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Asset Protection Trust Jurisdictions For Doctors Part 2: Going Offshore

April 22, 2013 by Leave a Comment

OFFSHORE TRUSTSLast week marked the second chapter of our discussion of asset protection trusts for doctors, with a look some basic issues of jurisdiction, that is, what geographic location’s set of laws control the trust. For those who want a potentially higher degree of security with a longer track record, offshore tools like international asset protection trusts (IAPTs) are often attractive. 

 

Although painted in a negative light in recent popular lore because of issues with large numbers of tax evaders (many of who are American doctors) the defensive value of the IAPT remains intact. The simple mistake made by most of the people you read about having trouble with offshore accounts can be reduced to simply failing to report the accounts as the law requires. You do have a well-established right to have offshore bank accounts and trusts and the event of moving money to a foreign bank account owned by a trust or held personally as we covered in our previous article on offshore finance is typically not taxable in and of itself. 

A large number of successful American doctors set up this kind of defensive planning in the first place because they lack full confidence in the often inconsistent and subjective nature of the American court system and are unwilling to remain exposed to any claim or lawsuit that may come along, regardless of its validity and amount. One of the questions that I’ve asked clients pondering the domestic vs. foreign asset protection trust question is this: If you feel you that ensuring your life’s efforts against the above mentioned exposures in the U.S. court system is a good idea, does it make sense to rely on that very same system’s laws and subjective judgment in the planning you implement against it? While opinions and tactics vary widely among planners not all of those strong opinions are backed by actual long-term experience; make sure the answers you are getting actually are.

There are many international jurisdictions to choose from when creating an IAPT ranging from familiar Caribbean islands to Belize, Jersey, The Isle of Mann and the Cook Islands, one of my personal favorites. Some jurisdictions (especially many of the romanticized Caribbean ones) are now too close and connected to the United States to provide the full value of an offshore trust structure and others may be too remote, politically unstable or under-developed to provide many westerners comfort. This author’s personal experience with several thousand of these structures has been to use a remote but well-established protective jurisdiction staffed by top international banks and trust companies that controls assets housed in first-world, European-state-owned and insured banks. These provide superior solvency risk and political stability.  Banks such as these provide the many layers of protection and part of the system of checks and balances so important when moving your assets.

Once assets are moved, the “investment advisor” to the trust can allocate the trust’s assets to nearly any imaginable conventional investment and a few you can’t participate in directly as an individual U.S. citizen. In addition to the basic legitimate business purposes of wealth preservation and estate planning, the IAPT is also gaining popularity with those who have concerns about having their entire investment portfolio here in the United States. Currency stability as well as social political and economic variables have prompted more Americans than ever before to investigate these options over the last five years.

The costs and legal formalities, as well as the history and legal protection afforded, vary widely between jurisdictions, so it’s important to work with an experienced planner that has full range of required support resources like banks, trust companies, protectors, and investment advisors. As always, timing is key, so looking at these tools after an exposure has occurred dramatically reduces their effectiveness and legality.  In this limited forum we can’t possibly cover every detail, so get personalized professional legal help when examining this important asset protection strategy or any other.

 

 
Filed Under: APT, Asset Protection, asset protection trusts, business legal planning, closely held business, DAPT, doctor sued, Doctors, IAPT, Ike Devji, lawyers, Legal Strategies, offshore, offshore banking, offshore trusts, Wealth Transfer Strategies Tagged With: , , , , , , , , , , , ,

Asset Protection Trust Jurisdictions for Physicians – Part 1, Domestic

April 16, 2013 by Leave a Comment

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.

Filed Under: Asset Protection, asset protection trusts, chiropractors, DAPT, dentists, doctor sued, Doctors, Domestic Asset Protection Trusts, FINANCIAL ISSUES FOR DOCTORS, financial literacy, HEALTH CARE LAW, Ike Devji, Legal Strategies, Medical Practice Management, physicians, recession survival, trusts, Wealth Transfer Strategies Tagged With: , , , , , , , , ,

Medical Practice Liability Insurance Tune Up: The First Line of Defense

March 19, 2013 by Leave a Comment
law and money for doctorsWe’ve previously detailed both the most common fatal flaws in physicians’ asset-protection planning and the reasons insurance alone is inadequate to protect doctors. Those issues aside, insurance against known and recurring exposures is always the essential first line of defense.
 
As you’ve seen in this column before, it is unreasonable to think that we can adequately insure against any and every possible loss or liability to an unlimited amount, but we can catch some of the big and predictable ones. Below is basic list to consider, along with an expert, which can explain the details and gaps common to many policies.

1. Adequate liability and loss coverage. It’s important to not only insure your physical facility for liability but also for loss and in an amount that adequately covers the structure, its replacement, the improvements you’ve made, and the fixtures and equipment at actual replacement value. Work with a reputable company that has national claims service offices, which can be held accountable under bad faith jeopardy and that is experienced in insuring businesses like yours.

2. Employment practices liability insurance. We’ve covered the issue of employment and the significant exposure it creates for every medical practice with employees in several articles in the past. It remains the number one exposure most practices face and sexual harassment awards average over $500K.

3. Data breach insurance. Make sure you are protected against the loss, theft, or intentional misuse of patient financial and HIPAA-protected information. Be careful about the use of mobile devices, laptops, and tablets and make sure they are covered as well. Have demonstrable security policies in place and enforce them; in some cases liability is based on your proactive efforts, or a lack of them.

4. Directors and officers insurance, a.k.a. D&O. We’ve covered this in detail recently; many physicians, practice managers and executives face severe civil and even criminal liability for their decisions, acts and omissions. Make sure those that have such responsibility are adequately insured against this additional professional liability.

5. Workers’ compensation insurance. This provides coverage for an employee who has suffered an injury or illness resulting from job-related duties. Coverage includes medical and rehabilitation costs and lost wages for employees injured on the job. The law in most states requires some form of workers’ compensation insurance and this protects the employer by limiting an employees right to sue for further damages.

6. RAC audit insurance. Any business that bills Medicare, Medicaid, or a private health-care provider should be prepared to be audited and have payments denied or classified as over-payments at some point. Defending against such an audit and the ensuing manpower demands the massive record production can create is stressful and expensive. There is coverage available to handle the various costs and exposures involved.

This list is no complete but is a good start in examining the adequacy of your risk management plan. As this week’s column is devoted to the practice itself, I’ll save a discussion of the personal coverage so crucial to practice owners themselves for a future column.

Be aware, however, that life, disability, and long-term care insurance are increasingly vital parts of doctors’ planning that need to be implemented in a tactical way and are often an extension of the practice’s own risk management and continuation plan.

 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. He works with a national client base from his office in Phoenix, Arizona. His legal practice is devoted solely to asset protection and wealth preservation.
Filed Under: Asset Protection, business legal planning, business survival, dentists, Director and Officer Liability, doctor sued, Doctors, Employment law, FINANCIAL ISSUES FOR DOCTORS, financial literacy, liability, liability insurance, Medical Practice Management, physicians, risk management Tagged With: , , , , , , , , , , , , ,

What Medical Practices Must Know About RAC Audits and Insurance

March 12, 2013 by Leave a Comment
 

In a series of recent discussions we have examined exposures like ELPI Insurance, cyber liability insurance, and the need for directors and officers coverage by many physicians and practice owners. Continuing our examination of commonly overlooked medical practice risk management issues we turn to today to the issue of Recovery Audit Contractor (RAC) Audits, or the government’s Recovery Audit Program.

 

What is a RAC Audit?

As many physicians know, RAC audits is part of the government’s program to reduce fraud, waste, and errors in healthcare insurance billing practices and Medicare and Medicaid in particular. Audits run as part of the test program between 2005 NS 2008 resulted in nearly $1 billion in compensation being returned to the Medicare Trust Fund by medical service providers, that $1 billion (approx) was the yearly dollar number by 2012.

Auditors are assigned regions of the country and conduct audits on providers in response to whistle-blower tips and complaints and as a result of irregularities and red-lag markers in billing and coding practices by “…providers that have a high propensity for error based on the Comprehensive Error Rate Testing (CERT) program and other CMS analysis,” according to information available at CMS’ website.

The site lists the following key reasons for determining overpayment:

-Incorrect payment amounts;

-Non-covered services (including services that are not reasonable and necessary under section 1862(a)(1)(A) of the Social Security Act);

-Incorrectly coded services (including DRG miscoding); and

- Duplicate services

Who do RAC Audits affect?

Almost any healthcare provider (including hospitals, doctors offices, home health care providers, nursing homes, or anyone else who submits bills to government programs such as Medicaid or Medicare) should prepare to be audited at some point.

What are the risks and burdens of a RAC Audit?

The auditors themselves work on a contingency fee basis and the five regional firms contracted by the government are paid up to 12.5 percent of all claims they successfully identify as invalid and which they collect. The burden this places on healthcare providers from both a resource, financial liability and record-keeping standpoint is significant, they can go back as far a three years and the maximum number of requests per 45 days is 400. The maximum request amount is per campus.

Campus is defined as one or more facilities under the same Tax Identification Number (TIN) located in the same area (using the first three positions of the ZIP code). This means two locations of your practice properly incorporated separately, with different tax ID numbers in the same city, could theoretically be required to produce and defend up to 800 files in a 45-day period. The average payment denied to hospitals, as one example, on automatic denial basis is nearly $600 and those defined as “complex” denials on larger cases average a loss or denial to the provider of nearly $6,000, yet more than 50 percent of hospitals say that they have had no training on avoiding payment errors from either CMS or its contracted RACs.       

How do I protect myself and my practice against RAC Audits?

First, as with all effective defensive or preventative legal and financial planning, it’s better to identify the issues and correct them before a RAC auditor does it for you. Over the last few years a substantial industry of compliance auditors and software systems that will proactively identify and correct issues has emerged. Choose carefully, as some are law firms or accounting firms with specialized training and experience, some are software companies, and some are independent “consultants” with murky credentials that may or may not be of value.

Second, get your own professional audit counsel in place if your practice is subject to a RAC Audit. A significant percentage of claims are appealed and a percentage of those denials are overturned in the provider’s favor, but this seems to statistically favor hospitals over other providers.

Finally, and perhaps most importantly, insure yourself against the costs. There is RAC Audit liability coverage available that will help address the massive research cost and resource drain an audit creates.

A good policy may also cover expensive related exposures like:

• Medicare & Medicaid Audit (RAC Audit)

• Commercial Payer Audits

• STARK Violations

• HIPAA Compliance

• EMTALA Violations

Coverage is typically affordable and includes the costs of defending a healthcare provider such as legal fees, specialized consultants, secure document reproduction costs, and independent audit work in addition to the audit fines and penalties themselves.

 

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.

Filed Under: doctor sued, Doctors, FINANCIAL ISSUES FOR DOCTORS, HEALTH CARE LAW, liability insurance, Medical Practice Management, physicians Tagged With: , , , , , , , , , , ,

Directors and Officers Liability Insurance Issues for Physicians

February 22, 2013 by Leave a Comment
PHYSICIAN AND HEALTHCARE EXECUTIVE LIABILITYA commonly overlooked area of risk management in physician’s business and asset-protection planning is the need for “Directors and Officers” coverage, commonly referred to as D&O insurance.
 
In previous articles we have covered a variety of essential life, disability and liability insurance strategies, always the first line of defense. This week we examine the increasing risks faced by doctors in their expanding roles as business leaders, owners and executives.
 

D&O coverage is often confused with a variety of other forms of coverage with similar sounding acronyms and is often overlooked by doctors and insurance agents alike.

I consistently find that doctors who have been advised on a full suite of liability products by their local property and casualty insurance guru have no idea that D&O is even available or that it is distinct from their general liability, malpractice and E&O coverage.

As one example, I was recently referred a client that is the owner and president of a multi-state business that does $15 million a year in annual revenue. The business has a variety of regulatory requirements and, because it is being closely held and managed by my client, my client would certainly face directly personal liability for decisions, acts, and omissions he made in his executive capacity.

I asked him to contact his insurance agent and get quotes on D&O insurance adequate for his liability level and was shocked when the client called me back and said that his agent had informed him that, “You can’t get D&O coverage unless you are on the board of an HOA or a big corporation.”

Not only was the agent just plain wrong, he was too lazy to do a little research and make a sale to a client that actually needed help. To confirm I checked with liability insurance pro Dallas Cowan at Minard-Ames Insurance in Phoenix. Dallas was shocked, and confirmed that the insurance was available and that it was extremely important for owner/operators who don’t have the more diffuse liability found in the broader, deeper management structures of larger public or private corporations with multiple layers of management and a system of checks and balances under a board of directors. Put simply, fewer people in the executive chain means more blame for each person on wider range of issues, including up to the level of criminal liability even if the acts are committed without the executive’s direct knowledge or permission.

Getting the right policy for your role as a physician entrepreneur and executive involves having an expert agent that can explain the different types of coverage available under an E&O policy and what each one does. Policies are different and have different features and pricing. Dallas explained that the primary types of coverage include:

• Side A — for the officers and directors themselves

• Side B — for the corporation if it is required to indemnify

• Side C — for security claims

The scope of the liability for doctors is wider than most realize. You have all of the conventional medical practice related issues such as HIPAA compliance, Medicare and Medicaid billing regulations, and of course the policies and procedures related to care delivery itself. Add to that responsibility for issues ranging from waste disposal and employment policies to accounting and tax reporting and you begin to see the tip of the iceberg we are trying to avoid and protect you against.

This exposure applies not just to medical practices and related businesses like labs and medical supply, research and medical device and technology companies but also to a variety of other businesses that seek to include doctors on their boards and executive management teams for their knowledge, prestige and connections. Realize this liability extends beyond the business world into service on private foundations, charitable boards, and even boards of religious institutions; I’ve recently seen lawsuits against people on the boards of churches, synagogues, and mosques as well.

What does all this cost? It depends. Like nearly every other form of insurance it is underwriting specific and is based on your previous record, lawsuits and the policies and procedures you have in place to minimize the likelihood of an exposure and an insurance claim in the first place. That said, in one recent internal lawsuit in a business without D&O insurance in place the legal defense bills exceeded $250K paid out of pocket by the principals; the insurance would have been pennies on the dollar of that amount.

Ike Devji has a national Asset Protection legal practice and is a frequent guest speaker and teacher on asset Protection and Risk Management issues for doctors at medical conferences across the United States. He is also a regular contributor to Physicians Practice, where he has over 100 bylines and where this article originally appeared.

Filed Under: Asset Protection, business legal planning, business survival, CEO, Director and Officer Liability, doctor sued, FINANCIAL ISSUES FOR DOCTORS, Legal Strategies, liability insurance, medical practice mangement, physicians Tagged With: , , , , , ,

HIPAA EXPOSURE GETS EVEN MORE ONEROUS – Medical Practice

February 22, 2013 by Leave a Comment

BUSINESS AND MEDICAL PRACTICE OWNER LAIBILITYAs we’ve discussed in several previous articles, insurance that covers corporate and executive liabilities in an essential first line of defense, including Data Breach or Cyber Liability Coverage for doctors. This coverage grew even more important on Jan 25, 2013 as DHS provided additional rules and liability for medical practices which go into effect on March 26, 2013.

The liability level for breach and exposure of HIPAA protected data gets even more serious this week. According to OH health care attorney Joe Feltes:

“Physicians need to dust off their old HIPAA policies and NPPs, review them with legal counsel, and update them to meet these new requirements aimed at safeguarding patient privacy in a brave new post health care reform world.”

The whole story is available here: http://www.mdnews.com/news/2013_02/hipaas-new-
563-page-mega-rule.aspx 

RELATED – See More Here:

Data Breach and Employment Liability Insurance for Doctors:

http://www.proassetprotection.com/2010/11/two-types-of-liability-insurance-your-practice-needs-and-likley-lacks/

Director’s and Officer’s Insurance for Doctor’s:

http://www.physicianspractice.com/blog/directors-and-officers-liability-insurance-issues-physicians

Filed Under: business legal planning, dentists, Director and Officer Liability, doctor sued, liability, liability insurance, medical practice mangement Tagged With: , , , , ,

Bad Advice Doctors, Business Owners Get from Financial Advisors

February 19, 2013 by Leave a Comment
BUSINESS AND MEDICAL PRACTICE OWNER LAIBILITY

As we have discussed here multiple times in the past, the most effective wealth preservation planning has four key components: tax planning, legal planning, investment planning, and insurance planning. Fortunately more advisors from different disciplines are adopting a more holistic view of their clients and educating themselves in a variety of areas outside their own primary practice area in order to be of greater value and part of a real team.

Unfortunately, misinformation, bad habits, and “wives tales” continue to plague doctors and create or ignore serious financial exposures.

The following bad advice comes from a variety of sources, including CPAs, financial advisors, and, perhaps most shockingly, estate-planning and general business attorneys who have handled foundational planning for physicians and are often just reluctant to admit that they overlooked an area of planning.

1. You’re not risky enough to worry about asset-protection planning. This common bad advice plays into the idea that the risk picture you have of yourself is accurate or complete. We all have a specific “risk picture” and things we consider to pose the greatest risk to ourselves and our assets; that picture is distorted. My experience over the last ten years as a defensive planner is that while we must plan against the most obvious and likely exposures, it is most often the issue we never thought of that will create the biggest exposure. This includes the medical malpractice exposure doctors face, as we have explained in past discussions financial exposures and employee lawsuits have been much more frequent sources of serious and recurring exposure. 

2. You have a big umbrella policy; you don’t need anything else. I recently met with a couple in their 60s that had married later in life. Each of them had been previously married, successful, and brought their own children and substantial assets to the relationship, north of $5 million each. After a review we discovered that the retired physician had, as one of his investments, a nutraceutical company that he closely held, managed and for which he formulated products.*

We prescribed a system of legal tools and specific risk management measures. The result would have been to reduce their collectability from seven figures each to less than $200K each. Upon review of the suggested plan, both their CPA and estate planner felt that they were low risk and did not need any measures in place beyond the liability insurance and seven-figure umbrella policy they had in place.

While I fully agree that umbrella is a good idea, it is the height of naïveté to think that a personal liability umbrella, no matter how high the limits are, would be adequate to cover risks we’ve previously covered in areas like employment lawsuits, events of data breach, and liability related to their roles as directors and officers of corporations, which we covered in detail last week. However, because the couple and their advisors could point to no immediate, specific known threat, they chose to remain unprotected, with the sum of their lives’ work exposed to any twist of fate. The essential problem? If they are wrong it is doubtful that they will be able to replace 40 years of work given their age the prevailing economic conditions.

While this list is not complete it identifies the basic underlying issues and attitudes that are allowing this misinformation to spread. The idea is simple; we can’t predict where, if ever, an exposure will occur for any particular individual, so you must aggressively plan and defend yourself against as many risks as reasonably possible while you still have an opportunity to do so.

Consider this simple analogy. Almost every person reading this has liability insurance that includes coverage for fire damage to their home, yet when I ask rooms full of doctors across the country how many of them have ever had a house burn down I’ve never seen more than a single hand raised. The number of hands in the air when I ask how many people have ever been involved in lawsuit of any kind is substantially higher. If this is the level of cousnel you are getting, perhsps it’s time to investigate more sophisticated help that understands and will help adress your liability

*minor identifying details changed.

For a more complete look at myths and misconceptions that cost people everything, see the article “Common Fatal Flaws of Asset Protection” here: http://www.proassetprotection.com/2010/10/common-fatal-flaws-of-asset-protection-planning/
 
This article orginally appeared at www.PhysiciansPractice.com , The Nation’s Leading Practice Managment Resource, where Ike Devji is a regular contributor.
Filed Under: Asset Protection, Asset Protection Fraud and Failures, business legal planning, closely held business, doctor sued, financial advisors, FINANCIAL ISSUES FOR DOCTORS, financial literacy, lawsuit awards, liability insurance, Uncategorized Tagged With: , , , , , ,

10 Survival Tips on Asset Protection for Real Estate Investors & Owners

February 6, 2013 by Leave a Comment

 

ASSET PROTECTION - REAL ESTATEReal estate management issues fall into several basic categories: debt, liability, and loss. We provide an introduction to these issues to help you get your house in order below. As many business owners and physicians also have investment in real estate outside their business itself, I’ve included issues of wide applicably.

Debt

The nature of real estate debt and the significant guarantees that often accompany it can have grave consequences. We’ve covered some of these in detail including the effects of real-estate investments on physicians’ financial solvency.

Make sure you clearly understand the limits and extents of the personal guarantees you sign. Many investors are signing as “jointly and severally liable” for 100 percent of the total debt when they only own 20 percent of the deal, as one example. Limit your liability share to your ownership share and understand if the loan you are signing for is a “non-recourse” loan or not.

Have your leases, indemnity agreements, and other legal docs drafted by a lawyer, or at least reviewed by a lawyer BEFORE you use them. Asking us what we think after the fact is useless. Always have these agreements reviewed by an experienced real estate attorney. Having your brother-in-law the DUI lawyer look at it could be the most expensive $500 you ever saved.

Don’t sign blanket personal guarantees, be specific in what you agree to collateralize as much as possible or the bank will value what you own at pennies on the dollar and try to take it all.

Get professional accounting help to maximize tax deductions. Use strategies like energy studies and cost segregation studies to reduce your fixed long term costs and maximize what you keep. Some real estate lawyers and accounting firms also offer “lease audits” these verify all the mysterious monthly expense add-ons you may face if you rent rather than own the building, the calculations are often wrong, and not in your favor.

Liability

Protect yourself from your , clients or patients (or renters, their guests, and business invitees); you are liable for their health, welfare, and safety related to the property and conditions on it. Have specific leases, written policies on conduct and the use of the properties and penalties for violating them. Insure yourself to hilt against liability incurred on the property. You will almost always be more collectible and better lawsuit target than your renters. That said, don’t ever forget that insurance alone is just one layer of defense and is not adequate protection.

Don’t put too many eggs in one basket. Divide properties based on use, equity, and danger or liability. If you have multiple pieces of property in a single LLC, for instance, remember that ALL of them are potentially at stake for an exposure at one property.

Implement personal asset protection planning and consult with legal counsel on how you are protected and which of your other personal assets are at risk and should be made legally distinct. If he or she says, “just by more insurance” fire them and get better help.

Loss

Adequately insure yourself against loss and property damage, as distinct from liability. Use only top rated national carriers that you can sue for bad faith if they don’t pay under the policy as they should. Yes, this is common, “bad-faith” lawyers exist for a reason. Remember that vacant property is often not covered by general loss and liability insurance after as few as 30 days if you don’t let the insurance company know and pay them extra.

Get ALL the right insurance. If you are a owner/manager you need general liability, E&O (like professional malpractice), and potentially D&O insurance (directors and officers) if you are a director or officer of a company that may be personally named for professional acts or omissions, i.e. “I made the call that reinforcing the balcony railing was too expensive and not required at the property…”

As always, act today, anything you do after an exposure is more expensive and less likely to work. Be proactive and tactical in defending what you have earned.

Attorney Ike Devji has a decade 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 of dollars in personal assets for these clients. Ike also regularly writes, teaches and speaks on these issues to executives, 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.  

© 2013 Ike Devji, J.D.  

Filed Under: 2013 Economy, arizona economy, arizona real esate, Asset Protection, business legal planning, commercial real estate, doctor sued, financial literacy, homeowner's liability, investing, investment exposure, liability insurance, medical practice mangement, property insurance, vacant real estate liability Tagged With: , , , , , , , , , , , , , , ,

Addressing Employee Liability Issues at Your Medical Practice or Business – 12 Month Practice Tune-up

January 18, 2013 by Leave a Comment

January 08, 2013 | Finance, Risk Management, Law & Malpractice, Staff

By Ike Devji, JD

Happy New Year and thanks for continuing into 2013 with us. In one of my last columns of 2012, I suggested that many of the complex issues we discussed together over the last few years in this forum can seem daunting when taken as a whole and that we would provide a series of guides to help you address major issues in a time- and cost-effective way. This article is the first in that series.

One of the greatest assets and largest liabilities any business faces is its employees. The average American business is five times more likely to face legal exposure by an employee than for another reason. And judgments for common complaints like sexual harassment routinely produce verdicts of $500,000. We continually see that many of the issues that arise and become adversarial or create significant legal and financial exposures for doctors result from a failure to plan and have adequate “risk management” measures in place. Risk management is the first line of defense as preventing harm or liability is almost always cheaper and easier than trying to correct it. This is also a great time to make some changes; employees expect that policies and procures are updated periodically, typically at the beginning of the year.

Issue One: Employment Manuals

A good employment policy manual, a.k.a. employee handbook, is one of the most basic and effective lines of defense and an indispensable management tool. The majority of medical practices out there have either no manual at all or worse, a form manual that is poorly drafted and fails for some reason. Many manuals in place are outdated in terms of compliance with current employment laws or have been borrowed from another doctor, sometimes in another state, and the laws around which they were drafted do not apply.

The common practice of borrowing another doctor’s manual of questionable value and simply cutting and pasting the name of your practice in to save a few dollars will almost always produce a bad result when it’s challenged. We’ve provided a specific resource and very specific tips from an expert in a previous article but a good manual will, as a minimum:
• Be drafted for your business and how it actually operates;

• Include a specific and legally enforceable conduct, confidentiality and discipline and termination policies; and

•Be specific to the current employment laws in your state.

Issue Two: EPLI Insurance

Employment Practices Liability Insurance (EPLI) is another “must have” tool. This very specific type of insurance is structured to help handle the cost of an employee lawsuit and may not only provide the costs of legal defense, which can easily be six figures on its own, but also provide some coverage in the event of a judgment. Like all insurance, its cost is based on underwriting and your past risks and exposures. The cost is very low and it will pay for itself the first time you have any need for an employment attorney in a controversy, based on my experience. In fact, in most cases a year of insurance can cost less than just a retainer required by a lawyer. Work with an insurance expert that can explain in detail the differences and gaps between different carriers and policies.

Issue Three: Workers Comp Coverage

This is another specialized area of insurance that requires professional guidance. Remember this policy is there to protect your employees from loss and injury incurred on the job, it’s also there to help avoid you and your practice for being help directly and personally liable for those losses and the financial and legal costs involved. I often see physicians trying to shop this on price alone. Don’t do that. This not only protects those who trust and work for you it also protects you by limiting their right to sue you for the harm in exchange for these benefits.

Issue Four: The Human Factor

As carefully as we plan, there is one exposure that’s very hard to prevent: the human factor. Always keep in mind that you are responsible for the workplace and the specific human interactions of the people in it, including employees, contractors, vendors, and even owners and partners. Intentional conduct or gross negligence are almost always going to cause you trouble and cost you money. Make this the year that you identify and fix specific behavior issues that create these liabilities or terminate those that cause exposure if they refuse to conform. Your business is at stake.

This article originally appeared at www.PhysiciansPractice.com and is used here with permission. Asset Protection only attorney Ike Devji has 10 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.

Filed Under: business legal planning, chiropractors, dentists, doctor sued, Doctors, Employment law, FINANCIAL ISSUES FOR DOCTORS, HEALTH CARE LAW, Leadership & Management, liability, medical practice mangement Tagged With: , , , , , , , ,

Fatal Flaws in Doctors’ Asset Protection Planning

January 7, 2013 by Leave a Comment

During my practice with a client base of thousands of doctors I have seen the best and the worst of asset protection planning available to the American public as well as the most common flaws evident in both self-directed planning and plans executed by “professionals” who do not practice primarily in this area.

Below is the first part of a short summary of “fatal flaws” to keep in mind when addressing this crucial issue. Please bear in mind that information in forums like this is not specific to you, is written in the broadest terms and is never a substitute for consulting with an experienced professional:

1. FAILING TO ACT (Timing) — Asset Protection is best analogized to “net worth insurance” and like insurance you have the best, most effective and legally supportable options available to you when you implement the planning before a crisis exists. Transfer of assets into plans after you have specific exposures is costly, ineffective, and some cases illegal (fraudulent conveyance). The best time to act is always now and every day that passes makes your planning stronger.

2. THINKING YOU’RE NOT RICH ENOUGH — A sin I see committed on a weekly basis, often by professionals like lawyers, CPAs, and financial advisors. Advisors often tell clients that they are not rich enough to do any planning and that that they should have a net worth north of $5 million or even $10 million to consider it. Nothing could be further from the truth, especially if you are in the “fall” of your earning career. All you have is important to you and there are precautions that can be taken at any net worth level. When should you start? There are many simple ways to analyze this but here is an easy one, answer these questions:

• If you lost what you have today, or some significant portion of it, are you at an age, earning level, and financial condition that will allow you to maintain your family’s goals and expenses?

• Do you have assets that would be difficult or impossible to replace given your age, health, and economic conditions?

• Are you financially and legally prepared for a lawsuit that is either uncovered by liability insurance or which often produces verdicts above the limit you are carrying?

If you’re not comfortable with your answers, it’s time to take responsibility and action for your financial future.

3. RELYING ON YOUR TRADITIONAL ESTATE PLANNING — “I’ve got this covered, I think. I have my home, cars, and investments all titled in my trust.” This is something we hear often. The layperson usually feels that a transfer of these assets to a vehicle like an estate planning trust, like a Revocable Living Trust, is effective asset protection; it’s not. The first word in the trust is “revocable” and in most cases a judge will simply order you to revoke the trust and tender the assets for a judgment. That is death planning. What has been done about your life planning and the exposures you face every day practicing your profession, driving a car, having children (some driving your car), or having employees…?

4. TOO MANY EGGS IN ONE BASKET— Others implement a good tool like an LLC as a barrier between themselves and their investments, but fail to adequately segregate and subdivide assets so that they are protected from the owner and each other. A common example is the case of the property owner who has single LLC that is legally and financially responsible for a wide variety of properties that have different levels of liability, equity, and use. If you call and say you have $5,000 to 10,000 down on four new short sale properties in a single LLC, it’s probably OK, because your total exposure is theoretically limited to $20,000 to $40,000, the value of the LLC’s assets. On the other hand, if you call and say that you have seven pieces of real estate with a total equity position of six or seven figures, some paid for, some all debt, including a triplex, a lot, and a commercial strip mall, I’m going to start sweating on your behalf. Why? Because any exposure at a new, zero equity property could wipe out your entire portfolio of paid for or partially paid for properties. Assets must be divided based on use and equity as well as into the right kind of legal vehicle, among many other factors.

5. SQUARE PEG, ROUND HOLE — USING THE WRONG TOOL — Certain vehicles have great use for specific business functions supported by statute, tax law, and case history. You and your planner must have a good handle on these issues and know what pros and cons each entity presents, what the effect on your liquidity will be, and what it will take to maintain and support that stated business purpose as a start (Starting to see the detail required?). One good example is the common misuse of Family Limited Partnerships (FLP) to own the client’s personal residence. What is the legitimate business purpose of using a vehicle that is most often created for “family investment management and wealth transfer” to own the house you personally live in? If you’re not paying commercially reasonable rent, you don’t have one. The plaintiffs (or worse, the IRS) will successfully argue that you are using the FLP as personal piggy bank that is not legally distinct and immune from your personal assets and liabilities.

6. DRAGGING LIABILITY INTO YOUR PLAN — Similarly, we often see dangerous articles of personal property like your personal vehicles moved into this structure or others like an LLC or S-Corp. that is your primary business, or equally dangerous, into an entity like an FLP that is holding safe and attractive assets like cash, stocks, bonds, and other liquid assets. Think about it, if you lease or own your vehicle through your business, you have linked the most dangerous thing you likely do on a daily basis, drive a car, and linked it to either the source of your wealth, your business, or in the case of your FLP, the place you keep your wealth.

7. RELYING ON GIFTING TO RELATIVES (SEE ALSO FAILING TO ACT) — Transferring all of your assets to your spouse and/or children, especially after something has happened, will not protect your assets from a lawsuit and simply opens up another Pandora’s Box. There are thousands of lawsuits filed daily due to employment grievances, “slip and fall,” and auto accidents. Consider this scenario: Let’s suppose that you transfer all of your assets to your 18-year-old son who causes an auto accident. Several other cars are involved in the accident and several injuries are incurred. Chances are high that the other parties will come looking for the driver with the deepest pockets. If your son “owns” your house and business, a sympathetic jury will undoubtedly take the possession away from your son in order to teach him a lesson for his reckless driving. The same holds true for spouses, parents, and even friends. Also, gifting is limited to about $13,500 annually, per spouse, per donee. Gifts over that amount must be documented with a gift tax return. Failing to do so will result in you having to answer the question: “Are you lying now re: the date and validity of this transfer or did you cheat the IRS?” This is a bad place to be in a time of need.

8. USING UNPROVEN, POORLY STRUCTURED TOOLS OR SCAMS LIKE “FRIENDLY LIENS” — Another common scam I see is promoters of LLC mills setting up LLCs that you or a friendly party own and then having that entity record a “lien” against some valuable asset, typically real estate. While validly recorded and executed liens do have great deterrent power against creditors, they have to be backed by a real exchange of value. So if your brother-in-law owns a Nevada LLC that holds a lien on your home for most of its value, there should have been some exchange or “consideration” roughly equal to the amount of the lien. “Your sister has a $300,000 lien against the $400,000 home you live in? Uh, OK…then where’s the record of the $300,000 she gave you, as a bank would have in a real home equity loan? She didn’t give you anything in return? Great, we’ll take the house.”

This article just scratches the surface of what you need to consider when evaluating your exposures, asset protection planning, and the countless options available. Act today, seek experienced counsel, and keep looking for more light and information that will help you and your family keep and enjoy the fruits of your labors. Remember, it’s not just what you make; it’s also what you keep!
 

Asset Protection only attorney Ike Devji has ten 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. This was originally published in Jan, 2011 and is the kind of material Ike has taught for a decade as an expert speaker and educator for medical groups.

Filed Under: Asset Protection, Asset Protection Fraud and Failures, dentists, doctor sued, Doctors, Ike Devji, medical practice mangement, physicians Tagged With: , , , , , ,
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