Three Liability Planning Tips for Physicians Anyone Can Use

Whether you are a physician or not, you probably know that the practice of medicine is a profession fraught with liability.  It’s not just medical malpractice claims either – employment related issues
, careless business partners and employees, contractual obligations, and personal liabilities add to the risk assumed by a physician in private practice.  Unfortunately, in our litigious society, these liability risks are not unique to physicians.  Business owners, board members, real estate investors, and retirees need to protect themselves from a variety of liabilities too. 

Below are three liability planning tips anyone – physicians and non-physicians alike – can use to protect their hard earned money.

Tip #1 – Insurance is the First Line of Defense Against Liability

Liability insurance is the first line of defense against a claim.  Liability insurance provides a source of funds to pay legal fees as well as settlements or judgments. Types of insurance you should have in place include (as applicable):

• Homeowner’s insurance
• Property and casualty insurance
• Excess liability insurance (also known as “umbrella” insurance)
• Automobile and other vehicle (motorcycle, boat, airplane) insurance
• General business insurance
• Professional liability insurance
• Directors and officers insurance

Tip #2 – State Exemptions Protect a Variety of Personal Assets From Lawsuits

Each state has a set of laws and/or constitutional provisions that partially or completely exempt certain types of assets owned by residents from the claims of creditors.  While these laws vary widely from state to state, in general you may be able to protect the following types of assets from a judgment entered against you under applicable state law:

• Primary residence (referred to as “homestead” protection in some states)
• Qualified retirement plans (401Ks, profit sharing plans, money purchase plans, IRAs)
• Life insurance (cash value)
• Annuities
• Property co-owned with a spouse as “tenants by the entirety” (only available to married couples; and may only apply to real estate, not personal property, in some states)
• Wages
• Prepaid college plans
• Section 529 plans
• Disability insurance payments
• Social Security benefits

Tip #3 – Business Entities Protect Business and Personal Assets From Lawsuits

Business entities include partnerships, limited liability companies, and corporations.  Business owners need to mitigate the risks and liabilities associated with owning a business, and real estate investors need to mitigate the risks and liabilities associated with owning real estate, through the use of one or more entities.  The right structure for your enterprise should take into consideration asset protection, income taxes, estate planning, retirement funding, and business succession goals.

Business entities can also be an effective tool for protecting your personal assets from lawsuits.  In many states, assets held within a limited partnership or a limited liability company are protected from the personal creditors of an owner.  In many cases, the personal creditors of an owner cannot step into the owner’s shoes and take over the business.  Instead, the creditor is limited to a “charging order” which only gives the creditor the rights of an assignee.  In general this limits the creditor to receiving distributions from the entity if and when they are made.

Final Advice for Protecting Your Assets

Liability insurance, exemption planning, and business entities should be used together to create a multi-layered liability protection plan.  Our firm is experienced with helping physicians, business owners, board members, real estate investors, and retirees create and—just as important—maintain a comprehensive liability protection plan.  Please call our office if you have any questions about this type of planning.  

Contact Bobby Sawyer at (704) 944.3275 or bobby@csjlawonline.com with any questions or issues, or if you would like to discuss some strategies for addressing this topic.  

Are You Wasting Money? Part 3: Taxes, Insurance, Not Bidding and/or Negotiating

So far in this series on wasting money (part 1 and part 2), we have looked at how people may overpay for housing, interest, transportation, food, clothing and entertainment. In this last part, we will look at a few more areas in which we may pay more than necessary—taxes, insurance, not obtaining bids for services, and not negotiating for large purchases.

While you may already be astute in these areas, sharing good financial practices like these with your children and/or grandchildren can be part of your legacy, as you help them prepare to be prudent and responsible beneficiaries. And, for tax management and risk management (via insurance coverage), your legal and advisory team can produce integrated tools to assist you in keeping more of your money within the family than having it leak out unnecessarily.

The Key Takeaways

• Any time you pay more for something than you have to, money is wasted.
• Reviewing tax deductions and insurance coverage, comparison shopping, bidding out services and repairs, and negotiating—these take time, but they can help save significantly.
• Any time you save money, you are being financially responsible and will find more money for the expenses in life that are really important to you.

Where People Waste Money…And Actions to Consider

1. Taxes. Take every deduction to which you are entitled. Even if a professional prepares your tax returns, it is a good idea to become familiar with allowable deductions. For example, charitable deductions, even small ones, add up—if you volunteer, keep track of your mileage and financial contributions; fill out the form when you make clothing and household donations; and instead of dropping cash into the offering box at your place of worship, write a check or set up automatic payments.  Of course, if you have significant charitable interests, trust-based strategies offer you cost effectiveness and a disciplined structure.

2. Insurance. Review your policies every year. Property values change, and it’s important to not over- (or under-) insure. For example, an older car may not need collision insurance. Increasing deductibles will save on premiums. Bundling various policies (home, autos, personal liability, jewelry) under one insurer will probably earn you discounts and save time.

3. Not getting bids when hiring workers. Asking friends and neighbors for references is a good start, but it is also important to get at least three estimates. And remember, the lowest price is not always the best value.

4. Not periodically rebidding current products and services. Being loyal is commendable, but not if it causes you to pay more than necessary. If you are able to find a lower price, your current provider may match it to keep you as a customer.

5. Not negotiating for large purchases. We all know there is profit margin built into pricing, and there is usually a larger margin on expensive items. Some vendors actually expect to negotiate. Learning how to negotiate fairly and respectfully will frequently save you some money.

What You Need to Know: It’s easy to get caught up in the current culture of instant gratification and impulse spending. We could all benefit from slowing down a bit and becoming better consumers. Taking the time to evaluate purchases and comparison shop will not only help avoid overspending and wasting money, but it results in satisfaction from being responsible and efficient with money. 

More Actions to Consider

• Evaluate how you may be overspending in these areas. Commit to following through on some of these suggestions and note how much money you save.
• Think where you could use that extra money. Would you like to pay off some debt, or save for a family vacation, car, home, college, or charitable gift?
• Start to prioritize spending and set some money-saving goals. Creating a budget and monitoring spending on a regular basis will help avoid wasting money and start meeting goals you set. (For more on this, read the previous blogs on budgeting and setting spending priorities.) 

Contact Bobby Sawyer at (704) 944.3275 or bobby@csjlawonline.com with any questions or issues, or if you would like to discuss some strategies for addressing this topic.

How to Stop Worrying About Running Out of Money in Retirement

Many retirees today worry about having enough money for their retirement. Of special concern is if there will be enough money to provide for the surviving spouse. This is called “shortfall risk,” and it is a valid concern. People are living longer and health care costs continue rising, especially long-term care which many seniors will need. In addition, the recent recession has given us setbacks in investments and record low interest rates. When combined, these issues can have a serious effect on retirement savings and projected income. But there are some things you can do now to help manage your shortfall risk and protect your assets.

The Key Takeaways

• The fear of running out of money in retirement is a valid concern due to increased longevity, increasing health care costs, low interest rates and the recent recession.
• Using experienced advisors who specialize in certain areas can help you increase your retirement income as well as preserve, grow and protect your assets.

The Role of Specialists

A retirement specialist can help you determine the best strategy for taking distributions from an IRA, 401(k) and other retirement accounts; the tax implications involved; how to continue to grow your savings; when to start taking Social Security benefits; and how to plan for out-of-pocket medical and long-term care costs. An estate planning attorney can help you shield your family and your assets from probate court interference at incapacity and death, unintended heirs, unnecessary taxes and lawsuits. Other specialists can be brought in as needed, for example when life insurance is used to provide an inheritance for a child who does not work in the family business.

What You Need to Know

The financial advisor who helped you grow your retirement nest egg may not be the best choice to help you determine how to take your money out. Likewise, your business attorney is probably not the best choice to do your estate plan. An innocent error by a well-meaning but inexperienced advisor can result in a costly and often irreversible mistake. 

Actions to Consider

• Be open to new products and strategies that you may not have considered in the past. For example, consider trusts combined with investments and property to manage the conflicting demands of income, spending, taxes, distributions and transfers.
• Explore new long-term care options from insurance companies. These include:
• Asset-based long-term care (a single deposit premium; if not needed for long-term care, the benefit amount is paid tax-free to your beneficiary);
• Life insurance accelerated death benefit (allows you to access the death benefit before you die for long-term care expenses);
• Home health care doublers (a guaranteed lifetime income contract that doubles your income for up to five years if you need long-term care).
• Delay taking Social Security benefits. If you delay benefits until age 70 and live past age 79, your lifetime income will be more than if you start taking benefits at Full Retirement Age (66-67). 
• A revocable living trust will avoid court interference at both incapacity and death. This is why more people prefer a living trust over a will.

Contact Bobby Sawyer at (704) 266.0727 or rsawyer@sawyer-law.com with any questions or issues, or if you would like to discuss some strategies for addressing this topic.

The Truth about Personal Risk Management, Part 1 - Insurance

Personal risk management is being aware of the risks in your home and in your life, and then planning how to handle those risks. Insurance plays a big part in managing risk. Most people don’t like paying insurance premiums, but when something happens and the insurance pays for a covered expense, they are relieved they had it. 

The Key Takeaways

• Not recognizing and managing risk can set your family up for financial ruin.
• Recognizing and managing risk will give you and your family the freedom to live life, without worrying about how you would handle a catastrophic loss.

What kinds of risks should I be aware of?

Property and casualty risks include your car and other vehicles, home and furnishings, jewelry, cameras, and so forth. You would want to protect these from accidents, theft, fire, flood, and earthquake damage. Health and long-term care insurance help protect your finances if you become ill or injured. Disability income and life insurance help replace income in the event of a long-term illness or death. If you volunteer with children or youth, you may need personal liability insurance. An increase to your umbrella policy is warranted once you have teenage drivers. If you are a business owner, you may need insurance as part of a buy-sell agreement with a key employee or business partner in addition to business liability insurance. If you are in a high-risk profession (like health care, construction or real estate), you will probably need additional asset protection planning.

How much insurance do I need?

You need enough insurance to protect your assets in the worst-case scenario. At the same time, the premiums should be an amount you can comfortably afford in your budget. Decide what you need to insure, how much to insure it for, and how much you are able and willing to pay in deductibles and premiums.

What You Need to Know

Your family’s needs for insurance will change over time and will reflect your values at each stage in life. For example, you may need more life insurance when your children are young; you may want long-term care insurance as you near retirement (although it is less expensive when you are younger); you may not need as much personal liability insurance if you retire from volunteering or once your children become independent; and you may not need business insurance if you sell your business.

Actions to Consider

• Look at ways you can reduce premiums. For example, installing a home security alarm system or trimming shrubbery may save on your homeowner’s insurance. If you drive an older car, you may not need collision insurance. If you can handle higher deductibles, your premiums will likely be lower.
• Look for ways to reduce risk entirely. For example, you may want to sell a property that is high risk or even retire from a high-risk profession.
• Some risk may be perfectly acceptable to you. Consider what you might lose if the worst happens and see if you could live with the loss. This is called risk budgeting.
• Keep good records on personal property. Review the values and your insurance coverage annually. Values fluctuate, and you don’t want to over- or under-insure.
• Determine what you would lose if someone sued you with a liability claim. You worked hard to build your net worth and you do not want to lose wealth if someone files a claim against you. Even if it is a frivolous claim, you may have to spend a small fortune to defend yourself. Take action to protect your assets for yourself and your family.
• Health care and long-term care costs are increasing at an alarming pace, people are living longer, and many older Americans have seen their retirement savings decline in recent down markets. A professional can help you evaluate your health care risks and determine how to plan for them.

Contact Bobby Sawyer at (704) 266.0727 or rsawyer@sawyer-law.com with any questions or issues, or if you would like to discuss some strategies for managing risk.

Year End Estate Planning Tip #2 - Check Your Beneficiary Designations

With the end of the year fast approaching, now is the time to fine tune your estate plan before you get caught up in the chaos of the holiday season.  One area of planning that many people overlook is their beneficiary designations.

Have You Checked Your Beneficiary Designations Lately?

Do you own any life insurance policies?  If so, have you named both primary and secondary beneficiaries for your policies?

How about retirement accounts – are any of your assets held in an IRA, 401(k), 403(b) or annuity?  Or how about a payable on death (“POD”) or a transfer on death (“TOD”) account?  If so, have you named both primary and secondary beneficiaries for these assets?  

What about your vehicle – do you have it registered with a TOD beneficiary?  And your real estate – is it held under a TOD deed or beneficiary deed?  

If you have gotten married or divorced, had any children or grandchildren, or any of the beneficiaries you have named have died or become incapacitated or seriously ill since you made beneficiary designations, it is time to review them all with your estate planning attorney. 

Beneficiary Designations May Overrule Your Will or Trust

Speaking of estate planning attorneys, has yours been given and reviewed all of your beneficiary designations? 

It is critically important for your estate planning attorney to review your beneficiary designations as your life changes because your beneficiary designations may overrule or conflict with the plan you have established in your will or trust (unless your state law provides otherwise, but you should certainly not rely on this).  Also, naming your trust as a primary or secondary beneficiary can be tricky and should only be done in consultation with your estate planning attorney.   

What Should You Do?

Whenever you experience a major life change (such as marriage or divorce, or a birth or death in the family) or a major financial change (such as receiving an inheritance or retiring) or are asked to make a beneficiary designation, your beneficiary designations should be reviewed by your estate planning attorney and, if necessary, updated or adjusted to insure that they conform with your estate planning goals.  

If you have gone through any family or monetary changes recently and you’re not sure if you need to update your beneficiary designations, then consult with your estate planning attorney to ensure that all of your bases are covered.

6 Check-Ups to Get Your Finances In Order

I don't like looking at my finances primarily because I am instantly reminded of how far I am from my goals.  With 3 kids (which includes twins), my plan for college tuition right now consists primarily of Powerball tickets.  I'm kidding.

Regardless of the size of your 401(k), IRA or college savings, plan, it's important to give your portfolio a regular check-up to make sure the plan reflects your current life and goals.  Here are 6 steps that will get you headed in the right direction.

1. Check the balances and allocations in your various investment accounts.  Call your financial adviser and tell him you'd like to review the allocations in your investment accounts. Depending on where you are in your life, the state of the market and several other factors, your investments could use some readjustment.  For example, if a stock has split, it may now occupy a larger than ideal portion of your investment.  If you play your cards right, you might even be able to get your adviser to pick up the bill for lunch!
2. Review insurance coverage.  Make sure your life and disability insurance coverage reflect reality.  If you've received a raise, had another child, bought a new house, then you need to make sure your insurance reflects these changes.
3. Review and update beneficiaries.  This is an important one, especially if you have minor children.  If you don't have a revocable living trust and something were to happen to you while your children were still under 18, then the children would receive the life insurance proceeds and retirement accounts outright.  You may have the most responsible kids on the planet, but an 18-year old with hundreds of thousands of dollars (or more) is simply not a good idea.
4. Assess and review your estate plan.  "But I don't have an estate plan!"  Yes, you do.  The state has one for you, and it's time-consuming, a burden for your family, and usually expensive.  If you have a will or, even better, a Family Legacy Plan, then it's a good idea to review it to make sure the plan still reflects your current wishes and goals.
5. Guardians for minor children.  If you have a plan in place, make sure it is still consistent with your wishes.  If you don't have a plan, make one.
6. Review your advanced health care directive.  Make sure you have a healthcare power of attorney and living will.

If you have questions on how to get any of these accomplished, or you would like more information on how a Family Legacy Plan can take care of most of this list, feel free to contact Bobby Sawyer at (704) 266.0727 or rsawyer@sawyer-law.com.