2021 Asset Protection Part 3 – Personal Finance

Basic personal finance issues that can threaten your wealth including both external threats and risky behaviors to avoid.

Asset Protection for physicians includes a wide variety of personal finance issues. We continue our 2021 physicians’ asset protection checklist including the personal risks of tax season, identity and credit theft, and personal cybersecurity, among others.

We started our 2021 risk management review with Part One, a look at risks related to current social and political events that can create legal exposures inside your practice in areas including security, employment law and social media exposure. Part two covered more predictable recurring risks related to personal and business insurance coverage, a look at your risk factors, and self-exams on both crash testing your legal planning and what assets you currently have at risk.

In Part 3, we look at basic personal finance issues that can threaten your wealth including both external threats and risky behaviors to avoid.

Check both your personal and business credit reports, bank statements, and credit card statements very carefully.

This is an important time to double-check balances, debits, refunds and charges. In a previous column on holiday scams targeting doctors I covered some of the issues that spike during the holidays when your credit card usage is often at its highest and fraudulent charges may be missed. Combine that regularly heavy seasonal usage with the increased online purchasing nearly every family in America has engaged in during the pandemic and the opportunity for fraud or error is even bigger.

Check your credit report.

Your credit itself is an exceptionally valuable and fragile asset that must also be protected from mistakes and identity theft in many forms that we have covered in detail. The process is easier than ever, is free and allows you to review your score and report at all three major reporting agencies.

Review your personal cybersecurity practices, change your passwords, and store them securely.

If you use the same password at more than one website, don’t use two factor authentication, store passwords on your desktop in a document marked “passwords” instead of using a secure password storage service, or use passwords with your own name or that end in “20” or “21”, you should make some immediate changes and review Erika Adler, JD’s previous warnings on remote work security as well my recent conversation with an IT security expert. If you are like most Americans it has probably been too long since you changed your passwords (note the plural), and your password security practices are probably creating opportunities for hackers and criminals.

Beware of aggressive tax planning sales and landmines, including those you may already own.

This is high pressure sales season for tax plans and asset protection is often as much about what you don’t doas it is about what you do. Issues to be aware of range from the abuse of tools I have covered in detail on several occasions like captive insurance companies and conservation easements to completely fraudulent plans that lack any legal basis, are often criminal tax evasion and that capitalize on fear and contentious politics to sell plans that have significant legal and financial exposure implications for the tax payer.

Fund qualified plans and other exempt assets NOW for asset protection benefits.

Funding retirement plans, 529 plans, and custodial IRAs for your kids, like most asset protection strategies, is always something better done today that in the future. ERISA-qualified retirement savings plans are exempt assets that have statutory legal protection (varies by state, but generally very good) from creditor claims including from bankruptcy. Rather than waiting to fund your plans at the last possible minute before Tax Day in April or until you have a specific number from doing your taxes, consider making at least significant estimated contributions you are comfortable making now to get those assets out of your personal names where they are exposed and into the safe harbor of the plan. Every single day can make a big difference, as one example, in Arizona IRA contributions are creditor remote after only 120 from that date of the deposit, including from bankruptcy. Funding your plan now, as opposed to two months from now, gets you halfway to the date of that protected status.

As always, this is a just starting point that covers some basic issues to which you must apply your own facts, not legal advice that can replace the help of experienced advisors.

About the Author

Ike Devji, JD, has practiced law exclusively in the areas of asset protection, risk management and wealth preservation for the last 16 years. He helps protect a national client base with more than $5 billion in personal assets, including several thousand physicians. He is a contributing author to multiple books for physicians and a frequent medical conference speaker and CME presenter. Learn more at www.ProAssetProtection.com.