The best laid plans can be ruined without some defensive planning. Physicians need to protect their assets and shouldn’t have to worry about a lawsuit or injury jeopardizing their financial future. Below are some steps we follow for the physicians we work with.
Purchase Insurance Coverage
Carrying the appropriate amount of malpractice coverage should go without saying. However, the biggest asset for most physicians is their ability to produce an income over their lifetime. You need to obtain the maximum disability coverage available, as early as possible, and focus on the after-tax benefit. Obtain an “own-occupation” policy and ensure that the coverage keeps pace with any increases in your income. Also, purchase a large umbrella policy to protect against personal liability.
Optimize Your Retirement Assets
Not only are retirement plans a great way to save on a pre-tax basis for your retirement, they also offer federal and North Carolina protection from creditors. Every effort should be made to optimize these accounts. An exception to the creditor protection is inherited IRA’s where physicians might want to consider an IRA trust.
Bonus: Get our free flowchart “Should I Set Up a Traditional 401(k) For My Business?”
Utilize an LLC
Assets such as your medical practice, rental properties, office buildings and recreational vehicles should be owned by their own Limited Liability Company, or LLC. Doing so should limit any claims to that specific LLC, and not the rest of your assets.
Title Assets Correctly
If you are married consider titling your home as “tenants by the entireties”. This means that both you and your spouse own the entire house and therefore the equity is protected from creditors of just one spouse. Also, get your name off of assets you can’t control such as your adult children’s car or boat.
Physicians should tailor their plan to their state and coordinate plan actions with a team of professionals, including an attorney, accountant, insurance broker and a fiduciary financial advisor. Proactive planning and coordination will help protect what you have earned and get you one step closer towards financial independence.