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When Bad Things Happen to Good Physicians
It occurs, and often when you least expect it — things can change abruptly and cause you to depend more heavily on your financial resources and previous financial planning.
Estate/asset protection is critical for almost all physicians, especially as net worth increases over time. Protecting your assets in these circumstances requires that you have already put into place coordinated legal and financial planning strategies.
Here are two examples of undesirable yet all too common life events, along with strategies available for you to deal with them.
Unjust Liability Claims
Estate/asset protection is critical for almost all physicians, especially as their net worth increases over time. Unfortunately, our litigious society often sees high-end physicians as “deep pocket” targets for unwarranted claims and lawsuits. Protecting your assets in these circumstances requires that you have already put into place coordinated legal and financial planning strategies. These plans would include but extend well beyond your current personal risk management insurance protections, such as professional liability insurance coverage, business continuation insurance coverage, personal disability income protections coverage, buy/sell insurance practice coverage and family needs life insurance coverage.
Additional strategies to fill the exposure gaps include the utilization of various types of trusts, often including both revocable and irrevocable trusts. How these trusts are structured and funded will greatly affect their ability to help protect your assets in the event of unjust litigation. The additional considerations of selecting trustees, providing appropriate distribution standards and the duration of the trusts all play critical roles in effectiveness toward helping meet your objectives. Even the legal structure of your medical or specialty practice (solo practitioner, ensemble partner, hospital employee, etc.) has a direct bearing on the amount of personal liability exposure you retain and the effective ways to help protect your assets. Seeking out professional expertise in these areas is important.
It is painfully sad, but divorce happens in our society. Saving your assets when you cannot save your marriage is a critical step in continuing your life after a divorce. High-net-worth physicians often have additional, special issues needing to be appropriately addressed at this time.
There may be a need for significant modifications to your asset allocation to provide the liquidity required for child support and/or alimony maintenance payments. In addition to having your remaining investment portfolio allocations rebalanced after the spousal asset division, you will need to have your risk tolerance recalibrated based upon your diminished portfolio value. Depending upon the housing situation after a divorce, capital may need to be raised for the purchase of a new residence. While pride and ego often enter the settlement negotiations, it is counterproductive to fight in court over property beyond the true market value of the assets in question. Objective financial assessments must be made to ensure this does not occur, as it can be very damaging to both parties.
There may also be a requirement for changes to life insurance policies, such as altering policy beneficiaries to an irrevocable status. Additionally, settlements often require the purchase of additional insurance coverage to provide the required child support and/or alimony in the event of your premature death. While divorce attorneys will help with the required court discoveries and legal filings, financial counseling is equally important to preserve a fair share of hard-earned assets.
Brian T. Hinson is the owner and managing partner of First Financial Group of Huntsville, LLC, and is a registered representative of Lincoln Financial Advisors Corp. Securities and investment advisory services are offered through Lincoln Financial Advisors, Corp., a broker-dealer (member SIPC) and registered investment advisor, 400 Meridian Street, Suite 100, Huntsville, AL 35801, offering insurance through Lincoln affiliates and other fine companies. This information should not be construed as legal or tax advice. You may want to consult a legal or tax advisor regarding this material as it relates to your personal circumstances. *Licensed, not practicing CRN201201-2063337.
MDNews March/April, 2012 North Alabama