Asset protection planning for doctors that involves doing the wrong thing, acting at the wrong time, or working with the wrong advisors can cause financially fatal exposures. It's vital you consider the due diligence issues I outline below before you decide who to work with.
Legal Issues Best Handled By an Actual "Lawyer"
We continuously get reports and queries from clients who have either implemented planning they should not have or have been pitched planning of questionable effectiveness and legality by someone who lacked the expertise and training to do so. In some cases, these plans are being sold by "promoters," often non-attorneys who are not delivering personalized and fact-specific legal advice and services, but rather "document preparation" applied to every "buyer" with the same wide brush. Whether they market to you directly, buy your group dinner at your local steak house, or even pay to speak at your medical convention (most concerning because doctors assume vendors are there on professional merit, not just because they were willing to pay to pitch you), always look at the fine print. You should also understand exactly what your relationship is, if you are dealing with a law firm or just a document printing company that sounds like a law firm and finally, if the person you are dealing with is an attorney or not. If they are, find out if they are formally acting as an attorney in representing you.
Just as failing to deal with a trained medical professional can create dangerous side-effects, dabbling in law is dangerous for many reasons including:
- A non-attorney promoter (including a lawyer that is not acting a lawyer, but as a book, DVD or other "kit" seller) typically has no formal legal education in this specific area beyond knowing how to fill out forms;
- Even a perfectly executed and recorded form document is somewhere between useless and dangerous to you if not used with the required skill and for the right purpose. Buying a laser doesn't make me a surgeon, nor does selling lasers;
- Your communications are fully and easily discoverable and are not covered by attorney client privilege;
- They have no professional oversite or discipline, nor do they have any legal liability or malpractice insurance for bad advice.
A Near Miss
One recent caller was wrongly advised to implement a very complex asset protection strategy by a document preparation group. They failed to advise the client that it is ineffective, if not illegal, to implement any planning against any known and specific exposure (fraudulent transfer). Even worse, in this case the preexisting creditor was the IRS, an exceptionally well-funded and aggressive "super-creditor." Not only were the tools they prescribed both legally ineffective for the problem and inappropriate for the client's liquidity and net worth level, they would have cost him six figures in additional legal fees, taxes and penalties if implemented as prescribed; on top of the $40,000 fee they requested to set it up.
A Specific Recent Fraud Case
Unfortunately, just working with a lawyer isn't enough to guarantee the best possible outcome, it's got to be an ethical and experienced one that has specific experience in this area of the law and understands what you can and cannot do. Know who they are and look for a history and professional references.
In one recent case, working with a crooked attorney cost a client $1 million that the lawyer allegedly spent at casinos, gun stores, liquor stores and on exotic travel. The victim claims that Tampa, Fla. attorney, James Lee Clark set up a series of trusts and other entities for her for a variety of purposes including asset protection. Unfortunately, Clark allegedly set himself up as Trustee and retained the ability to access his client's funds at will and without any checks and balances, according to McKnight's Senior Living. This action alone would be considered somewhere between unethical and malpractice by many experienced lawyers who would not name themselves as a trustee, had power of attorney over client assets or ever have power to access or benefit from client funds. This is how it should almost always be. In this case, as Clark is (or was, now facing both a lawsuit and suspension) a lawyer and is being sued for this conduct, he hopefully has malpractice insurance and may also face criminal fraud charges.