Three Major Asset Protection Issues for Physicians

April 10, 2018

It’s spring, so that means keeping an eye on seasonal exposures, particularly IRA funding, automobile liability, and even medical marijuana business profits.

A variety of seasonal exposures must be on physicians’ radars this spring.

Issues ranging from automobile liability and blossoming medical marijuana businesses to IRA funding may require legal planning and the help of expert advisors.

IRA Funding and Beneficiary Issues

Hopefully you max-funded your IRA and other retirement accounts for 2017 tax benefits. It’s a sound financial practice, but I like it even more from an asset protection standpoint.

Qualified accounts are afforded a heavy degree of legal protection form your own creditors and liabilities to high dollar limits by state and federal law, including from bankruptcy. For those doctors with significant IRA accounts, where you and your heirs live will determine how well (or even, if) any accounts you leave to them are going to be protected from their own future creditors. I’ve previously summarized inherited IRA asset protection and the legal tools used to protect exposed IRAs that should be of interest to all doctors who fund such plans.

Auto Liability Issues

A variety of changes in number and usage of vehicles affects physicians and their families every spring, but your most basic risk management never changes.

First, be heavily insured on all your personal and business vehicles (this means boats, planes, RVs, etc.), including both high limits of uninsured and underinsured coverage and an umbrella policy of at least $1 million, ideally more.

Second, pay close attention to how your vehicles are titled. Leasing or purchasing your vehicle through your medical business is very dangerous and ties your medical practice’s assets and income to any liability that is incurred by you or any other drivers of your vehicles.

The risk of an accident is always there, but I’ve seen the following patterns for years:

• Children of all ages, including college-age children, have more unsupervised free time over spring break and the coming summer vacation. They will often use their and your vehicles more often and in more distracting circumstances. Be aware of how and when your property is being used and enforce rules for the privilege of being able to use it.

• If you are acquiring a new vehicle for a teen driver or recent graduate, consider if the title and insurance coverage can be held in their name only. In some cases, their age may make this legally or financially impossible, but not being on title or the listed insured is always your safest bet to escape the liability they many create.

High Profits in Medical Marijuana

We continue to see physician entrepreneurs participating in the medical marijuana market. While there certainly are those that are part of the industry as cannabis-friendly healthcare providers, there is significant current profit and real money to be made in a wide variety of ancillary related businesses. We have seen successful physicians of all ages and specialties investing in startups in both grows and dispensaries and more generic businesses like testing, management, and security, as just a few examples.

It’s important to keep these business activities and the liabilities and profits they produce legally distinct and firewalled from your pre-cannabis assets. This is both good conventional legal and risk management planning and due to the uncertainty of how these businesses could be treated by federal law enforcement, which is currently unfriendly to this industry.

In many cases, the doctors I am consulting with do not have a current need for this investment income stream because of their unrelated professional success and financial condition. In those cases, the profit is retained in some business and/or estate planning structure for future, more predictable distribution.

In other cases, any profits are kept in separate accounts to avoid any “comingling” of assets or used to heavily fund (new, separate, and traceable) statutorily protected qualified retirement plans instead or in addition to those funded from your other income sources.

While the effectiveness of any of these arguments and planning methods is not yet conclusive, most investors and their counsel believe that doing something, including making these otherwise well-recognized and predictable legal planning moves is miles ahead of doing nothing and will help you keep these assets physically segregated.

Attorney Ike Devji has practiced in the areas of asset protection, risk management, and wealth preservation law exclusively for the last 15 years. He helps protect a national client base with over $5 billion in personal assets that includes serval thousand physicians and is a contributing author to multiple books for physicians and a frequent medical conference speaker and CME presenter.