Recent headlines illustrate asset protection issues.
We examine asset protection issues in the news and that occur seasonally that can affect physicians’ wealth.
We cover a wide range of asset protection and risk management issues here every month, often in abstract terms. This week, we look at some recent headlines that provide real life examples of those issues and take a timely look at some recurring seasonal risks including cryptocurrency and engagements.
Bad tax news for crypto investors?
We’ve previously covered some basics for physician crypto investors including how those assets should be held for estate planning and asset protection purposes, including both fraud/theft and creditor risk.Of course, the biggest risk for crypto investors has been market volatility and the near complete collapse of many so-called meme or junk coins that have resulted in some very significant losses for investors.
Unfortunately, these losses may not be deductible as a “capital loss on the sale of a security” as many questionable ‘soundbite advisors’ and influencers in crypto social media circles (many of whom are constantly pumping the value of their own holdings) may indicate. The IRS recently issued a memorandum on the deduction of crypto losses that provides specific guidelines for determining when a deductible loss has actually occurred and what actually qualifies as a “security”. As one cryptocurrency taxation expert summarized in an analysis of the IRS memorandum for Forbes:
Many cryptocurrencies including luna and its associated terraUSD stablecoin plummeted from all-time highs to near-zero values last year. Dozens more have dropped more than 90%. As the April 15 filing deadline approaches, some U.S. taxpayers are wondering whether they can claim deductions for these catastrophic losses on their 2022 returns without selling or discarding the assets.
This memo appears to primarily target the most aggressive and speculative investors who are seeking large deductions for holdings they now consider “worthless” and which may be unmarketable, as opposed to those who have marketable holdings that still have value, although perhaps significantly reduced from the original purchase price. It also outlines the affirmative, demonstrable steps required for “abandonment” of a worthless cryptocurrency by the investor.
Valentine’s Day starts proposal season, AKA PreNup season
If cupid is leading you to making or accepting a Valentine’s Season marriage proposal, it’s time you understand the basics of a key asset protection measure for physicians, prenuptial agreements, a.k.a. ‘prenups’. We live in a country with the third highest divorce rate in the world. Your odds of divorce significantly increase if you are married very young, under age 25, or when you are boomer aged or older. You are also significantly more likely to get divorced in a second marriage and even more so in a third marriage. The wide range of fascinating divorce statistics available also includes a “sweet spot” to get married, for the best odds of avoiding divorce, ages 28-33 and a variety of factors including state of residence.
Legal requirements for enforceable prenups vary from state to state and require full disclosure of all assets by each party. Concealment of assets not only jeopardizes the applicability of the prenup to that one asset, it can also invalidate the entire agreement. Seeing that parties have independent counsel (or at least had full opportunity to consult with counsel and were explicitly advised to do so) and addressing any other formalities required by state law, including witnesses. My partner that practices in this even videotapes signings.
Timing is vital, implement the agreement well in advance of the marriage so that it is free of any duress or eleventh-hour presentation that could extort the other party to sign it under the threat of calling off the wedding. This means your prenup should ideally be drafted and signed monthsbefore the wedding, but better late than never, or after. Prenups can cover a wide variety of financial and legal issues including:
We will look at more specific headlines and other seasonal threats later this month.
Attorney Ike Devji has 20 years of legal experience focused exclusively on asset protection, risk management and wealth preservation. He helps protect a national client base with more than $6 billion in personal assets, including several thousand physicians. He is a contributing author to multiple books for physicians, a Physicians Practice contributor for over a decade and a frequent national CME presenter. Learn more at www.ProAssetProtection.com.