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"Prepping" from an Asset Protection Point of View - What is Your Family Ready For?

This article was originally published as  a two part series, I provide it in total here below. Asset Protection is not just about lawsuits. It's about a rational understanding of all risks and exposures and being prepared for them, it's a state of mind that provides the confidence of being prepared for the unexpected. Sometimes those expected events are financial or legal, sometimes they are much broader and more basic. As always, timing is key - you can't prep for something that's already happened .  - Ike Devji

Recent events like the seemingly impossible East Coast earthquake and the hurricane season have been good reminders that we need to perform financial check-ups periodically on a variety of issues. In the past we’ve discussed a checklist of essential legal and financial planning, but even when that planning exists a periodic review is essential to make sure that it is adequate, known by your family, and complete.

Your Estate Plan, Mortgages, and Titles to Property/Insurance Documents: Where Are They?


Most people overlook the importance of being able to document the important business and legal transactions that are the center of their wealth and security. Amazingly few of us take proper care of those documents or have a place where they are safely and predictably stored. Yes, those paper banker’s boxes from the office supply store are great until a flood, fire or other unexpected surprise takes them out, then what? When Costco and other big retailers have fire- and water-proof safes that will hold your documents for as little as $100 — and larger gun safes capable of holding documents, jewelry, laptops and many other valuables for as little as $500 — delivered to your door, there is no longer an excuse to not have some way to secure these items.

Who ELSE Knows Where These Items Are?


In many families, certain issues are often handled by one party or the other, even if these issues are joint decisions. We often see an unfortunate gap in the knowledge of the details, however. This adds stress, expense, and delay during difficult times. Make sure your spouse or (or other responsible parties) knows where the documents are and how to reach them. If you have team members, like a financial planner, lawyer, insurance agent, and CPA , make sure your family knows who they are and how to reach them.

Is Your Insurance Coverage Adequate and Complete for Your Current Level of Success?


As hard as it is to believe, there are still people with substantial home equity. Most of those people have been in their home a decade or longer or committed a large amount of cash to the purchase of their home, making it one of their most valuable assets. A review of the homeowner’s policies of many of these people shows some frightening gaps in the coverage in several areas.

First, we often see that the PERSONAL PROPERTY LOSS coverage successful people have in place does not account for what they have accumulated and purchased in terms of their décor, furnishings, appliances, fixtures, and clothing. Take a look at your policy and see what the limits are then walk around the house and add up the costs of the contents of every room and whatever you have stored in the garage and attic (bikes, sports equipment, holiday décor, etc.) and you will likely be stunned by the amount of money you have tied up in those things. Now imagine having to replace all of them out of pocket in current dollars…

Second, we often see that valuable collections of personal property are underinsured, uninsured, or completely excluded from certain policies. Common examples include guns, high-value electronics, and jewelry.

Finally, make sure the alternate dwelling and replacement cost for complete loss coverage you have in place is adequate for your current family. The policy limits you put in place while single or newly married may not be enough to cover adequate housing for your family of four with two pets while your home is being rebuilt. Similarly, the construction cost of your home at its current level of finishes and upgrades may be substantially above what your insurance company thinks is “reasonable, adequate, or equivalent”. If you have spent large amounts of money upgrading your home, finishing that basement, and redoing the kitchens and bathrooms, you know what’s involved; be sure your carrier knows too.

PART TWO

In the first part of the “family risk drill,” we covered a variety of issues related to your legal, financial, and insurance preparedness for a variety of risks including disasters like floods, fires, and other losses. Since that time a massive two-state, two-country blackout was in the headlines, shutting down power for several million people in Arizona, California, and parts of northern Mexico. Thankfully, the grid was restored in about 24 hours, but even that short amount of time did millions of dollars in damage and resulted in food losses, business closures, security risks and airports being shut down, not to mention that it required the shutdown of two reactors in a major nuclear power plant.

The majority of disaster preparedness experts aren’t concerned with terrorists, zombies, or enemy invasions. They are worried about issues like natural disasters, technology failures (like power grids), and pandemic illnesses.

Imagine how many parts of the country would be devastated by prolonged power failures in the extremes of an East-Coast or Midwestern winter or the brutal summer in the southwest and the possibility of a disaster becomes much more realistic in our technology driven age. 

Do You Have a Plan Everyone Knows?

Have a simple plan on two key issues: where you meet if the home is lost, damaged, or inaccessible and who you call or go to if you need to leave a message or have lost your phone or transport. In some cases, just having a place to check-in is vital. If your spouse or kids could not get home because of a natural disaster, do you know where they would go instead? Do you know who they’d go to instead or check in with if their cell phone was dead?

Are Your Digital Assets Safe?

Much of your vital information is stored on a computer in the home that could be easily damaged or stolen. Make sure it’s backed, up, invest in back-up power supplies, and think about the security of those items like any other easily portable valuable. Remember that having a back-up drive that’s on the floor, under a desk, or a place likely to be stolen with the computer if your home is broken into is not much help at all, especially if you need the backed-up photos and scanned receipts to document the contents of the home that are damaged or missing. Consider using services like Lo-Jack and various cloud storage options for your computers and take advantage of the “Find My Device” features on Apple products like iPhone and iPads before a problem occurs when they are lost or stolen. Finally, password protect all computers, drives, phones, etc.

Can You Last Even a Few Days Without Technology?

Remember that we are extremely vulnerable due to our dependence on electricity and computers. Even most affluent people have very little cash on hand, a fact that renders them penniless during something as simple as a blackout or other weather emergency that will either make banks and credit/debit cards inoperable or inaccessible if they shut down due to a “run” on the bank for cash in a panic. During a prolonged period of extreme weather or a power failure food will spoil quickly and the few stores that do open won’t be able to take your credit or debit cards, only cash.

In most places the same is true for gas stations, natural gas, and even tap water, most of which is controlled by electric pumps and regulators somewhere. Make sure you can last at least a short period of time with what’s in your home. This means reasonable amount of food, water, sources of warmth, and perhaps most importantly a short reserve of prescription medicine for those who are dependent on it for life-sustaining issues as simple as insulin. Also, if power grids are down, the dispensing of controlled medications requiring prescriptions will come to a complete halt. Ever been to a Walgreens when the “system is down?” Then you know what I mean. Got a big co-pay? Good luck paying for it without your credit cards working even if the store is partially open.

Personal Security

This is perhaps the most controversial issue. This does not just mean guns, however it can often mean simple things like locks, light sources, walkie-talkies and even a good old fashioned big dog with a big bark. Think about your home and the vulnerabilities that arise in the kind of extreme situations addressed above.

As always, the list could be pages long. This discussion has a simple goal; to get you to start thinking about your exposures and address them in a calm and reasonable way, as preventative medicine.

As always, the information presented here is general and educational and can never replace the advice of experienced counsel specific to your assets or situation. This article originally appeared at www.PhysiciansPractice.Com where Ike Devji is a regular contributor, and is reprinted here with permission.

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Tax Planing Schemes Every Physician (and Business Owner) Should Avoid

The next 60 days marks the final push to sell physicians and private business owners across the United States tax plans of both good and questionable value. Promoters of various plans are well aware of the pressures affecting your income and will make a variety of frivolous arguments that appeal to your desire to save. As always a great CPA is your first line of defense against both tax exposure itself and the risk of committing tax fraud through an overreaching plan, but there are a number of common markers that are easy to spot. 

The IRS creates an annual list of the “Dirty Dozen” tax schemes; here’s a breakdown of the top ones that affect or target doctors and business owners.

 

Remember that the higher your income, the more likely you are to face an audit and substantial civil and criminal penalties that I guarantee will exceed any short-term savings gleaned from any bad planning. This simply means that you and your team must be committed to strictly adhering to the tax code, full and accurate reporting, and being realistic about how you pay yourself and the amount of income you declare. In most cases, it is not “commercially reasonable” to pay yourself less than six figures when the average salary for specialists like you in your state is much higher but we see doctors and CPAs abuse this discretion on a regular basis.

Hiding income offshore
I use offshore tools for a variety of my clients business and asset protection purposes regularly; tax planning is not one of them.

Taxpayers have tried to avoid or evade U.S. income tax by hiding income in offshore banks, brokerage accounts, or through the use of nominee entities. Taxpayers also evade taxes by using offshore debit cards, credit cards, wire transfers, foreign trusts, employee-leasing schemes, private annuities, or insurance plans. (via the IRS)

You have a well-defined legal right to have an offshore account and in our global economy even manage certain business and investment activities offshore but that income is taxable and even the mere existence of an account has a reporting requirement. Simple rule, full disclosure, and compliance mean never having to say, “I’m sorry.”

Frivolous arguments
These schemes are increasingly sophisticated in their arguments and packaging and often even include either false or off-point private letter rulings on the legality of a specific plan or letters of opinion from a “top tax law firm.” The IRS has a very specific guide to understanding those arguments.

Abusive retirement plans
The IRS continues to find abuses in retirement plan arrangements, including Roth Individual Retirement Arrangements (IRAs). The IRS is looking for transactions that taxpayers use to avoid the limits on contributions to IRAs, as well as transactions that are not properly reported as early distributions. Taxpayers should be wary of advisers who encourage them to shift appreciated assets at less than fair market value into IRAs or companies owned by their IRAs to circumvent annual contribution limits. Other variations have included the use of limited liability companies to engage in activity that is considered prohibited, a common exposure in self-directed IRAs without professional guidance.

Disguised corporate ownership
Corporations and other legal entities are formed and operated in certain states for the purpose of disguising the ownership of the business or financial activity by means such as improperly using a third party to request an employer identification number. Such entities can also be used to facilitate underreporting of income, fictitious deductions, non-filing of tax returns, participating in listed transactions, money laundering, financial crimes, and even terrorist financing. The IRS is working with state authorities to identify these entities and to bring the owners of these entities into compliance with the law.

While the actual list is much longer, some of the issues like identity theft exposure are applicable to the public at large. Others, including filing false or incomplete W-2s, claiming excessive fuel tax credits, and over-reporting withholding to reduce income are simply intentional tax fraud that we will assume you are not ever going to consider. Make sure you understand the nature of the methods used on your return, you are responsible for what’s on it regardless of who prepared it, and keep tight records on deductions for travel and dining.

Finally, carefully discuss the value of claiming excessive business usage for vehicles and a home office deduction with your CPA; they are common over-reaching red flags and typically of limited value.

As always, the information presented here is general and educational and can never replace the advice of experienced counsel specific to your assets or situation. This article originally appeared at www.PhysiciansPractice.Com where Ike Devji is a regular contributor, and is reprinted here with permission. See more of Ike’s work on law, wealth and business at http://www.proassetprotection.com/blog/

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D.I.Y. Asset Protection Strategies Every Physician and Business Owner Can Implement TODAY

Many of the issues and case studies we have discussed on physician asset protection planning in the age of decreased earnings and unlimited liability may seem daunting and complex. Fortunately, not all the moves you can make require a great deal of time and expertise to address. Here are some small simple issues that every physician can act on by themselves today with little or no cost as a first step to being free from fear.

Do something today.
The number one most important rule of asset protection is that timing is king. Think of it like insurance, which is effective only when implemented in advance of the exposure.

Buy more insurance.
We talked about why insurance alone is not adequate protection in the past, but it is and always should be your first line of defense. Have both personal and professional policies at maximum reasonably affordable limits and then have general liability umbrellas on both. The cost of both umbrellas is typically less than the cost of retaining defense counsel on even a single small exposure.

Maximize your “incidental” asset protection.
Every state has limits on the baseline assets it protects for your family by law, often found in your state’s bankruptcy statues. Make sure you maximize the assets you have in each of these protected categories where practical. These protections are based in the law of your state and are typically supported by a great deal of precedent and case law.

Common protected assets include:

Life Insurance: Understand your state’s protection for the cash value of life insurance. It’s something you likely have, need or want, regardless of whether you enjoy paying for it or not. Given the high allocation to cash most physicians have right now because of instability in the stock and real estate markets this is an increasingly important issue. Make sure that your polices are owned and have named beneficiaries that are protected by statute. For instance, Arizona protects life insurance cash values to full cash value, but only if owned by an individual and when the owner’s dependents are beneficiaries. This small detail dictates whether the money is safe or not.

Homestead: Every state has a “homestead” provision of some type that dictates how much of your equity is protected from creditors including bankruptcy, an increasing concern for physicians. Make sure you know your state’s limits and how much of your home’s equity is exposed or how much “room” you have to bank money up in your home. Be aware of how you hold title and the specific requirements most states impose to get this legal protection. Doing it wrong could cost you your home.

Fund Retirement Plans: Plans with heavy protection include IRAs in their many forms, ERISA-qualified plans, and defined contribution and defined benefit plans. Analyze what portion of your investment assets are long term and allocate as much as possible to those plans. While the laws and their application regarding the safety of these assets vary from state to state most are protected to about $1 million. Ask your financial advisor to explain the limits of these plans in your state. I like them because, again it’s the law and the protection is well established and typically vests quickly. As just one example, IRA contributions in some states are bankruptcy remote after as little as 120 days but remember the timing issue; you can’t establish and heavily fund these plans at the eleventh hour after getting in trouble as defensive planning. That’s known as a fraudulent conveyance or transfer and is the one exception to these laws in most jurisdictions.

Watch Your Annuities: Many doctors purchased annuities due to high guaranteed returns over the last decade. In many states the cash value of the annuities and even the proceeds may be protected. Many of those high return annuities are maturing in a much lower return environment and physicians are looking for places to put money that was earning as much as a guaranteed 7 perent and re-allocating those funds away from annuities which now have much lower returns. Make sure you exhaust your examination of the other available legally protected alternatives (including rollovers) before allocating protected assets to something that may have higher returns but which will also be exposed to a lawsuit. Make your financial advisor do the work; it is part of what they are paid for.

As always, the information presented here is general and educational and can never replace the advice of experienced counsel specific to your assets or situation. This article originally appeared at www.PhysiciansPractice.Com where Ike Devji is a regular contributor, and is reprinted here with permission.

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Computer Disposal at Your Medical Practice or Business: The Other Hazardous Material

  Computer Disposal at Your Business or Medical Practice: The Other Hazardous Material

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By Ike Devji, JD | January 3, 2012

Happy New Year! Thank you for your continued readership, feedback and support.

We start 2012 by addressing something you may have already done — replaced or updated computers and other electronic equipment in your practices. Like many other businesses, medical practices often replace or order new computer and electronic equipment at year end to generate additional expenses and deductions and to maximize efficiency going into the new year. You doubtless put a lot of thought and research into what you bought, or at least picked an expert to make those choices for you but how you dispose of the old equipment is just as vital a choice for your practice.

Unless you are part of a hospital or very large practice with dedicated IT officers you likely now need to safely and securely dispose of a variety of computers and related electronic devices including:
• Networked printers, faxes, scanners, etc.
• Computer servers and arrays
• Devices that combines hardware and software for a specific function, medical or administrative
• Networking equipment
• Electronic data storage devices and backups
• Desktop and laptop computers and smartphones that have been used to access or relay protected data

You’ve likely noticed that “computers” themselves were listed last, primarily because they pose the most obvious threat to the sensitive and legally onerous financial and HIPAA-protected information that virtually every medical office in the United States stores and is legally responsible for. However, the admittedly partial list of other devices that can store and transfer this data shows how much wider the exposure is and why all practices must deal with this exposure of patient data in a systematic way. As an example of just how serious the exposure can be, a simple printer can have tens of thousands of patient social security numbers and intake forms stored in its memory.

You may be asking, “Can't we just give them or throw them away?”

No, not in most cases. You can certainly donate (and in some cases take a tax deduction for) certain peripherals after determining if they pose a storage risk or not, (things like mice, keyboards, and monitors are the most basic examples), but the computers themselves and most other devices that transfer, copy, or store data present a serious exposure to your business. Whether your computers are going to be destroyed, donated, or recycled, it’s vital that all data on the computer is wiped out as a minimal first step.

Downloadable software programs or those available at most office stores can be a first step and may already be present in your operating system or anti-virus programs. Remember that data on personal computers is not actually “erased” unless the hard drive itself is destroyed. In many cases a professional ID thief (or an average 12-year-old) will be able to retrieve the info from a wiped computer.

Here’s a simple five step outline to get you started. These steps will help mitigate your practice’s legal and financial exposures for the data, potentially facilitate the use of the equipment by a worthy charity or individual and help your practice be more green.

1. Take action now. It’s too easy to put the old equipment into a storage area that no one pays attention to or takes inventory on until something goes missing.

2. Have a plan and make someone specific responsible. Create a written chain of custody and educate the person in charge about the risks and gravity of the task at hand.

3. Keep records of how many devices you have and are destroying or donating (make a copy for the CPA including depreciated value and replacement cost) and where they went or how they were disposed of.

4. Disconnect old machines, sign all users out of them and disconnect them from your network where they are often not maintained or updated and where they may actually create a security risk.

5. Keep the equipment secured until it’s ready to be recycled or destroyed. Keep records of where it goes.

Asset Protection lawyer Ike Devji has over eight years of practice devoted exclusively to Asset Protection and Wealth Preservation planning. He works with a national client base including 1000’s of physicians and business owners often through their local attorney, CPA or financial advisor. Together, he and his associates protect billions in personal assets for these clients. Ike also regularly writes, teaches and speaks on these issues to physicians and other professionals nationally. See his work in WORTH, Advisor Today, Physician’s Practice and at www.ProAssetProtection.Com

As always, the information presented here is general and educational and can never replace the advice of experienced counsel specific to your assets or situation. This article originally appeared at www.PhysiciansPractice.Com where Ike Devji is a regular contributor, and is reprinted here with permission.

Seven Legal Survival Tips for the Office Holiday Party - Asset Protection

This week marks the traditional start of the holiday party season for many businesses and most readers will attend multiple holiday parties and perhaps even host one or more. Attending a few of these events myself I’m always surprised to see employers with exemplary employee interaction throw all caution to the wind at this time of year, often with unpleasant results. While I certainly don’t want to scare you out of having a party and sharing the holiday spirit with your valued employees, we must address the way people really behave at these events and what it means for your practice.

As discussed in previous columns, employee liability is a major issue that we are always trying to be proactive about. Most employment liability centers around a lack of clear rules and procedures and perhaps most importantly, a set of well enforced behavioral expectations that they support. Below are some simple tips and issues to consider when planning your party. 

Invite your “guests” — don’t require their attendance.
Make it clear that the party is an optional perk, not a required work activity that is linked to their job requirements. If they are required to attend it raises your liability.

Lead by example.
“The boss” or some kind of hall monitor being present goes a long way. Be friendly and collegial but control your drinking, get people to eat, and make sure someone is clearly in charge and visible as the host. Many of our clients have been involved in lawsuits related to the conduct of their partners while everyone was making sure the guests were behaving. The rules apply to everyone, especially you and all management.

Set the tone with a dress code.
Make sure your colleagues and employees understand that this is a business event, not a nightclub atmosphere. Encourage appropriate dress for the event and set guidelines if you know some attending may dress in a manner that is inappropriate or overly suggestive. Communicate it clearly and in advance so your guests are not surprised or embarrassed.

Feed them first.
Put some food in your guests, before the drinks are really flowing if possible. This will keep them busy, slow their drinking and help ensure they don’t drink until they are full.

Control and limit the booze.
It’s not realistic to expect that many offices will abstain from serving alchohol completely, but this is the number one source of problems at most parties. Remember that you are responsible for just about everything that happens during and even after the party, including liability for those who may injure themselves or others (even people not in attendance) as a result of excessive drinking or as their lawyer will put it, “being over served.” You can do this by limiting service hours at the bar, providing drink tickets for a specific reasonable number of drinks, or by having the drinks passed and served at intervals.

Consider the venue and limit access if it’s at the office.
During the day everyone knows where they are allowed to be and what is and is not appropriate, the lines get blurred after a few cocktails. Consider hosting your party off-site. It’s often more fun and helps transfer liability on some issues to the “professional” hosts at a restaurant or other venue. Make sure the venue itself does not create additional liabilities or an environment that may promote inappropriate contact or behavior or excessive consumption; cross the “Home of the Barber Shop Shot Chair and Mechanical Bull” bar off your list. If logistics don’t allow that, limit access to the office and request that the computers not be used. The last thing you want to happen is to have four employees gather in a cubicle watching Internet porn (true story). Make sure that items that are sensitive, controlled, or dangerous are off limits and inaccessible. Remember that you may have strangers in your office like caterers or delivery people and that no one will be watching them.

Have a good time.
Have some genuine fun and make sure others are doing the same. We often see that “boring” parties create the most issues as people drink, fight, argue and gossip to keep themselves busy. On the other hand a well-organized party with a flow that keeps people talking, eating, moving, and interacting reduces the opportunity for much bad behavior.

Asset Protection attorney Ike Devji works from Phoenix, AZ with a national client base. See more about him and how to preserve your wealth at www.proassetprotection.com

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Asset Protection: Are Your Children a Lawsuit Exposure?

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I clearly remember when I first really understood that my parents were responsible for my actions. 

I was 15 years old and standing in front of my high school with my friends when a kid from another clique walked up and started running his mouth a bit too much. One of my friends objected and the exchange ended with my friend punching the bully in the mouth, knocking out and actually breaking a few of his teeth. The ensuing threat of a lawsuit ended with my friend’s father, a successful radiologist, writing a large check for a substantial amount of dental work.

This was a relatively minor and commonplace type of exposure and incident; kids fight and do other stupid things, but the level of liability and the willingness of attorneys and plaintiffs to sue is at an all-time high. This heightened risk has surprisingly not been accompanied by increased defensive planning or education by most parents.

We all like to think our kids are better behaved, smarter, and more sensible than the ones we see in the news or read about, but their exposures are unpredictable and often arise from mundane activities you never dreamed would be an issue. In a previous article, we discussed Financial Literacy for Your Children and part of that discussion must include a detailed explanation of the fact that Mom and Dad are personally financially responsible for any harm, damage, or loss cause by their minor children.

In one case, a successful physician we work with left town for the weekend with his wife, and his 17-year-old daughter threw an party at their home — a pattern that happens all over the country a thousand times every weekend. Unfortunately in this case, a young man from another high school whom she had never met before came to the party and overdosed on the drugs he brought with him, tragically dying at the scene and creating a lawsuit against the young lady’s parents that sought damages in excess of three million dollars. Neither the young lady, her parents, or anyone else in the upscale community of private schools and gated multimillion dollar homes ever dreamed this was possible in such a “nice neighborhood” and the resulting claim was in excess of the limits of the homeowners liability policy the family had in place. The story is dramatic, but the dozens of other parentally liability exposures I’ve seen over the years typically come from much more mundane issues.

Here are a couple of specifics to consider and explore with your kids. This list is only a start and assumes you are adequately insured, have an umbrella in place to help shield you and that you have taken steps beyond insurance to secure your assets before the harm occurs:

1. The Family Car: Make sure your minor children are specifically named and insured on any vehicle you let them drive. You are liable for everything they do behind the wheel, whether you gave them permission to drive the vehicle or not. If they are irresponsible or if they take the car without permission you must take control of the keys and treat the vehicle like a loaded gun. Suddenly your high school senior cutting class with her friends and pilling them into to your car to go to Starbucks is remarkably less “cute.” There is no excuse for you not knowing where the car and the kids are as there is vehicle-tracking technology available for only few hundred dollars from sources as common as Brookstone.

2. Behavior Issues: Negligent Supervision and Negligent Entrustment — If your child is of a young age or is of questionable judgment and creates harm, you own it. The same holds true for others that have custody or are entrusted with supervision, so any guardian is at risk if the harm would have been prevented absent inadequate supervision. This also creates potential liability for you for the children of others you have custody of, even overnight.

3. Access to Firearms and Other Dangerous Items: It should be obvious by now, but if you have guns in your home (or bows and arrows, ATVs, jet skis, a swimming pool, prescription drugs, or anything else that can be misused) you are legally and financially responsible for not only property damage but in some states and fact patterns CRMINAL LIABILITY for the actions of your child. Given the cost of defense counsel, the litigation alone could be financially devastating not to mention the possibility of someone getting killed and the resulting costs and consequences to all involved.

As always, the information presented here is general and educational and can never replace the advice of experienced counsel specific to your assets or situation. This article originally appeared at www.PhysiciansPractice.Com where Ike Devji is a regular contributor, and is reprinted here with permission.

Asset Protection for Your Home - Bad Legal Advice is the Norm

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Asset Protection for Your Home – Bad Legal Advice is the Norm

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Mid pleasures and palaces though we may roam,
Be it ever so humble, there’s no place like home.
John Howard Payne (1791 – 1852)

A good part of the American dream and the largest single asset many people own is their home. Whether shelter or showpiece, the sanctuary it provides and the investment we make in our homes is among the largest in the Western world yet surprisingly little thought goes into protecting that investment.

In some states the equity in your home, should you be fortunate enough to have any left at this point, is completely protected by law, typically homestead statutes. In other states that protection is so low that it is virtually non-existent and requires you to take action to protect your investment. Knowing what the homestead limits in your state are and when they apply, (i.e. only in bankruptcy or only on a dwelling actually occupied by you) is a good start.

 The key is simple: You do not need to hold personal title to your home to use, control and enjoy it the way you want to.

We see many physicians and other business owners transfer their primary residence to a spouse, child, or other relative for safekeeping, a common amateur mistake that fails to protect the asset in any competent way. All this achieves is the substitution of your liability for that of another individual that drives a car, interacts with public in some way, and may have their own professional liability issues. Even worse, if that person has only one or few assets, the home you transferred to them may be the only asset they have available to satisfy any kind of liability or judgment. Example? A physician in the Northwest does some Internet “research” (yikes!) and decides to transfer his paid-for $2.9 million home to his adult college-aged son to protect it from his professional liability. Within a year the son was involved in a car accident that killed another driver, the family home was his only asset.

Another common error involves the assumption that your home, or any other asset, is protected by having it titled in your Revocable Living Trust. As the first word implies, the trust is revocable during your lifetime and you can be ordered to convey it to a judgment creditor by the courts. Having your home adequately protected by an irrevocable trust on the other hand is a better option and may allow you to keep mortgage interest deductions and capital gains benefits in certain scenarios. These tools must be chosen appropriately and by experienced counsel as they have serious tax, title, and use implications that will affect your rights to use and hold the property.

Many estate planners use tools like qualified personal residence trusts (aka QPRTs) that are not age- and use-appropriate outside their intended purpose, making a real gift of your home to your heirs. Make sure you are working with counsel that understands that you may want to upsize, downsize, or equity strip the property to make an investment of some kind and that the tools they are proposing you will allow you to do so. Having your money in a “safe” is worthless if you can’t get it open when you want it.

Likewise, business attorneys often make the mistake of using “business” tools for “personal” assets, such as putting the home you live in into an LLC (or limited partnership, corporation, etc.) under the false impression that this somehow protects it. To be protective the vehicle has to meet all formalities of business entities, including separate bank accounts, records, and tax reporting. Further, it needs to have a legitimate business purpose, like property management or real estate investing and if you live in it you need to pay commercially reasonable rent to the entity that owns the home.

Given this only partial list of the details and hurdles involved you can see that, “Put your personal residence in an LLC,” is both bad and incomplete advice for most people and such a transfer to a corporate entity can also cost you the capital gains benefit and mortgage interest deductions if not handled the right way.

Asset Protection only attorney Ike Devji has over eight years of practice devoted exclusively to Asset Protection and Wealth Preservation planning. He works with a national client base including 1000’s of physicians and business owners often through their local attorney, CPA or financial advisor. Together, he and his associates protect billions in personal assets for these clients. Ike also regularly writes, teaches and speaks on these issues to physicians and other professionals nationally. See his work in WORTH, Advisor Today, Physician’s Practice and at www.ProAssetProtection.Com

As always, the information presented here is general and educational and can never replace the advice of experienced counsel specific to your assets or situation. This article originally appeared at www.PhysiciansPractice.Com where Ike Devji is a regular contributor, and is reprinted here with permission.

Why the United States is Still a Great Place to Do Business

By Ike Devji, J.D. | July 8, 2011

As we return to work this week after celebrating the most uniquely American of holidays it may be easy to take many of the benefits American business owners and professionals enjoy for granted. This is especially true in light of current economic conditions and the relentless barrage of bad news and negativity on all economic fronts we are presented with on a daily basis.

Many of you reading this have lived and worked in other countries or perhaps your family is still new enough to the United States that you still remember what it was like in the “old country.” This is a partial list of the advantages we enjoy and a simple reminder of how much power each of us has in capitalizing on these benefits as part of our individual success.

1. Freedom — A broad term, to be sure, but the freedom to pursue one’s dreams and passions, pick a profession and choose the level of effort we are willing to direct towards that goal is still more attainable here than in most other countries. There are many places in the world where need, quotas, family connections, or a single aptitude test determine if you are going to be surgeon, soldier, or coal miner.

2. The Rule of Law — The U.S. is unique in terms of the level of legal sophistication that we have achieved and the number of laws we have on the books. While much of our previous discussion through this column has focused on exposures and abuses in our legal system that affect your wealth, that same system can be used to your benefit and you have the right to “opt-out” of the lawsuit system proactively as we have discussed. The things that make our society and economic system run, like the concepts of liability, property, contracts, and accountability still do not exist in any meaningful way in more than half the world.

3. A Culture that Supports Excellence —Americans love a winner and we love excellence. This means that any business, including a medical one, can exercise its power and freedom to excel and build a loyal following. If you decide that you and your business are going to be better, faster, kinder, and more efficient than the shop next door, they will come.

4. The Power of Marketing and Technology – The number of experts and free and low-cost resources available to the American business owner is staggering. The ability to communicate your value, services, and knowledge is key to supporting the culture of excellence; it’s no good being great at what you do in your office by yourself, people need to know about it. There is no business culture in the world that has our resources in the area of marketing and communication, one thing we certainly still lead the world in. Skeptical? Take a look at whatever you think the biggest social media companies in the world are and I’ll guess all of them are American companies, started here, and adopted by the kind of people that make your practice run.

5. A Stable Economic and Political System — Yes, really. I know the hour may seem dark now, especially to those of you who are seeing the country in its greatest period of crisis in your lifetime. However, if you have travelled extensively or follow world events closely you will quickly recognize that the stability we enjoy is unique, even among so-called Western Democracies. This is a place where you can make long-term plans, build a future for your family, and be relatively free of fears of drug gangs, the complete collapse of your currency, and the validity of your property rights. Even our closest neighboring countries don’t all have these benefits. Yes, we have serious problems; we also have one of the largest machines in the world at work on those problems twenty-four hours a day.

6. Nearly Unmatched Infrastructure and Education Systems – Yes, things could be better and getting and keeping things funded is a continuing uphill battle. That being said, the things that we take for granted like basic infrastructure including  reliable phone and internet connections, power that works without fears of rolling “brown-outs” in the middle of your work day, roads that are well maintained and clear of debris, fire and police protection (most of the world has no 911, and very few places even yield to an ambulance like we do here) and mail and courier services that reliably deliver your inbound and outbound mail without stealing it are only a few examples of things that do not exist in many other countries.  Add to that our nearly universal access to education and the general availability of  reasonably skilled, honest and hardworking people to be a part of your business and you have a competitive advantage that business owners in most countries would kill for.

This list is far from complete, I’m not sure it ever could be, but I’ll keep working on for myself and the benefit of those I work with. Please share your thoughts on these issues and remember what is perhaps the most important and uniquely American trait we all share, the power of our determination to succeed based on our desire and efforts as one united nation.

This article originally appeared at www.physicianspractice.com, The Nation’s Leading Practice Mgmt. Resource, where Ike Devji is a regular contributor.

How to Pick an Asset Protection Lawyer - Key Due Diligence Questions and Caveats

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How to Pick an Asset Protection Lawyer – Key Due Diligence Questions and Caveats

By Ike Devji, J.D.

The last four years has created an explosion in the Asset Protection planning field due to both the large number of people who have finally realized that their wealth is more finite and fragile than they ever imagined and the litigation boom that inevitably follows tough times. Unfortunately, this new found interest in Asset Protection and the large number of people seeking to profit from has created a more puzzling and fraud-ridden landscape for legal services consumers than ever before.

It seems every attorney that has attended even a single continuing legal education (CLE) class on Asset Protection now feels qualified to implement tools and strategies that have far reaching and potentially fatal effects if misused or not completely understood. While I myself take CLE classes in a variety of areas outside my very narrow practice field, I do so simply to be generally educated and to help me spot issues for clients so I know when to get them help from qualified and experienced counsel, not to try and keep work I don’t know how to do inside my firm.

As one simple example, the thought of litigating a divorce case for a client despite the fact that I have a general understanding of the marital property laws in my state would be ridiculous. Not only would it jeopardize my client but create a substantial liability for me, especially since I have a roster of exceptionally qualified help in this area at specialty firms that will serve my client better in that area than I could ever hope to. 

Even worse, attorneys that I have personally met with and discussed issues for planners or co-counsel opportunities who flat out told me that they don’t practice in this area at all are going back to their offices and adding “Asset Protection” to their websites. A review of the websites of many small and mid-size law firms that have recently tacked this area onto their websites will reveal that that their “expert” is also listed in a number of other categories, like estate planning (at least this one is close), contracts, employment, real estate and etc. what this tells me as an attorney is that they don’t have enough work in any single category to have a focused practice and will handle anything that comes across their desk. This is appropriate for some simple, general legal issues, but not Asset Protection planning.

The last eight years of my national legal practice have been devoted exclusively to Asset Protection law. In that capacity I have been fortunate to help protect a client base of thousands of clients representing billions of dollars in safely protected assets. This very concentrated practice has also provided a good understanding of the plans and planners at work in this specialized field and I have seen the very best and very worst of the plans being sold across the country.

In the worst cases we are asked to appraise the protective value of existing poorly implemented plans using bad tools, jurisdictions or both by either lay-people facing a threat or their experienced litigation counsel that know that my associates and I practice in this area and want a real appraisal of the system that they have in place and its protective value. Unfortunately, this 11th hour stress-testing is often limited to an informational exercise as many of the good, valid legal moves and tools are outside the reach and use of the client at that point because they are already in trouble and the kind of changes needed to make their planning useful would constitute fraudulent conveyance.

20/20 HINDSIGHT BY LAWYERS

Another common issue I experience is being approached by a potential client who is concerned about their wealth and the level of exposure they have. After a thorough review and the delivery of a specific written plan to protect them by myself or other qualified counsel they often go back to their existing legal team (that allowed them to get where they are today without protection) to get their input. What is stunning is the number of attorneys who will review an expert’s plan, make a couple of minor comments or changes and then say, “Yes you need some more planning, we can do that”.

What puzzles me is that if the lawyer and client had a long relationship and the lawyer was privy to all the details of their business, liability, assets and etc., knew the client needed additional planning and was qualified to deliver it, why did they wait years and until their client took action on their own to try and jump in and do work outside their skill set and practice area? If your lawyer did not know enough to do it or at least suggest considering Asset Protection when you were first qualified based on your assets and liabilities, they probably don’t know enough to put it in place for you now.

DUE DILLIGENCE QUESTIONS TO ASK AN “ASSET PROTECTION LAWYER”

#1: Are you a lawyer or part of a law firm that will keep our discussion privileged?

Remember that dealing with “promoters” or LLC Mills does not provide the skill set and training required. More importantly, if you are not dealing with a law firm that allows all your communications to be attorney privileged everything you do is discoverable with a simple subpoena, including all emails and other communications.

#2: How many clients have you done this specific type of planning for?

An East Coast law firm has nearly plagiarized the website of my associates. On it they claim to serve thousands of clients and be a top asset protection law firm. Closer examination of the site reveals that they have a dozen plus distinct practice areas and are simply representing that client base as if all of it is with Asset Protection clients.

#3: What's the average net worth of your clients?

It’s important to deal with a lawyer and firm that has a depth of experience with businesses, assets and families like yours. Knowing what your liquidity needs are and not using outdated estate planning tools that are not income, business and age appropriate (like using a QPRT for a 33 year old) are common amateur mistakes we see other lawyers make. Also, be aware that a number of different specialties now classify themselves as “Asset Protection” planners when it was formerly used only for the kind of pro-active, defensive legal planning I am focusing on in this article. The field now includes elder care lawyers, annuity and insurance salesman and variety of other folks that may have good products and services, but are probably not what you are looking for. If your planner is an Elder Care planner, as one example, they are probably not equipped to handle and as familiar with the needs of a high net worth business owner, physician, or high visibility individual like a professional athlete or entertainer.

#4: Where do you work?

Having a law firm that works nationally is a good hedge. It’s important that they understand the protection available by statue in your locality and give you a plan that will stand up to attacks in any jurisdiction. It’s also important that it is portable so it can travel with you if you move and flexible enough to allow you to do business and own assets in more than one jurisdiction, i.e. something as simple as a vacation home in another state or a life insurance policy with a high cash value that could be lost in a lawsuit.

#5: How many types of law do you practice and how long has Asset Protection been part of your practice?

See my more detailed explanation of this concern at the opening of this article. Make sure you are comfortable with their experience level. Lawyers are increasingly specialized and while many of have a good general knowledge of a variety of concepts and issues we tend, like all professionals, to be good at only one or two on a good day.

#6: How many doctors do you protect?

This is obviously a doctor specific question, but an important one if you are a physician or the advisor of a physician doing due diligence on their behalf. In my experience with a client bas that includes thousands of doctors we have learned that medical professionals of all types including MD, DDS and DC have unique needs and specific technical and legal exposures that only get more onerous as their success grows. Make sure the planner you are dealing with understands those unique issues and is trained well enough to be another set of eyes on your behalf for a holistic check-up of your wide array planning needs.

#7: Can you provide any professional recommendations?

This can be tricky for lawyers, especially those who practice in sensitive fields where people value their privacy like Asset Protection as opposed to say, a real estate lawyer. Nevertheless, they should be able to provide at least a couple of professional references that speak specifically to their experience in this field or from related professionals outside their own firm that refer clients to them for this specific service.

#8: Have you written anything on this topic that outlines your tools and strategies?

If your planner is even marginally qualified to work in this area with you they should have extensive educational materials that describe the tools they use and what each tool does. If they can’t educate you about the tools they will likely do more harm than good, as part of our job as planners in this area is to educate our clients on what works best, why and how to use it going forward. No matter how much support a firm offers they can’t be with you 24/7 so they better be able to train you.

#9: Can you provide a specific written plan that outlines costs, results and requirements?

Every firm prices its services differently, and that’s OK, but they should be able to show you in writing what result they are going to attempt to achieve ( I say attempt because there is no such thing as certainty in the law, all we can do is follow proven best practices supported by law and experience with others. Anyone who tells you their system is undefeatable and “will” never be broken is lying, or worse, stupid) for a specific price.

#10: What kind of on-going support and education do you provide to your clients and at what cost?

Hiring an Asset Protection lawyer is one step in a holistic multi-step process with many pieces, not a one-shot magic bullet. If you pay someone in my business to build you a “Legal Vault” that is capable of containing your life’s work, they better be there to help you put the assets in it, use it the right way, teach you to lock the door and show you how to open it when you need your assets or use of them. Merely getting a box of legal papers on its own is not going to serve you and your family well. Be wary of the fees involved to use the plan, in addition to what it costs to set up. Ask specific questions about accounting, compliance and tax status and reporting burdens, many of the best Asset Protection tools and plans are explicitly tax neutral. Finally, be clear about how accessible your planner is going to be going forward and at what cost. Many hide huge fees on the back end to lure you in up front.

This list will doubtless be fluid and expanded as other issues prove outside the experience of clients and advisors. For now, consider it a starting point on your journey to financial security and to having your own “net worth insurance” policy in place.

ABOUT THE AUTHOR:

Attorney Ike Devji has over eight years of Asset Protection only legal experience and helps protect a national client base of thousands of clients comprising over $5 billion in personal assets. This client base includes several thousand doctors and a wide variety of high net worth business owners, C-level executives and other affluent individuals. He is a frequent teacher, speaker and author on this subject and has dozens of bylines in publications ranging from WORTH magazine to Advisor Today and Physicians Practice. To learn more about him visit www.ProAssetProtection.com .

The Common Traits of Long-Term Wealth

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The Common Traits of Long-Term Wealth

By Ike Devji, J.D. | May 24, 2011

I have been fortunate to work with some of the most successful people in America through the course of

my career. All of them excel at something; medicine, business, real-estate development, science, and

even the arts. What this vastly diverse crowd has in common (besides money) though are a set of traits

that have made them not only good at what they do but wealthy and successful by any standard in a

long-term and predictable way; here are a few of the most notable ones:

They Work Hard: Nearly all of them are the source of their own wealth. That is, they get up every day

and commit themselves to the practice of some profession with skill, passion and diligence. They always

strive to be smarter, more informed about their market and more skilled at what they do than the day

before.

They Never Take Their Market Position for Granted: They understand that in a down economy discount

solution, product, and service providers emerge in every market. They know competitors will be selling

price first and many consumers won’t see the differences until they have been poorly served. They make

sure their marketing efforts, network, and professional relationships are as important and well-nurtured

as they were before the reached their current level of success. “Good Enough” is not part of their

vocabulary.

They are Team Players: They look for every way to add value and collaborate with other top service

providers in their field so that they are a natural part of every project or client they are involved with.

They associate with other best-of-class teams and attend professional education and networking events

on a regular basis.

They Are Proactive, Not Reactive: They take preventative care of their health, business, and known

liabilities and plan to avoid problems, not manage them. They understand that a small amount of time

and resources directed at these issues now will save them vast amounts of energy and money in the

future and gives them the greatest number of options. They understand that preventing an illness,

whether physical or financial is almost always better than treating it.

They Understand Wealth is Finite and Fragile: They live very well, but also “well within” their means.

They are willing and able to adjust their lifestyles and spending to adjust for market realities and income

fluctuations. They have money in the bank, not just on their wrists, and can handle fluctuations is cash

flow and earnings as well as most common unplanned expenses without panic or liquidating large assets

at a bad time in the market. They get that an important part of wealth is “having some.”

They Prioritize and Do “Boring” Things Before Spending on Lifestyle: They buy life, health, and

disability insurance, get estate and asset-protection planning, stick to savings and investment plans and

other things that often have a hard time competing with new cars and vacations. They are financially

disciplined and meet the mental commitments they have made to their families and future wealth and

success before meeting today’s “wants.”

They Create Success Maintenance Teams: They identify top professionals in various areas, create

relationships with them and act decisively to implement their suggestions and expertise. They have

control of their egos and understand that as bright and successful as that are, they are better off being

surrounded by experts in areas outside their field. They know “what they don’t know” and are willing

and able to delegate responsibility to others and let go enough to be free to do what they are best at,

which is never everything.

They read Physicians Practice regularly: And other sources of information that present a wide range of

expert guidance and stimulate critical thinking. They know that their learning is a lifetime process and

they never stop.

This article originally appeared at www.PhysiciansPractice.com the nation’s leading practice management resource, where Ike Devji is a regular contributor. It is reprinted here with permission.