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Lawsuits Against Doctors Are For More Than Just Medical Care Delivered

PHYSICIAN AND HEALTHCARE EXECUTIVE LIABILITYGetting back to the asset protection roots of our discussions, today we examine a variety of liabilities for doctors that are not strictly related to the “standard of care” at the center of most malpractice claims.

If you joined us last week, we discussed so-called “defensive medicine” and the idea that limiting diagnostics based on what third parties want to pay for can lead to tragic results for patients and their doctors. There’s a logical nexus between the most common cause of medical malpractice lawsuits and the issue of what is subjectively enough diagnostics and testing. Approximately 35 percent of all such claims are related to “failure to diagnose” including the closely related claim of “misdiagnosis,” according to a 2013 medical malpractice study.

RELATED:  So-called “Defensive Medicine” is often Good Medicine and “Best Practice” for Doctors http://www.proassetprotection.com/2014/03/defensive-medicine-is-often-good-medicine-and-best-practice-for-doctors/

As serious and obvious as this exposure is to doctors, the actual care delivered is only one of many reasons that patients sue doctors. Below we examine some recent examples that range from shocking to arguable, but in most cases, it is actually the doctor’s fault.

In one recent case that displays a shocking lapse of judgment, a California anesthesiologist put stickers on a patient’s face to make a mustache, gang tears, and etc., during surgery. Upon being shown the photo, the patient sued and her lawsuit seeks damages from the hospital, the anesthesiologist, and his entire medical group for violation of privacy, infliction of emotional distress, and other allegations. Her attorney said the plaintiff was forced to leave her job ordering and maintaining supplies for the hospital’s operating rooms because she was “ridiculed and humiliated while under anesthesia.” While this may seem funny, I know plenty of attorneys that would use an incident like this as de facto evidence of the surgical team’s ineptitude in the event of any adverse patient outcome (fortunately, not a claim here) and I’d bet plenty of courts would agree.

An even more egregious case is a $1.5 million suit in Cook County, Ill., that names Dr. V. Puppala, the Feinberg School of Medicine, and the Northwestern Memorial Hospital. A patient is claiming invasion of privacy and infliction of emotional distress according to court documents. The patient was allegedly admitted to the hospital in extremely intoxicated condition and was then allegedly photographed by the attending ER physician who photographed her crying, passed out, with an IV, etc., and then not only posted her pictures on social media but later refused to take them down when requested to do so by hospital security. The plaintiff patient is a Northwestern student that had the “potential to someday work for Fortune 500 companies, which may now not occur because of said photographs,” according to the complaint.

In perhaps a more defensible case, a New York physician was sued by a patient for testing her for HIV and telling her she had it without her express consent. The treating physician was concerned about her white blood cell count after her condition failed to improve despite continued treatment and he had blood drawn and had the test done, presumably to protect her health. Unfortunately, this is a case of “strict liability” as New York law requires specific informed consent, counseling after testing, patient education, and a litany of other conditions that control how this testing is administered, regardless of the doctor’s actual intent. Given the patient’s history of non-compliance, the idea that she would have gone through all the required steps is frankly ludicrous, but I imagine a “failure to diagnose” claim would have followed in the future had he not acted and had her condition continued undiagnosed. What’s the right answer? Hard to say in case like this, perhaps having her sign a strongly written (i.e. by a healthcare lawyer) waiver of the test would have helped.

No compliance plan can protect doctors where shocking conduct, lack of common sense, or a failure to follow state law controls the claim. As always, effective asset protection for doctors involves doing the right thing in terms of policies, best practices, insurance and legal structures, and compliance for all medical personnel in the chain of care including staff and enforcing the same for your physician partners, who hold the future of your practice in their hands as well every time they see a patient.

Income Tax Deductions Doctors and Business Owners Often Overlook

CPA TJ CASEY

CPA TJ CASEY

As tax day bears down on us with increasing momentum, I turned to a CPA for some tips on commonly overlooked deductions. As always, legal and tax advice given in this forum can only be general information and can never be considered individual tax advice, so discuss these issues with your own CPA now, while meaningful discourse and even some legal tax avoidance planning is still possible.

CPA TJ Casey is experienced in working with doctors through his firm TJ Casey CPA in Mesa, Ariz. and shared the following tips. Hopefully you have your own great CPA that you can turn to and who is helping your practice stay on schedule with its own business-planning calendar.

Here are Casey’s tips:

• Take advantage of reduced income tax from participating in employee-sponsored retirement plan, generally 401(k) plans.

• Keep track of your personal medical expense deductions for possible deductions on state tax returns. Many people don’t bother to keep track of medical expenses due to federal ceilings being so high that medical is generally disallowed. For instance, in our state, Arizona, all deductions for this expense may be allowable

• Take advantage of any available state income tax credits — allocating your tax dollars to working poor, private schools, and public schools; in some states to the tune of about $2,800 each year.

• Mileage deductions for self-employed doctors and practice owners. Most people don’t keep a log, and end up not being able to justify a deduction that could be a $0.55 per mile deduction depending on your state of residence.

• Not reporting when you should. Failure to report foreign bank account and security ownership (including through trust and other legal entities) can cost a doctor up to 50 percent of the account value if discovered by the IRS.

Note from Ike: Although we have discussed the use of a variety of offshores tools by doctors in this column and I personally use them with thousands of clients nationwide, all such tools are tax neutral, and are fully reported to the IRS. The penalties for abusing these tools, as many doctors are prone to do, (often at the suggestion of unskilled or unscrupulous tax plan salesmen and financial advisors), are exceptionally onerous and carry fines of hundreds of thousands of dollars and multi-year jail sentences. Full tax disclosure means never having to say, “I’m sorry.”

• Missing Alternative Minimum Tax (AMT) credit carry forwards and missing other tax attribute carry forwards like loses from previous years you may not have been able to fully use then.

• Misreporting issues like failing to properly report debt relief income from real estate transactions like short sales or other write-offs where you escaped the full liability of financing debt.

• Paying unnecessary penalties for failure to properly and timely pay estimated tax payments (do your really want to leave a tip?)

As Casey explained to me, none of this individually may be that exciting from a numbers perspective, but not letting a number of these things get away from you has a substantial cumulative effect.

Given the time of year and the damage severe winter storms have done to many parts of the country I discovered a few other timely and important deductions to consider:

• Deductions for damages and losses due to disaster (and theft and other losses). Again this is fact-specific but we’ve seen large numbers of practices affected over the last few years by tornadoes, hurricanes, and now severe winter storms. Those in official federal disaster areas get some level of automatic qualification, but get professional advice and don’t try to deduct things that actually weren’t a loss (i.e. normal wear and tear) and for which you may have been fully reimbursed by insurance, as one prohibited example.

• Deductions for caring for a parent or other dependent individual. The IRS may allow you take a specific deduction of up to $3,000 known as the “Dependent Care Credit”  for the care of a parent or other individual that meets certain minimum qualifying criteria and who is incapable of caring for themselves.

• Deductions of a variety of common and recurring business expenses including:

• Financial advisory and financial management fees including bank fees of various types;

• The cost of last year’s tax returns;

• Property taxes you may have paid on any time share property (doctors love these); and

• Qualifying personal and business legal expenses.

Again, please explore these issues only with professional tax help in the context of your own business and personal tax returns.

This article originally appeared at www.PhysiciansPractice.com , the nation’s leading practice management resource, where Asset Protection Attorney Ike Devji has written over 125 articles.  See them here: http://www.physicianspractice.com/authors/ike-devji-jd

CPA TJ Casey has experience ranging from estate planning services coordinator in a local law firm to “Big 4″ and local public accounting. He provides his tax clients an added benefit with his extensive background and experience in estate planning both from a tax and trust administration perspective. TJ graduated from Arizona State University with his Bachelors Degree in Accounting in 2001 and Masters Degree in Taxation in 2002. He is a member of the American Institute of Certified Public Accountants, the Arizona Society of Certified Public Accountants, and is a current member of the Board of Directors for the East Valley Adult Resources Foundation. In his spare time, TJ enjoys fishing, camping, attending his children’s sporting events, and playing guitar in a Phoenix based rock band. Learn more about him at: http://tjcaseycpa.com/

Asset Protection and Wealth Preservation Attorney and Author to Speak on in Maui, November 21st, 2013

A Seminar About Protecting Your Wealth and AssetsFOR IMMEDIATE RELEASE:  

Maui, HI.  November 17, 2013.

Asset Protection Attorney Ike Devji will be the featured guest speaker at a November 21st, 2013 educational seminar for doctors, business owners and other high net worth individuals sponsored by Ronsman & Associates, a wealth advisory firm serving specially qualified clients in Hawaii, Arizona and Alaska.

 

The complimentary event will be held from 5:30 to 7:00 PM at the Maui Beach Hotel’s Molokai Room.

Attorney Ike Devji will share insight gained as a former litigator who has spent the last decade of his legal career helping thousands of successful individuals across the United States protect over $5 Billion dollars of their personal assets from litigation, risk and other variables.

“We are at a point where we have 70,000 lawsuits filed per day in the U.S., and Hawaii is not immune to this issue, or the many other areas of risk management not addressed by basic liability or malpractice insurance that continually take successful people by surprise”, said Devji. “Wayne Ronsman, President of Ronsman & Associates, has many existing Maui clients who he originally wanted to share this vital educational content with and he decided to make it available to general

Maui community as a public service. Wayne understands that it’s not just what you make, it’s what you keep, and the most successful Americans are more worried about loss than growth right now. We are going to make sure they have a starting point in defending their success in plain English.”

The seminar will common cover the risk picture in the U.S. and address key issues like the difference between traditional estate planning and asset protection planning and a variety of key issues that must be addressed by every doctor, business owner and executive. Ike Devji is a national speaker, author and educator on the area of his practice and was recently a guest speaker at ACR 13, the annual convention of the American College of Rheumatology in San Diego.

He is the former managing of attorney of one of the United States leading asset protection law firms and has been listed among a select group of WORTH magazine’s “Leading Wealth and Legal Advisors”, is rated a “Perfect 10.0 by AVVO, appears on various Top Lawyer lists and has literally hundreds of nationally published articles in publications including Financial Consultant, Advisor Today, Public Accountant, countless medical journals (with over 130 articles for doctors at Physicians Practice alone), in addition to being a contributing author to the book, Optimal Financial Health. He has also recently completed an CME (continuing medical education) course for doctors at the request of the American Educational Institute (AEI) that will be shown in AEI’s marquee classrooms all over the U.S 1000 times in the next 12 months.

For his part, Wayne Ronsman brings Maui 40 years of financial industry experience with high net worth clients like doctors and business owners and is the Founder and President of the Benefit Institute which is in the business of providing financial services. The Company works extensively with Trust Officers, CPA’s and Attorneys, frequently playing a key role in finding solutions to their clients’ tax and estate problems and in taking advantage of their existing financial opportunities. Part of this work includes finding experts in other fields that are vital to persevering his clients’ success and using them to educate and serve his clients.

For More Information or To Reserve a Seat:

Wayne Ronsman, President, The Benefit Institute

toll-free at (877) 759-2181 EMAIL: wjronsman@msn.com or FAX to (480) 460-5748

Website: http://waynejronsmanassociates.com/About.html

FOR MORE INFO ON THE SEPAKER:

Ike Devji, J.D. Managing Attorney – Pro Asset Protection

(602) 808-5540 EMAIL: ID@thewealthy100.com

Website: http://www.proassetprotection.com

Tagged: Lawsuits, Asset Protection, Wealth Preservation, Maui, Hawaii, Doctors, Executives, Physicians, Business, wealth, Wayne Ronsman, Ike Devji, medical, seminars, continuing education, CME, medical practice management, CEO, entrepreneur, Business Owner, CPA

 

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Employees, Financial and HIPPA Data Create Risk for Medical Practices and Business Owners

BUSINESS AND MEDICAL PRACTICE OWNER LAIBILITYHIPAA and financial data present an ongoing asset-protection issue for physicians and medical practices. This week we take a look at a specific exposure suffered by up to 40,000 (yes, 40,000) patients of one Arizona medical practice and some simple precautions that may help your practice avoid the same exposure. 

While written for doctors, this applies to ANY business that handles HIPPA protected info or client financial data like social security numbers, account numbers, credit cards, etc.

Recent news reports from Scottsdale, Ariz., detail the alleged activities of a medical billing firm employee and her boyfriend. According to news reports, Brittany Davidson and her boyfriend Winfred Aurelious Dick, Jr., were arrested after a Maricopa County Sheriff Captain spotted an unauthorized charge on his credit card. Further investigation revealed Davidson had reportedly stolen his credit card information from the medical billing firm where she worked, which handled billing for a Scottsdale dermatology clinic.

As a result, the financial data of as many as 46,000 patients may have been exposed by the duo that used patient credit card numbers for items ranging from rims and tires to fast food. The practice, Scottsdale Dermatology, has offices around the city and data from multiple offices was potentially exposed by the billing company’s security breach.

 

What Could Have Helped?

 

  1. 1.    Cyber liability insurance.

We’ve previously covered a variety of vital forms of commonly overlooked medical-practice insurance policies, and discussed the importance of data breach or cyber liability policies, which we can only hope the practice owner has in place here. These policies cover a variety of issues in our increasingly electronic world, including not only outside theft or loss of medical records but also the intentional misuse of patient data by employees. In this case both the medical practice and the billing company, which is likely a “business associate” of a covered entity, face substantial liability for a variety of issues including:

 

• Any actual losses incurred by patients;

• The expense of formal notification of over 40,000 patients;

• Ongoing remediation including credit monitoring and credit repair for those actually exposed;

Reputational damage and loss of patient trust.

 

I’d also add that EPLI, or employment practices liability insurance, could prove useful in such a situation. While much of my previous coverage of this vital issue has centered on its value in protecting a doctor’s office from an employee lawsuit, the best policies often include riders that protect the employer from the liability associated with the unsanctioned actions of an employee as well.

  1. 2.    Background checks and proper employee credentialing.

In this case the billing and subsequent breach occurred at a third-party company that we can only hope was properly credentialed and met the specifications of the dermatology practice’s third-party payer contracts. It could just as easily have been at the doctor’s office itself. Part of your HIPAA security procedures should include a discussion of the entire chain of custody of the records your practice handles and discloses to third parties and that review should include questions about any third party’s background-screening practices. Find out if they indemnify you for their loss or misuse of the information you share with them, and get a copy of their “in-force” liability policy that covers you in the event of such a breach.

 

I can only hope some phones are ringing on these issues at billing companies across the country later this week.

Arizona Asset Protection Lawyer Ike Devji in Financial Consultant Magazine

IKE DEVJI FEATURED IN FINANCIAL CONSULTANT MAGAZINE

Attorney Ike Devji was recently featured as an author in the premier issue of Financial Consultant Magazine.

Ike’s article, “The Growing Role Of Financial Advisors – Asset Protection” takes a look at the financial devastation that many successful professionals experienced over the last few years and the role that top advisors must play in helping their successful physician, business owner and executive clients keep their wealth.

The link below provides the article in it’s full original form, and provides details on what went right, what went wrong and how some people have even managed to prosper during this challenging time.

SEE THE ARTICLE FROM FINANCIAL CONSULTANT HERE:

https://www.dropbox.com/s/k0ioupamb5rfv47/FINANCIAL%20CONSULTANT%20MAG%202013%20-%20IKE.pdf

 

Asset Protection Trusts For Doctors – An Introduction

law and money for doctorsAsset-protection strategies for physicians take many forms and range from sound policies and procedures that seek to minimize risk and liability to crisis-management plans, the right kinds insurance, and, finally, specific legal tools.

All of these strategies can be valid and effective parts of a true asset protection and risk management system and the key to the success of most plans is having many effective layers instead of seeking a single solution cure.

 

In previous discussions we’ve addressed the use of specific tools like limited partnerships and captive insurance companies by doctors, to name just two specific examples of tools that can be effective when used and drafted the right way. This week examine the Asset Protection Trust (APT) and address some of the most basic questions and misconceptions we’ve helped thousands of physicians investigate on a consistent basis.

When can I do it?

As with any asset-protection strategy, the key element is timing. This is preventative or defensive medicine but terribly ineffective against a pending or existing exposure. Implementing this against something that has already happened is called “fraud”.

What is it?

The Asset Protection Trust or APT is typically an irrevocable trust that becomes the owner of the assets being put into it, typically referred to as “gifting” or “funding.”

Why is it irrevocable?

In order for the property to truly be outside the reach of a judgment creditor by law it must go into a vehicle that is granted permanent, irrevocable title. If you, the “grantor” can easily pull it back at will, it is generally not protected from others either. It must truly be the property of the trust.

Is it the same as my estate-planning trust?

Typically no, but some estate planning vehicles do provide asset protection. The estate planning trust most doctors have or have seen is generally referred to as a Revocable Living Trust, a.k.a. “family trust” or RLT. This structure is often correctly funded with your home, investment account, and other assets. This is so those assets follow a specific chain of custody at your death and avoid the probate process. Unfortunately because this vehicle is revocable by you at will it offers ZERO creditor protection during your lifetime. A simple way to keep this straight is this: Estate planning is death planning and concentrates of giving your property away as you desire at your death. Asset protection on the other hand is life planning and preserves the assets you have, use, and would like to pass on so that they actually get to the estate plan.

I paid a great deal for my trust, does that mean it does more?

Usually not. Fees can vary widely based on the local legal market and the skill and experience of the drafter and what their expertise demands. Unfortunately, paying more does not it automatically make it better or give it extra features.

Can any lawyer do it?

Like any area of the law asset protection is an increasingly complex and specialized practice and as such it should be ventured into with an attorney with some very specific experience, just as you’d select a divorce, tax, bankruptcy, or other focused practitioner. While it shares similarities with other areas of law including corporate law and estate planning, there are a variety of considerations that must be accounted for with every move including timing, the liquidity needs of the doctor, the most defensible choice of legal entity, the jurisdiction that controls and legitimate business purpose. As asset protection has grown increasingly popular with consumers the number of attorneys and non-attorney promoters that have entered the field has grown exponentially. Furthermore, the leading sellers of form legal documents have recently increased their marketing of documents structured for the this purpose. In some cases, those documents are adequate; in others they are hopelessly inappropriate or drafted with fatal errors. Either way, even assuming the form is perfect, the application must be learned and apply to your very specific asset structure and fact pattern. Buying the best laser in the world will not make me a surgeon.

This simple introduction just scratches the surface of the features and issues physicians should understand when considering an APT. We will continue the conversation over the next few weeks and cover issues like jurisdiction, selecting counsel and the appropriate use of the tool as part of a system. As always, this information is general in nature and never fact specific legal advice. This article originally appeared at www.PhysiciansPractice.com, where Attorney Ike Devji is a regular contributor.

 SEE THESE LINKS FOR MORE DETAILS:

Drug-Based Treatment Liability Issues for Physicians

DRUG LIABILITYA variety of medical specialties use drug-based treatments administered by the  physician’s office as a routine part of their treatment regimes. This usage presents expanding serious liability issues that require serious consideration  and risk management.

The use of specialty-compounded drugs to treat a variety of ailments is on the rise (one recent report says they account for a full 6 percent of medical-error claims) and so are associated risks for medical practices. One recent case involved the use of infected epidural steroid compounds unknowingly used by pain management practices across the country. Hundreds of patients across a dozen states came down with meningitis and a variety of other diseases, and in some nearly 50 cases with fatal results.

A review of many top malpractice and drug-injury lawsuit websites makes it clear that the doctor will very much be part of the lawsuit chain in these unfortunate circumstances. One such website reads, in part, “The doctors who prescribed (or administered) the drug that injured you may also be liable for your injuries because they are part of the chain of distribution of the drug.” Given this hostile environment it is more important than ever to have and enforce a drug-quality policy at your practice whether you work in pain management, cardiology, or any other specialty. Regardless of actual “fault” always remember that lawsuits seek deep, easy pockets like yours.

What You Can Do to Protect Your Patients and Practice

1. Have a written plan. Just as with HIPAA liability a key issue in attributing blame to a medical practice and its owners is whether or not they took any reasonable efforts to ensure quality and prevent harm.

2. Make someone responsible for enforcing it, then implement at least one secondary check and failsafe.

3. Keep immaculate records of the quality assurance program and note each time you check the responsible party’s work for compliance. Also keep detailed notes and examples on the correspondence and marketing between yourself and your vendors.

4. Do some due diligence on your vendors. Check their licensing, look for lawsuits and complaints, and get specific representations in writing about the quality and source of any pharmaceuticals you personally administer in your office. Common red flags we’ve seen emerge over the last few years include billing from outside the United States, drugs labeled in foreign languages instead of or in addition to English, and prices that are too good to be true.

5. Implement a comprehensive and proactive risk management program that includes not only your regular malpractice coverage but also director’s and officer’s insurance (for those who make executive decisions on vital like the “who, when and where” of such purchases made by the practice) and RAC audit insurance (to help defend you against things like Medicare audits).

6. Remember that many insurance programs you may bill for treatment, including the use of drugs, require that all pharmaceuticals are sourced from licensed U.S. providers. If you use and bill for tainted drugs that do not meet these conditions you have both risk of injury to the patient and the potential to face a Medicare fraud claim, another exceptionally onerous issue that will have to be litigated and defended separately if you think you can prove you were an “innocent purchaser”.

7. Finally, review the informed-consent procedures you have in place in connection with such treatments. This area has been key in establishing liability for the doctors themselves.

Doctors Lack Key Financial Planning Info

law and money for doctorsRecently, I read a 48-page report issued by AMA Insurance on financial preparedness among  physicians, based on 2,500 respondents. Consensus: Many doctors feel  they are under-planned and undereducated about personal finance issues. The good news? We’ve already covered and continue to address many of these issues for you here and at www.PhysiciansPractice.com, where this article originally appeared.

I didn’t find the results of the well-documented report particularly surprising based on my personal experience with a wide variety of doctors across the country. However, the report did help narrow down some of the areas to visit in greater detail going forward. The one constructive criticism I’d offer is that the report did not disclose any interest in or questions about asset-protection planning. As this column is primarily about physicians’ asset-protection and wealth-preservation planning you may assume some bias toward the topic by the author but two key facts remain: First, most polls show this is an area of significant concern and real exposure to doctors. Second, financial planning is moot if the assets get taken away from you. The key findings of the report identified several key concerns:

Half of physicians surveyed feel they are behind where they should be in their retirement planning while only six percent feel they are ahead of their savings plan;

Many doctors lack confidence in their education and decisions on key planning issues like estate planning, life insurance, disability planning, and retirement planning;

Many female doctors feel they are behind their male counterparts in these areas;

All are concerned about their future and the adequacy of their retirement savings.

We will soon address these issues again and, in turn, will feature discussions with experts in areas like the use of 401K and self-directed IRA plans. We’ll also focus on financial behavior patterns from the perspective of advisors who work with a heavily female professional client base. Until then, here’s a quick look back at just a few of the ideas we’ve introduced for your further discovery.

Estate Planning and Life Insurance

We’ve covered a variety of estate-planning-related topics and taken a look at common estate planning mistakes made by doctors; we’ve also published a multi-part article series on specific tools like limited partnerships (a.k.a. family limited partnerships) and asset protection trusts. On a related note we also addressed issues like the tactical use of life insurance and took a look at ways to help determine how much life insurance your family needs.

Investing and Retirement Planning

Our most recent of nearly one dozen columns in these areas have covered issues like the liability associated with administering a 401K plan for your practice as well as common issues related to investment fraud targeting doctors. We’ve also covered due diligence issues in dealing with an investment advisors. Of course, inherent to any such discussion must be a good look at tax planning by doctors and we’ve addressed issues like the right corporate formation, tax fraud targeting doctors, and even provided a basic two-part checklist of legal and financial essentials that we will soon be updating for 2013.

My goal in our discussions has been to share information on issues that I’ve personally seen doctors affected by and to provide a simple introduction to the options available to proactively address them. We will continue to do so throughout the year and I welcome your direct questions or suggestions for coverage on areas of specific concern to you. Finally, if you are heading out on vacation over the next few weeks along with the rest of the country, please take a second look at our personal security tips. We want you safely back with us to continue the journey.

The “C” Word in business: Vital Issues To Consider With C-Corporations

TAXESThe article linked below contains some simple and important issues to consider regarding the taxation of C-corps. As an asset protection attorney I’ve never been a fan of them because they are weak , if not defective from a creditor perspective as the shares can actually be taken from you as an asset and handed to a creditor in the worst cases, unlike an LLC as one alternative. 

We’ve even seen estate planners use them as the General Partner of a Limited Partnership. A disaterous result when combined with the scenario above that would actually put a creditor in control of the entity you might be using for defensive purposes and to which they might not otherwise have had any access.

When ever I talk to the owner of a C-Corp. the question I ask is typically, “Why do you have a C-corp. ?” and I an continually surprised at the very small number of people who can actually articulate a reason other than that was what their CPA or attorney suggested and always does. I’ll say that’s not good enough and you and your counsel should be able to articulate a reason and that they should provide you with a comparison like the one at the end of the article linked below.

Look Before You Leap from an S to a C Corporation

http://www.accountingtoday.com/news/Look-Before-You-Leap-Corporation-66407-1.html?ET=webcpa:e6974:134343a:&st=email

There are absolutely times when the C-Crop. is the best choice as in cases where they are established to give the owner of a closely held and profitable business access to certain kinds of tax personal deferral planning. Unfortunately that’s often not why it happened. As always, this is not tax or legal advice specific to you. Get expert personalized help when examining these issues.

Asset Protection Trust Jurisdictions for Physicians – Part 1, Domestic

law and money for doctorsIn our discussion two weeks ago we introduced the Asset Protection Trust (or APT) as a tool and answered some of the most frequently asked questions regarding what it is and how it differs from the estate-planning trust many doctors already have in place. We continue our discussion of the APT this week and examine the often argued and misunderstood issue of jurisdiction, that is, the place and laws under which the trust is created that ideally control any legal action with or against it.

The Options

The most basic division between choices is simple; APTs can be on-shore or “domestic” or offshore, typically referred to as “international” or “foreign.” Look for these prefixes to indicate this elemental distinction. Both DAPTs and their offshore or international (IAPT) counterparts share some common elements:

 They are irrevocable

They must strictly comply with all legal, formational and operational requirements imposed by a specific jurisdiction and state so in their drafting

They have trustees appointed to mange the trust and its assets

Some require that the assets seeking legal protection are actually located within the jurisdiction and that an approved local agent, trustee or authority is appointed

 They must be set up and funded in advance of any claim or specific liability you want them to be effective against

 Neither structure is secret or tax free, despite what’s promised

Both are usually ineffective against a current spouse when used in a legal way

There are a number of states that have created laws that allow the formation of a domestic APT or DAPT in their jurisdictions. This number has grown over the last few years due to consumer demand and the states’ realizations that they can generate significant fees as part of being in the trust business.

Among the most popular of the DAPT jurisdictions are Nevada, Montana, Delaware, and Wyoming but there are many others that have similar statutes. Experienced planners have strong opinions about which jurisdictions are best and why and should be able to explain the benefits and how they can effectively apply to you and your assets well beyond just, “Because we are in state X”.  

These trusts are typically less expensive than their offshore counterparts but are as yet untested on any wide scale and rely on the hope that, for instance, a judge in California with jurisdiction over a California defendant will refrain from trying to grab that defendant’s assets in Nevada because Nevada says they are in a special trust. This also unfortunately flies in the face of “full faith and credit” which essentially states that a judgment in any state is good and enforceable against a defendant and their asset in every other state. Large numbers of DAPTS have been established over the last few years in various jurisdictions by planners of widely varying skill for clients with questionable timing.

I’m a strong believer that “bad facts make bad law” and given the number of bad fact-planning cases that have been executed in the last few years, I feel it is likely that you will see many of these structures pierced. Although these cases should be judged individually on their merits, human nature makes it more likely that they will begin to be viewed as a group by the courts and either generally upheld or viewed as ineffective. Until that drama plays out I advise not be in the legal equivalent of a clinical trial.

Consumers must be wary of who they chose to work with for both DAPT and offshore-based planning. There are significant ramifications for making transfers to these kinds of vehicles including tax, estate, and fraudulent conveyance issues that you must understand or have counsel that does. Many recent entrants to the asset-protection business are applying form documents without a full understanding of their use and how it will affect your future defense, control, and use of those assets. Get personalized help from an experienced attorney who can help make sure that you are following the letter of the law to get any and every possible benefit the trust may provide.

Our next discussion on this issue will turn to the use of offshore asset protection trusts by doctors and the myths surrounding IAPT planning and its effectiveness.

 This article was originally written for and published by www.PhysiciansPractice.Com, The Nation’s Leading Practice Mgmt. Resource, where Mr. Devji is also a regular contributor.