Transcript
The Business of Medicine: Asset Protection Strategies for Physicians
Mark C. Doyle, Esq.LLM Master of Law Taxation
Tredway Lumsdaine & Doyle, LLP1920 Main Street, Suite 1000
Irvine, California 92614
949-756-0684mdoyle@tldlaw.com
Presented By:
Bill Black
Exit & Retirement Strategies, Inc.333 City Blvd. West, Suite 2050
Orange, California 92868
866-370-3774billblack@exit-retire.com
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AGENDA
I. The Problem – Creditors & Predators
II. The Solutions
III. Tactics
IV. Fraudulent Conveyance
V. Action Plan – Risk Analysis Rating & Recommendations
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The Problem - Creditors
• Medical Professionals High risk occupation Deep pockets Personal Liability
• Third Parties ie tenants, bicyclists, etc• Future Spouse/ Significant Other
• Super Creditor – IRS
I.
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The Problem - Predators
• More suits are filed in the United States than in all other countries in the world combined.
• Why? Attorneys can be engaged on “contingency” basis. Losing party in litigation is not responsible for payment of
attorney’s fees incurred by winning party.
Excessive jury verdicts are highly publicized (e.g. verdict in McDonald’s coffee case: $160,000 compensatory damages + $2,700,000 of punitive damages to woman who spilled scalding coffee on her lap.) See Simpson v. UCI
I.
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• Realistic expectations Unrealistic: To expect creditors to “run
for the hills and disappear.”
Realistic: compare the probable outcome of litigation if an Asset Protection Plan had not been established with the probable outcome with an Asset Protection Plan in place.
II. The Solution:Planning, Risk Analysis and Response
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“The Three Legged Stool”Protection
FinancialPlanning
AssetProtectionPlanning
EstatePlanning
II.
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The Solutions: Design Alternatives
Control
II.
Protection
Nest Egg
$
in toto
$$$
Considerations for Asset Protection Plans
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Asset Protection Ladder
Title Assets
II.
Domestic Asset Protection Trust
Limited Liability Companies (LLCs)Family Limited Partnerships (FLPs)
Exemption Planning
Offshore Asset Protection Trust
Estate Planning
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Estate Planning
• Liability InsuranceProfessional, Auto, Home & Umbrella
• Credit Shelter Trust-A/B Trust• Lifetime Benefit Trust
• Irrevocable Trust
III.
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Titling Assets: Inter-spousal Transfers
• Separate Property of One Spouse not used to satisfied debts of the other spouse
• Community Debts Joint Liability of Spouse• Create Separate Property by Agreement:• Equal Split but Can Select Asset for each spouse ie
med practice to dr. house to spouse
Caveat: “What is good for the Goose is good for the Gander” – Jamie v. Frank McCourt
III.
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Exemption Planning
• Federal and state law exempt certain assets from claims of creditors.
• Always better to own exempt assets, rather than non-exempt assets.
• Homestead Exemption• Retirement Plan Account• Life Insurance / Annuity
III.
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Converting Non-Exempt Assets into Exempt Assets
a) Stripping Equity
b) Venue Shopping
a) Intentionally Defective Grantor Trust (IDGT)
b) Qualified Personal Residence Trust (QPRT)
III.
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Family Limited Partnershipsand LLCs
• Single Member LLC- disregarded for tax purpose, but provides liability protection.
• Particularly effective for Investment Real Estate.• Most states only allow a creditor to obtain a charging
order. Creditors cannot seize an ownership interest in the LLC/LP Assets.
• Minority discounts and ease of transferability to family.
III.
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Asset Protection Trusts
• What is an Asset Protection Trust?
An Asset Protection Trust is an irrevocable, self-settled trust, i.e. a trust in which the settlor of the trust is also a beneficiary of the trust.
distributions to the settlor, or any other trust beneficiary are within the sole and absolute discretion of the trustee the trustees pay obligations owed by the settlor to third parties (i.e. credit cards), or to purchase assets (vacation home) settlor can use.
Available only in select states not California
III.
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Asset Protection Trusts:Offshore v. Domestic
• The case of using Domestic Trusts
Easier for the settlor and the beneficiaries of a domestic trust to be in contact with the trustee (geographic proximity)
Usually less expensive to establish and administer
Does not carry the negative connotations associated with offshore Asset Protection trusts.
Full Faith and Credit US Constitution --judgment in California recognized in Delaware.
III.
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Offshore Asset Protection Trusts: Advantages
• Usually provide features that domestic Asset Protection trusts do not. These include:
A shorter limitation period for bringing claims
A higher burden of proof for proving fraudulent transfers (must be proven beyond a reasonable doubt)
Non-recognition of US judgments
• Creditors do not have the right to execute upon the U.S. judgment and attach assets of the offshore trust. They must litigate the claim in the offshore jurisdiction (even if the claim has already been litigated in a U.S. court.)
III.
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Revocable Living Trust
Home & Savings/retirement
Accounts
Business(i.e. Medical Corporation)
Investment PropertyRental Property
(i.e. LLC)
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Offshore Trusts:How They Work
III.
Beneficiaries
ASSETSProtector
OffshoreTrustee
DomesticTrustee
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Modular StructuringThe Modular Structure
III.
DAPTOr
FAPT
LLC#1 LLC#25% Member5% Member
Liquid InvestmentsReal Property
95% Member95% Member
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Offshore Trust: Misconceptions
• Are established to hide assets from creditors
• Are established in tax haven jurisdictions to avoid income taxes
• Will be effective only if all trust assets are located offshore
III.
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Fraudulent Conveyances
• Uniform Fraudulent Transfer ActAs a general premise, creditors cannot
seize assets that you don’t own.Exception: creditors can seize assets
that you transferred to a third party with intent to defraud, hinder or delay creditors.
This means do planning before a Creditor or Predator arrives.
IV.
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Asset Protection Planning
An Asset Protection Plan is
like the American Express card…
“You shouldn’t leave home without it!”
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Thank You
Please take advantage of our freeRisk Analysis and Rating
Mark C. Doyle, Esq.Tredway, Lumsdaine & Doyle, LLP
mdoyle@tldlaw.com(949) 756-0684
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