Business Planning

3 Liability Planning Tips For Physicians

February 3, 2023 By Gratia P. Schoemakers, Esq. Leave a Comment

You probably know that the practice of medicine is a profession fraught with the risk of liability. It’s not just medical malpractice claims either (although those are certainly scary enough). It’s the entire scope of risk from being in business, including employment-related issues, careless business partners and employees, and contractual obligations, as well as personal liabilities. Unfortunately, in our litigious society, these liability risks are not unique to physicians, although physicians are a frequent target.

Below are three liability planning tips for physicians to protect their hard-earned money.

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

Liability insurance is the first line of defense against a claim. Liability insurance provides a source of funds to pay legal fees as well as settlements or judgments. Types of insurance you should consider are:

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

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

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

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

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

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

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

Final Advice for Protecting Your Assets

Liability insurance, exemption planning, and business entities should be used together to create a multi-layered liability protection plan. Our firm is experienced with helping physicians, professionals, business owners, board members, real estate investors, and retirees create and—just as important—maintain a comprehensive liability protection plan. Please call or contact our office if you’d like to make sure you have the right protection in place.

Estate Planning for Rental Property Owners

May 2, 2022 By Gratia P. Schoemakers, Esq. Leave a Comment

In all parts of the country, services such as Airbnb have grown in popularity over the past few years. Indeed, these alternatives to hotel stays are popular among homeowners and vacationers alike. If you have a home or other rental property that is generating income, you should understand the following asset protection and estate planning considerations.

Protecting Owners from Liability

Just like any rental relationship, there is risk for the property owner. If anyone is hurt on the premises during their stay – no matter how short – a property owner could be held legally and financially liable for injuries suffered.

The first line of defense is general liability insurance – assuming there is proper and sufficient coverage on the property. In the case of a lawsuit the insurance company should step in and defend the claim up to the policy’s limits. Any damages beyond that may become a personal liability to the owner, depending upon how the property is titled.

If the property is owned by a limited liability company (LLC) instead of the individual(s), then the individual member(s) of the LLC may have some additional protection if the liability insurance coverage limits are not sufficient to cover the total amount of financial liability. It is important to note that in order to receive liability protection through the use of an LLC, the entity must be formed correctly and managed properly. If the entity is viewed as merely an “alter ego” of the member(s), the court may not uphold the liability protection, placing the property owner(s) back on the hook. To ensure that you have the most protection available, you need to consult with an attorney.

Estate Planning Considerations

Beyond liability in the event of an incident, deciding how an asset will be passed from generation to generation is an important part of estate planning. This is particularly true if such property is lucrative – like income-generating rental property. If the real estate is held in an LLC, you have options. You may choose to divide up the membership interest of the LLC among the multiple beneficiaries. With an income producing asset, such as a rental property, it is important to consider your family’s situation and your ultimate goals for the property.

Using an LLC is also helpful for estate planning because you can gift some of the membership interests during your lifetime without losing control, transfer it at the time of your death to the beneficiaries, or have it held by a trust for the benefit of the beneficiaries. Regardless of your personal situation or goals, there is a solution for everyone.

Determining whether or not to use an LLC for rental property is just one aspect of the overall estate planning process. We can guide you through your legal options and help ensure your property is protected and distributed at your death according to your wishes. Do not leave this to chance, call or contact us today to learn more.

5 Tips for Successfully Receiving an Inheritance

November 30, 2021 By Gratia P. Schoemakers, Esq. Leave a Comment

If you recently received an inheritance, or are expecting to receive one in the near future, it has likely triggered mixed emotions in you. You have lost a loved one and also experienced monetary gain. Studies show that a third of Americans who received an inheritance completely spent it within two years of receipt. Below are five practical steps for you to follow to maximize and protect your inheritance.

Take your time. Allow yourself to be emotionally ready. Making decisions on what to do with your inheritance while you are experiencing challenging emotions is not optimal. Be sure to commit to self-care — whether counseling, meditation, or family and spiritual support to help you work through this process.
Get advice. Before you make any major decisions — such as paying off debt, investing in a business idea, or something else — make sure you seek professional financial advice. This is especially true if you have never managed a large amount of money before. Of note, an inheritance may affect your ability to receive certain benefits, so working closely with an attorney can help minimize any impact it may have.
Strings attached. Understand whether or not there are any restrictions to receiving your inheritance. Whether you are being given the assets outright, relying on trustee discretion as to the distribution timing and amount, or something in between, your estate planning attorney can help provide solutions for you. The estate planning attorney can also assist you if you are subject to a state inheritance tax.
Update your estate plan. An inheritance will change your asset level and mix. Therefore, your estate plan needs to be reviewed and possibly adjusted to make sure you are fully protecting yourself and your loved ones.
Great expectations. If you are yet to receive the inheritance but it is on the horizon, consider working with the relative that will leave assets to you and your estate planning attorney. Creating an “inheritor’s trust” instead of leaving the assets to you outright — although a difficult topic to discuss — can provide long-term asset protection and preservation for you.

How We Can Help

Receiving an inheritance can be bittersweet and emotions may run deep during this time. But putting your inheritance to work to help achieve your short-term and long-term financial goals is a great way to avoid misusing these assets. Being informed is half the battle, so give us a call right away to learn more about your options under the law. Call our office at 832.408.0505 or schedule your appointment right now.

Three Liability Planning Tips for Physicians Anyone Can Use

March 3, 2021 By Gratia P. Schoemakers, Esq. Leave a Comment

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

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

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

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

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

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

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

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

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

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

Final Advice for Protecting Your Assets

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

Caution: Your Traditional Asset Protection Plan is Set Up to Fail

December 23, 2019 By Gratia P. Schoemakers, Esq. Leave a Comment

You may be surprised to learn that not only has asset protection planning been around for a long time, but you have already engaged in it at some point during your life. In fact, you probably have one or more types of traditional asset protection planning in place at this very moment. The problem is in many cases the type of planning you have right now won’t be enough to protect you and your family.

What is Asset Protection Planning?

Asset protection planning is done to preserve and protect your property in advance of a claim, or the threat of a claim. In other words, this type of planning will not be effective to shield your property from an existing claim. Instead, it must be done long before there is even the hint of a claim.

The goals of asset protection planning are to provide an incentive for settling a claim, improve your bargaining position, offer options when a claim is asserted, and, ultimately, deter litigation.

What Is Traditional Asset Protection Planning, and Why Does It Often Fail?

There are several types of traditional asset protection planning that have been around for years. The most common is liability insurance – automobile, homeowners, umbrella, officers and directors, malpractice, and the like. You probably have at least one liability policy in place right now. Unfortunately, liability insurance may actually encourage a lawsuit since it is perceived as “easy money.” Aside from this, liability insurance often fails because the coverage is inadequate, the policies have extensive exclusions, or the carrier becomes insolvent.

Another common type of traditional asset protection planning is the use of a business entity, such as a corporation, to segregate business assets and liabilities from personal assets and liabilities. But while a corporation may shelter your personal assets from a lawsuit filed against the corporation, the opposite is not true – if you, as the shareholder of a corporation, are personally sued, your shares of stock in the corporation are not protected from a judgment entered against you. Of course, it is possible that if your corporation fails to observe certain formalities, then the “corporate veil” may be pierced and your personal assets will become vulnerable to a judgment entered against the corporation.

The final common type of traditional asset protection planning is established under state law and allows residents to exempt specific assets from the claims of creditors. This may include protection for property owned jointly by spouses (“tenancy by the entirety” ownership), a primary residence (“protected homestead”), the cash value of life insurance, investments held in a retirement account, and annuities. Nonetheless, these state exemptions are often subject to limitations, such as placing a cap on the value or land area of the protected homestead.

What Should You Do?

You may think that only wealthy people need to do advanced estate planning. The truth is anyone who has accumulated any amount of wealth can be sued for just about any reason. The only way to protect you and your family is to engage in more advanced forms of asset protection planning such as irrevocable trusts and sophisticated business structures.

This office can help you go beyond traditional asset protection planning by creating a comprehensive plan that will be custom-tailored to your family situation and financial status.

Call or contact us today and find out how to better protect your family.

Your Vacation Checklist

June 12, 2019 By Gratia P. Schoemakers, Esq.

You’ve packed sunblock and a beach novel. You’ve planned your itinerary and bought plane tickets. But have you ensured that your estate plan is up to date?

Don’t leave home without making sure your financial health and the future of your loved ones is provided for. It’s even more crucial than getting a pet sitter and locking the front door.

Creating an Estate Plan

If you don’t have an estate plan yet, don’t panic. Now is a great time to connect with a qualified estate planning attorney who can sit down with you and get you started with an appropriate plan for your financial future.

Here are some questions to begin the process:

Do you have a will? An attorney can help you create an accurate and intentional will if you do not already have one.
Have you considered using a trust? Trusts have considerable benefits, from keeping assets safe from creditors to dividing an estate equally without worrying about the status of individual assets.
Are your children protected? An attorney can help you designate a guardian to care for your minor child in the event you are unable to. An attorney can also help you name an adult who will manage your minor child’s inherited property if you pass away. These may or may not be the same people.
Have you considered life insurance? If you anticipate leaving behind significant debt or hefty estate taxes, or if you have small children, you may want to consider a life insurance policy. Knowing your dependents are provided for will give you peace of mind.
Is your business protected? If you own a business, have you named a proxy to manage your interest if you cannot? Do you have a business succession plan? If you co-own a business, have you drawn up a buyout agreement? An attorney can help with that as well.

Pour-Over Wills: A Useful Tool

Considering a trust-based estate plan? It’s a great way to ensure that your assets are divided and protected in exactly the way you want. It can also help your beneficiaries avoid the expensive and lengthy process of probate, when an estate must be organized and distributed through a probate court. But as you may know, gathering the needed documents may be time-consuming.

If you need to complete an estate plan before leaving on a vacation and are unable to fully fund your trust, you may want to consider using a pour-over will in the interim.

A pour-over will stipulates that all assets that have not yet been funded into your trust will be put there when you pass away. Your trust becomes the beneficiary of any assets that you may not have had time to transfer there. In a crunch, it can serve as a stop-gap measure while your trust-based plan is being funded.

Trust, but Verify

Have you already created an estate plan? That’s great! It’s still important to verify that all provisions made in the estate plan are exactly as you want them.

Here are some items to confirm before leaving town:

Are your assets accurately inventoried? Have you left out any important assets or neglected to report changes?
Are your beneficiary designations accurate? Are your assets going where you would like them to?
When was the last time you reviewed your selection of fiduciaries? Being named as someone’s Personal Representative, Successor Trustee, Agent under a Power of Attorney, etc. can be a time consuming job. It is important that you review your selections periodically to ensure that those people are still the best choice to act on your behalf.

Contact Us Today

Estate planning with a trusted attorney is an important part of ensuring your financial health and preserving the legacy you’d like to leave to your loved ones. As you’re preparing for summer travel, don’t neglect your estate plan. We can help you put a plan in place that will reassure you and your family. Contact us today to plan for your tomorrow.

Get In Touch