In a recent interview I did with CBS I revealed the top 6 mistakes made by doctors when planning to protect their financial assets.
Doctors in particular are at risk of exposing their assets due to the prevalence of medical malpractice suits. Here are some of the most common pitfalls to avoid while trying to protect hard-earned assets.
One widespread misconception among my clientele is that living trusts are shielded from creditors.
Living trusts – or revocable trusts – are attractive because it allows for the person who formed the trust to move assets in and out of the trust whenever they want. They can also ease the transfer of wealth after the person passes away. The downside is that a judge could order the grantor to take money out of the trust to pay a creditor.
When planning to protect the financial assets, many are uncertain about where to put assets that will be inherited.
Make sure that any assets you wish to pass along to your heirs are placed in a trust with a trustee who is not the beneficiary. This will protect your assets from an ex-spouse taking money that is intended for your children, for instance.
Another common error made by doctors is putting their names on the titles of vehicles they don’t always personally use.
When someone else – such as your adult children – regularly use vehicles that are legally under your name, you could open yourself up to a world of legal trouble. If your kid gets into an accident, you could get sued.
I added that this is also applicable for snowmobiles, jet skis, and boats.
Titling assets incorrectly can also put your assets into jeopardy.
Some physicians place all their assets into the name of their spouse to avoid losing assets in a malpractice case. However, if their spouse gets sued, you could be liable as well.
Solutions to titling assets often depend on state laws. Also governed by state law is whether qualified retirement plans such as IRAs are protected from creditors, something that doctors often overlook.
Both Roth and traditional IRAs are overseen by state law. You should always consult an asset protection attorney on your state’s law before making any big decisions such as putting a pension plan into an IRA.
Another mistake is not having sufficient umbrella liability insurance, which provides additional coverage to homeowners and auto insurances.
Many tend to overlook the importance of having a robust umbrella liability insurance plan to adequately protect their assets, which can provide an additional security blanket if being sued.