you received a generic or brand name medicine. If your prescription is in error report the problem to the pharmacist before leaving.

Remember Medicare will never visit, call, or email you and ask for personal information such as your Medicare number, Social Security Number, address, or bank account number. Medicare already has this information and does not need you to provide it. Even when Medicare issues new cards that no longer contain your social security number in April of 2019 you will not be required to do anything. You can assume that anyone who claims to be helping you with Medicare and asks for your personal or financial information is a scam artist so close the door, hang up the phone, or delete the email.

When it is time to compare plans be sure to meet with a trustworthy advisor. Some insurance representatives give the industry a bad name by selling you a policy or plan that does not suit your needs or your budget. Some agents go so far as to ask you to sign a release form allowing them to make decisions on your behalf. Never sign anything related to Medicare without first reading it carefully. Additionally, it is a good practice to have a family member or lawyer review the document before signing it. The non-profit National Council on Aging (NCOA) has a free, brief assessment that allows you to compare plans online. You can also contact your local State Health Insurance Assistance Program (SHIP). SHIPs is a provider of free, federally-funded Medicare counseling via a trained volunteer or staff member.

Medicare fraud wastes billions of taxpayer dollars annually. Carefully review your medical bills and have inaccuracies corrected. Guard your personal information vigilantly and be wary of people asking you to provide that information. Meet with a trusted insurance advisor or compare medical plan options using the sites listed above. If you are unsure about something call Medicare directly for clarification.

If you have questions or would like to discuss anything you’ve read, please don’t hesitate to contact us for a consultation.

The Uncertainty of Social Security Funding

Social Security benefits, which are funded through 2 trusts, may not be available for much longer. The US Social Security Administrations funding trusts are known as the Old-Age and Survivors Insurance (OASI) Trust Fund and the Disability Insurance (DI) Trust Fund. In their annual report to Congress, the Board of Trustees has published some startling detail about projected insolvency for the Social Security Program. As reported, short term results indicate that beginning in 2020 and all subsequent years after; the program cost will exceed non-interest income. Because the OASI Trust has no authority to borrow money, asset spending will have to occur to cover the costs of social security benefits and deplete the reserves of both OASI and DI trusts. Considering each trust separately, the funds for the OASI Trust will be exhausted by the year 2034 and the DI Trust by 2052.

If you are 50 years of age or older and have worked, you have been participating in the funding of the Social Security Program for decades expecting protection against economic hardships that sometimes happen in retirement; protection promised to you by the federal government. The current actuarial status means that without significant changes to the OASI Trust, funding for your scheduled benefits is at risk of being reduced or possibly not there at all by 2034. It is a stunning admission by the Trustees of the unsustainability of a federally managed program handling your retirement money.

Many economists have likened social security to a Ponzi scheme, and now that the bulk of the population (baby boomers) are receiving benefits with fewer and fewer participants in younger generations paying into the system the entire program is in jeopardy. Increasing numbers of retirees, increasing longevity, and a shrinking workforce leaves the yearly intake of monies (receipts) and accrued interest less than the outlays to cover scheduled benefits. The law of large numbers works well until the pool of paying participants shrinks.

The current report suggests at the time of depletion of the combined trust reserves the Social Security Administration will be unable to pay scheduled benefits in full and on time in 2035. There is a suggestion in this report that it will suffice to pay between 77 to 80 percent of scheduled social security benefits. Legislative action is required to stop reserve depletion and preserve full payment of scheduled benefits to retiring and already retired Americans who have faithfully paid into the system. There is not a lot of time to get the fix in place because of the scale of the monies involved. Future beneficiaries may have a benefit reduction as a possible strategy to help shore up the program. Raising the rate of payroll taxes that both workers and employers have to pay is also a potential strategy. All of these proposed solutions are not likely to make voters happy since the essence of the fix is for the American taxpayer to receive less and pay more. Currently, the political gridlock in Congress does not give much hope that the social security benefit funding problem it will be quickly resolved.

In the event the OASI Trust becomes insolvent how will that affect your retirement plan? Very soon the federal government will have to take action and make significant changes so that Social Security Administration can continue benefit payments in full. Knowing that the government historically privatizes gains and socializes losses the brunt of the financial burden may well fall to individual Americans.

We help families prepare for retirement and the possibility of needing long term care. If we can be of assistance, please don’t hesitate to contact our office for a consultation.

Estate Planning Checkup

Just Like You Need a Medical Checkup, Your Estate Plan Needs a Checkup!

Whether or not you currently have estate planning documents, one important item to add to your calendar is getting an estate plan checkup.

Don’t Have an Estate Plan? 

If you don’t already have an estate plan, then getting one in place should be at the top of your to-do list.

Why?  Because without an estate plan, you and your property may end up in a court-supervised guardianship if you become incapacitated, and your property and your loved ones may end up in a time-consuming and expensive probate proceedings after you die.

Worse yet, if you don’t take the time to have any estate planning done, then the state where you live at the time of your death will essentially write one for you. It most likely won’t divvy up your property the way you would have and certainly will not protect your heirs the way you would.

A common misconception is that estate planning is only necessary for wealthy people. But this simply isn’t true – anyone with a bank or retirement account, a home, or a family needs to make a plan for what happens if they become incapacitated or when they die. Of course, the complexity of the plan will vary depending on your circumstances, but all estate plans should be put together with the help of an attorney who is experienced with the legal formalities required to create a valid will, trust, health care directive, and power of attorney in your state.

How Old Is Your Estate Plan?

Do you already have an estate plan?

If you do, then please pull your documents out of the drawer, dust them off, and look at the date you signed them.

Were your documents signed in the 80s or 90s, or, worse yet, before 1980?  If so, please run, don’t walk, to an estate planning attorney, because your documents are terribly out of date and need to be updated as soon as possible.

Did you sign your documents between 2000 and 2009?  Aside from the federal estate tax exemption jumping from $675,000 to $3,500,000 during that time period, state estate taxes disappeared in many states. Because of the significant changes in federal and state estate taxes, documents from this time period may be out of date and need to be tweaked in some shape or form.

Did you sign your documents between 2010 and 2017?  Federal estate taxes, gift taxes, and generation-skipping transfer taxes went through major changes during these years, and “portability” of the federal estate tax exemption between married couples was introduced.  Unfortunately, while your estate planning documents may only be a few years old, they very likely do not take advantage of the opportunities made available from recent changes in federal tax laws.  And, it’s not just tax laws that are changing – modifications to state laws governing wills, trusts, health care directives, and powers of attorney may warrant some revisions to your estate planning documents as well.

And last but not least, regardless of what year you signed your estate planning documents, think about all of the changes in your life since you signed them.  Did you get married or divorced, have a child or two or a grandchild or two, or move to a new state?  Did you sell your business, retire, have a significant change in assets, or win the lottery?  Any major changes in your family or financial situation will certainly have an affect on your estate plan.

Estate Planning Is Not a One Shot Deal

Estate planning is not a static event that you can grudgingly do once and then forget about it.  On the contrary, estate planning is a continuing process, because life is a moving target that is full of constant change: Your estate plan needs to change as your life changes.

We are here to help you navigate the changes that have occurred since you had your estate plan prepared and ensure your wishes are still being carried out as you envisioned.  For those needing an estate plan, we are here now and in the future to mold your estate plan as you move through the various stages of life.

Holding a Family Caregiving Meeting

A family caregiving meeting is an essential tool when dealing with the care of an aging loved one. These meetings are beneficial for helping to keep all family members abreast of decisions that need to be made, changes in diagnosis or prognosis, and helps to ensure that all family members feel that they have a voice. Family meetings can also help to keep caregiving responsibilities from falling solely on the shoulders of one family member. In addition, family caregiving meetings can foster cooperation among family members and lessen the stress associated with caring for an aging loved one.

Who should attend a family caregiving meeting?

There are a number of people who should be included in a family caregiving meeting. First and foremost, it is important to include the aging loved one in the meeting whenever possible. This helps the aging loved one to feel that they are being heard and that their opinions and thoughts are being considered. If a spouse is living, the spouse should be included, as well as any children and possibly siblings of the aging person. Some families may choose to include other family members, but this really varies from one family to another. Anyone else involved in care for the person should also be there. This could include paid caregivers, family friends, or neighbors. Depending on family dynamics, a facilitator can be helpful in running the meeting.

When should a family have a caregiving meeting?

First it is important to note that family caregiving meetings are not a one and done event. They must occur on a regular basis. The first family meeting can occur before an aging loved one actually needs care. This can give the person who may eventually need care more say in their future care, but often times this does not occur. Most families find that the initial meeting needs to occur when an aging loved when begins to show signs of needing care or when a diagnosis is given that determines care will soon be needed. In addition, meetings should be scheduled regularly to discuss changes in diagnosis, prognosis, or general needs of the loved one or the caregivers.

How can a family hold a successful caregiving meeting?

The key to having a successful caregiving meeting is cooperation. This doesn’t mean that family members will agree on everything, but it is important that all family members are respectfully heard and considered. Families must be willing to compromise and seek the best plan for their aging loved one. Additionally, a smoothly run meeting should have an agenda and families should try to stay focused on the items included on the agenda. When holding a meeting, always put things in writing and be sure that all those involved get a copy of the important information and everyone’s responsibilities.

What challenges do families face in caregiving meetings?

One of the biggest challenges to family caregiving meetings is the family’s history. All families have their own dynamics that can cause problems in a caregiving meeting. There may be members of the family who are at odds with one another. This can become an obstacle to having a successful caregiving meeting. The role that each family member plays can be a challenge. Some members may be overbearing and demand control, while others are peacemakers and do not feel free to share their thoughts. Another challenge is that some family members may be in denial of the severity of an aging loved one’s needs. This may make it difficult to get a consensus for care.

Family caregiving meetings are beneficial and necessary when an aging loved one can no longer care for themselves. These meetings can help to divide the responsibilities of caregiving and reduce stress placed on the family members. It is important that families remember that the meetings are for the care of their loved one and cooperate with one another to help the process to run more smoothly and successfully.

If you have any questions about something you have read or would like additional information, please feel free to contact me.

Avoiding Common Estate Planning Mistakes

Are Any of These 11 Mistakes Lurking in Your Estate Plan?

1) Lack of Healthcare and Disability Planning. The majority of deaths occur in hospitals or other institutions. Patients may be incapacitated to the point where they can no longer communicate their healthcare wishes. Advance Directives and a Healthcare Power of Attorney can identify healthcare proxy decision-makers, specify wishes for end-of-life care, and provide a formal plan to control financial and property matters.

2) No will or estate plan. Without proper planning, your estate may be tied up in probate court for months or years after your death, at a great emotional and financial cost to your family.

3) Lack of attention to digital assets. Without a plan for digital assets and social media, you may lose critical documents, photos, memories, and family records.

4) Lack of attention to your children’s possible future divorces or lawsuits. It’s not fun to think about, but if your children divorce or are sued at some point in the future, their inheritance may be decimated and end up in the hands of those you never intended. A trust can help protect your legacy and your children’s inheritance.

5) Lack of attention to the conscious transfer of family values. Comprehensive estate planning can include family meetings, a family mission statement, and custom planning for children.

6) IRA funds wasted. Retirement account beneficiaries often receive these account funds in a lump sum, creating the potential for a huge and unexpected tax bill. A standalone retirement trust (sometimes called an IRA trust) can protect these funds while still providing for your beneficiaries.

7) Chaotic record-keeping. Good planning is essential to make sure your heirs do not spend months or years trying to make sense of what you left behind. A comprehensive estate plan provides you with a framework for maintaining your vital legal and financial records.

8) Surviving spouse creditors and predators. If your surviving spouse remarries and then divorces, your estate could end up in the hands of people you never intended. Likewise, if your surviving spouse is victimized by financial predators – something increasingly common as the population ages – your family may discover too late that your legacy is gone. A trust can ensure family money stays in and benefits the family.

9) Family feuds over sentimental items. This problem can be avoided with a Personal Property Memorandum, which can account for tangible items like artwork, family heirlooms, and jewelry. In addition to the financial assets, your plan should include careful consideration of important family items.

10) HIPAA privacy lockout. If incapacity leaves you unable to communicate, family members—even your spouse—may not be able to access your medical records because of HIPAA privacy rules. Executing a HIPAA authorization ensures access to medical information.

11) Outdated Estate Plan. You may have a will and estate plan already. Does it reflect your current circumstances, goals, and needs? A comprehensive review by an estate planner ensures that your estate plan reflects your current situation, desires, and needs.

Asset Protection for Physicians

3 Liability Planning Tips for Physicians

You probably know that the practice of medicine is a profession fraught with the risk of liability.  It’s not just medical malpractice claims either (although those are certainly scary enough). It’s the entire scope of risk from being in business, including employment-related issues, careless business partners and employees, and contractual obligations, as well as personal liabilities.  Unfortunately, in our litigious society, these liability risks are not unique to physicians, although physicians are a frequent target.

Below are three liability planning tips for physicians to protect their hard-earned money.

Tip #1 – Insurance is Always the First Line of Defense Against Liability

Liability insurance is the first line of defense against a claim.  Liability insurance provides a source of funds to pay legal fees as well as settlements or judgments. Types of insurance you should consider are:

  • Homeowner’s insurance
  • Property and casualty insurance
  • Excess liability insurance (also known as “umbrella” insurance)
  • Automobile and other vehicle (motorcycle, boat, airplane) insurance
  • General business insurance
  • Professional liability insurance
  • Directors and officers insurance

Tip #2 – State Exemptions Protect a Variety of Personal Assets from Lawsuits

Each state has a set of laws and/or constitutional provisions that partially or completely exempt certain types of assets owned by residents from the claims of creditors.  While these laws vary widely from state to state, in general, the following types of assets may be protected from a judgment entered against you under applicable state law:

  • Primary residence (referred to as “homestead” protection in some states)
  • Qualified retirement plans (401Ks, profit sharing plans, money purchase plans, IRAs)
  • Life insurance (cash value)
  • Annuities
  • Property co-owned with a spouse as “tenants by the entirety” (only available to married couples; and may only apply to real estate, not personal property, in some states)
  • Wages
  • Prepaid college plans
  • Section 529 plans
  • Disability insurance payments
  • Social Security benefits

Tip #3 – Business Entities Protect Business and Personal Assets from Lawsuits

Business entities include partnerships, limited liability companies, and corporations.  Physicians who are business owners need to mitigate the risks and liabilities associated with owning a business, and real estate investors need to mitigate the risks and liabilities associated with owning real estate, through the use of one or more entities.  The right structure for your enterprise should take into consideration asset protection, income taxes, estate planning, retirement funding, and business succession goals.

Business entities can also be an effective tool for protecting your personal assets from lawsuits.  In many states, in addition to the protections offered by incorporating, assets held within a limited partnership or a limited liability company are protected from the personal creditors of an owner.  In many cases, the personal creditors of an owner cannot step into the owner’s shoes and take over the business.  Instead, the creditor is limited to a “charging order” which only gives the creditor the rights of an assignee.  In general, this limits the creditor to receiving distributions from the entity if and when they are made.

Final Advice for Protecting Your Assets

Liability insurance, exemption planning, and business entities should be used together to create a multi-layered liability protection plan.  I am experienced with helping physicians, professionals, business owners, board members, real estate investors, and retirees create and—just as important—maintain a comprehensive liability protection plan.  Please call my office if you’d like to make sure you have the right protection in place.

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