Personal Finance How Not To Lose It AllPresentation Transcript
Worst Case Scenario in Asset Protection – You Lose Everything! North American Veterinary Conference January 15, 2007 Is this who’s guarding your practice door? A tasty treat could easily defeat!
Mark J. M c Gaunn, CPA/PFS, CFP ® President
MJM Financial Advisors, LLC 114 Turnpike Road, Suite 107 Westborough, MA 01581-2861 phone: (978) 405-3133 e-fax: (978) 776-2609 e-mail: [email_address]
What it is
What it is not
What to do
What not to do
Planning that preserves wealth over time against numerous, unforeseen circumstances. We’ll discuss:
Well-designed plans arrange one's affairs so as to minimize the risk that one's wealth is subject to external creditor attack and frivolous lawsuits.
Effective plans contain multiple layers of protection.
Asset protection is fundamental building block of risk management.
Is common sense enough?
Effective asset protection starts with common sense .
But can practice owners protect assets from:
Foreclosure action by secured lender(s),
Breach of contract or intentional act by practice employee
Owner’s personal actions/debts outside veterinary practice (personal guarantee on secured debt),
Personal creditor attaching owner’s entity(s) stock
Practice employee/vendor harassment
Pet owner/visitor personal injury.
What to get?
Create a plan designed to offer genuine protection for veterinary practice owners:
not so simple you’re unprotected, but
not so complex it causes needless difficulty.
Planner needs a broad knowledge of asset protection options-from simplistic to most complex.
Avoid wealth protection seminars and “boilerplate” solutions.
Run if someone promises way to avoid taxes.
Each solution tailored to each practice owner.
So follow these 4 rules…
Rule 1 of 4
Do not own significant assets in your own name
Not doing so equates to leaving door to practice unlocked. All assets ( real estate! ) are targets.
Re-titling common practice of wealthy and large corporations (high profile targets). Best and least expensive strategy.
Walt created Disney World in 1970’s by forming >100 land trusts (each with different undisclosed beneficiary names and trustees) to own Orlando land.
Estimated lawsuit savings $100 million.
Rule 2 of 4
Use multiple entities to own your assets
Use a separate entity to insulate each liability-generating asset.
May include revocable and irrevocable trusts, both C ( really! ) and S corporations, Limited Liability Companies (LLC) and Partnerships (LLP)
May include foreign and domestic asset protection trusts (APT).
Rule 3 of 4
Maintain assets and entities that hold your assets in different or in multiple jurisdictions
Multiple jurisdictions can mean simply having entities domiciled in different states, not countries.
John D. Rockefeller, Sr. successful vs. PA even while owning properties in NY, FL and CT (he retained them without loss)
Rule 4 of 4-Remember!!!
Asset protection laws change constantly.
U.S. tax law has changed every other year since 1980.
New asset protection strategies come into favor (new islands and states seeing $$$)
Strategies fall out of favor based on case law (bankruptcies and appeals by IRS).
Veterinary Risk Management
Practice high-quality veterinary medicine.
Document all care you do.
Document what you don’t do.
Apologize right away.
Beware of "experts” and “guarantees”.
Maintain modest lifestyle with a low profile.
Avoid general partnerships.
Maintain more than adequate insurance coverage (Value=typically ins. co. must provide a defense.
Don’t do what “Stan the Man” did.
Don’t meet FBI or IRS on their turf!
Asset protection is not illegal and is honored if done for a legitimate purpose.
But, an entity or entities may not be created without business purpose and personal assets transferred to them with no relationship to any business purpose, simply as a means of shielding them from creditors (see Stranghi vs. Commissioner, expert Atty. Robert J. Mintz).
Photo source: washingtonpostonline.com
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