Asset Protection - Annuity and/or LI

Jun 2, 2019

  1. J2727
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    J2727 Expert

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    Some professions have increased liability, like doctors.
    Some areas have very high premiums for liability insurance (malpractice insurance for doctors).
    This means that some doctors "go bare"; they have zero malpractice insurance.
    This is especially true for Ob/Gyns and surgeons.

    Areas like South Florida have the highest premiums and the highest risk.
    This sounds insane, but if the premium is $120K, then you can see why they would just not have it.

    So, in these cases, these doctors needs to protect more of their money.

    Every state is different regarding which assets and accounts are creditor proof.
    Florida has all retirement accounts (IRAs, etc.) as creditor proof.
    In addition, in Florida all annuities and cash value life insurance is creditor proof.

    So, if a doctor has maxed out his retirement accounts, and can't or won't do a cash-balance plan to put away more tax-deferred money, but still wants to protect more money from liability and creditors... which option do you think makes more sense?

    Annuities or cash-value life insurance? Or both.

    Doctor would need to continue funding, preferably monthly. Can also do quarterly or yearly (worst option).

    A deferred annuity would seem to make the most sense. A FIA?
    Maybe an IUL for the cash-value insurance option?

    Obviously, in addition to asset protection, rate of return also matters.

    What say you?
     
    J2727, Jun 2, 2019
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  2. Tahoe Ray
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    Tahoe Ray Guru

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    Too many variables.

    Health and age of the hypothetical doc?

    Younger can be better for life...older FIA.

    Why won't they do a cash balance plan? Is it the commitment or the funding?

    If it's the commitment, then FIA all of the way. Funding then just walk.

    Focusing on potential return, most of your scenario depends on age/funding length. Life insurance can be a great option, especially for a younger (<55) person. There aren't a ton of FIAs that are really solid for monthly/quarterly contributions.

    Personally, I position FIAs in 2 places: guaranteed lifetime income (rollovers) and bond alternatives (accumulation for older: 55+ people).

    They can also be used to "de-risk" as someone gets older but still wants some upside without rising interest rate risk (vs. bonds)

    Frankly, like all planning questions, it depends.

    PS. This is all under the context of the asset protection concept that you outlined in the beginning of your post. If the doc is younger and that is not a consideration, then investing in a diversified portfolio (non-qual) is probably the best option, and if they're older, then a defined benefit/cash balance plan will be really strong.
     
  3. somarco
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    somarco GA Medicare Expert

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    This seems to be more of a legal question than insurance. Tax planning lawyers have a number of ways to protect assets including the use of LLC's, trusts, etc.
     
    somarco, Jun 3, 2019
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  4. J2727
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    J2727 Expert

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    It is a financial, legal, and insurance question.

    There are many variables to this and many strategies can be used depending on the situation of the doctor (age, married or single, kids or no kids, employer or employee, state, etc.)

    Annuities and life insurance can be part of the solution. So, I'm asking in that regard.
     
    J2727, Jun 3, 2019
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  5. Allen Trent
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    I don't buy this. No hospital or surgical center is going to let an uninsured surgeon operate without malpractice. Plus, most health carriers require malpractice if you want to get paid by them. So, unless these surgeons are working for cash only out of a strip mall, I don't believe it is especially true.

    Now, it doesn't take away from all your other valid points, but I don't believe it is "especially true".
     
  6. J2727
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    J2727 Expert

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    You're incorrect.

    Florida allows you to not have malpractice as long as you have something like $250K in assets.

    Many ObGyns and surgeons don't have malpractice insurance in South Florida.
    The premium for an ObGyn can be as high as $170K or so.

    My father is an ObGyn and he doesn't have it.

    Some doctors even have signs in the waiting room stating that they don't carry malpractice insurance. I've been to several of them.

    And yes, these doctors still have hospital privileges.
     
    J2727, Jun 3, 2019
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  7. Allen Trent
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    Yikes. i stand corrected. I figured there was no state requirement to carry insurance & knew the malpractice rates were ridiculous but couldn't fathom a situation where a hospital or its insurance carrier would permit an uninsured professional to treat or perform surgeries on its premises.

    However, I still believe you are incorrect in that "Florida doesn't require you to have malpractice if you have like 250k in assets". i bet the malpractice insurance requirement is waived if you have 250k in a escrow account solely pledged for the potential malpractice claim. An escrow account of that type is much different than merely having assets worth 250k. But I could see why some would go that route to avoid the high malpractice rates. I am guessing this is also why most Drs are joining larger firms, etc
     
  8. J2727
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    How they have to prove to the state they have $250K, or whatever it is, is not the point of this thread. I think it's a bond, or line of credit, etc.
     
    J2727, Jun 3, 2019
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  9. scagnt83
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    scagnt83 Worldwide Expert of Everything

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    There are lots of state based loop-holes for using a Bond in lieu of insurance coverage. In SC, you are not required to have car insurance if you purchase a Fidelity/Security Bond or whatever you call it. RIAs do not have to carry E&O in some states if they purchase a Bond to cover any claim. No surprise it exists for other professions as well.

    It actually makes a lot of sense for Doctors imo. Lawyers take malpractice suits because they know the insurance company will usually settle and have deep pockets. But if malpractice insurance is not in the picture, then it will be much harder to get paid and it will likely be a much lower payday if at all. The BS lawsuits in the OB fields has become insane, and Id bet more and more doctors do this. jmo
     
  10. scagnt83
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    scagnt83 Worldwide Expert of Everything

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    Best asset protection they can get is a Qualified Plan.

    After that, its state specific as to limits on Annuities and Life Insurance (very few states allow 100% to be protected from Creditors).

    After that, it just depends on needs, risk tolerance, personal situation, etc. Do they need life insurance is the first question to ask. If they do, then why not both? since they do different things... especially if your considering IUL.
     
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