Doctors and Dentists work many years to pay off their old student loans and start accumulating wealth. Many of our medical and dental clients are often concerned about malpractice claims or other lawsuits being asserted against them and the potential of losing what they have worked so hard for during their careers.
At NC Planning, one of our common focuses on our dental and medical clients is asset protection. While every client’s situation is unique, there are several common strategies that may be appropriate to implement for asset protection.
We evaluate our client’s non-exempt assets which are subject to creditor claims and determine whether it is appropriate to convert any of those non-exempt assets into an asset that is exempt from creditor claims. One piece evaluated under this strategy is the ownership of a home.
In North Carolina, when a piece of property is held by husband and wife jointly with rights of survivorship, it is held as “tenants by the entirety.” If the property is held as tenants by the entirety, there is an additional protection that a creditor of one spouse may not take the property to satisfy the debt of just one of the spouses. As such, for your homestead, we only need to worry about creditors that may have a claim against both of you jointly. For example, this would apply if you are both individually co-guarantors on a loan or mortgage.
Many types of insurance are exempt from creditors’ claims. As such, medical or dental professionals often elect to purchase insurance in favor of loved family members to ensure that individuals left behind are well taken care of after the passing of the medical or dental professional. Our firm has also worked with individual practice owners to maximize the asset protection of a captive insurance company which can also have extensive tax benefits.
There are also certain types of qualified retirement accounts that are exempt from creditor claims. Significant tax benefits can arise with this strategy. 529 Plans for our clients’ children are also commonly used tools to ensure wealth will be passed on to loved ones while avoiding creditor claims.
We also closely evaluate the structure of our client’s overall plan and determine whether it is advantageous to add additional business entities or trusts to their plans. Creating these separate entities can allow for a separation of certain personal assets from business assets to allow for greater limited liability protection.
Commonly, if the company assets are insufficient to satisfy the claims of a creditor, which would most likely be the case in a suit, a claimant’s attorney will try to access the personal assets of the business owner. This is just an item to be aware of and another reason for adding additional protection for your personal assets.
If you have any concerns regarding potential liabilities to which you may be exposed, then our team at NC Planning would be happy to meet with you to discuss these strategies further. We develop an individualized asset protection strategy for each of our clients and would be happy to find which strategy is appropriate for you.