Asset Protection - Annuity and/or LI

[J2727]

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

As I first mentioned, even if they wanted to get malpractice insurance, the premiums in some areas make it unaffordable. The premiums have come down in recent years, but still, even if its $80K premium, that's a lot and makes them consider "going bare".

Regarding being less of a target for lawsuits if they don't have malpractice insurance... yes, that's true. However, it doesn't make them immune.

For example, for an Ob/Gyn, if the baby dies or comes out with a shoulder injury, those are almost always going to be cases an attorney would move forward on, regardless if the doctor has malpractice insurance or not.

In one case, the baby died in the womb. Parents sued the hospital and got $500K. Don't know about the doctor.

There is still a huge risk and why I posted this thread in the first place.

Future earnings is also something that could be encumbered. I don't know how that money can be protected.

For a doctor without malpractice insurance, almost every penny they have should be in a creditor protected account, be it a legal, financial, or insurance account.

That's why I mentioned annuities and life insurance. In Florida, they're 100% protected. They're just more tools a doctor has for creditor protection.

 

[Tahoe Ray]

As I first mentioned, even if they wanted to get malpractice insurance, the premiums in some areas make it unaffordable. The premiums have come down in recent years, but still, even if its $80K premium, that's a lot and makes them consider "going bare".

Regarding being less of a target for lawsuits if they don't have malpractice insurance... yes, that's true. However, it doesn't make them immune.

For example, for an Ob/Gyn, if the baby dies or comes out with a shoulder injury, those are almost always going to be cases an attorney would move forward on, regardless if the doctor has malpractice insurance or not.

In one case, the baby died in the womb. Parents sued the hospital and got $500K. Don't know about the doctor.

There is still a huge risk and why I posted this thread in the first place.

Future earnings is also something that could be encumbered. I don't know how that money can be protected.

For a doctor without malpractice insurance, almost every penny they have should be in a creditor protected account, be it a legal, financial, or insurance account.

That's why I mentioned annuities and life insurance. In Florida, they're 100% protected. They're just more tools a doctor has for creditor protection.

Just buy a 5 million dollar house. That works too in FL, right?

 

[J2727]

Just buy a 5 million dollar house. That works too in FL, right?

Yes, FL has unlimited homestead exemption.
I believe the house must be within half an acre within a municipality and up to 160 acres outside of a municipality.

For bankruptcy purposes, I think you had to owned the home for 18 months or something to have full protection.

But if they buy a bigger house, then they can't invest the money and you run the risk of the housing market going down. So, they can buy a little bigger house than necessary, but up to a point.

 

[DHK]

Best asset protection they can get is a Qualified Plan.

But even then, just because it's protected, doesn't mean the plan owner can access the funds without creditor intervention.

Years ago, I helped someone with an IRA transfer from a brokerage to a variable annuity. The amount was about $300,000 and Met Life was having a "6-6-6" deal: 6% bonus, 6% income step-ups, and 6% income for life.

The brokerage was already with our firm. But once transfer paperwork was submitted, I got a call from the transfer desk saying that the CA child support department has a lien (or other claim) on the funds for $15,000 (or whatever). I contacted the client and asked if he still wanted to go through with the transfer and he did. (It was rather cool that the "bonus" more than compensated for the amount of child support that still needed to be paid.)

So while assets may be shielded from creditors... that doesn't necessarily mean that they have access to those funds without creditor intervention. Which was why OJ Simpson turned everything into SPIAs - so he can get the income.

This was in California and obviously not to be taken as legal advice.

 

[Allen Trent]

Which was why OJ Simpson turned everything into SPIAs - so he can get the income.

I don't believe they are run of the mill SPIA. I believe it is inside of a pension he created for himself, thus greater protected than regular SPIA income would be if everyday cash was used to purchase the SPIA. I recall hearing Lance Armstrong had done some of the same. I believe they utilized solo defined benefit plans that allowed the extremely large sums to cover the future defined benefit obligation spelled out in the pension document

 

[Tahoe Ray]

Years ago, I helped someone with an IRA transfer from a brokerage to a variable annuity. The amount was about $300,000 and Met Life was having a "6-6-6" deal: 6% bonus, 6% income step-ups, and 6% income for life.

That was probably one of the best products ever created.

 

[Allen Trent]

That was probably one of the best products ever created.

but the devil was in the details..................

 

[Tahoe Ray]

but the devil was in the details..................

I actually wasn't being sarcastic for once...it was really a great contract.

AXA had a similar one and has been trying to buy people out of it.

 

[Allen Trent]

I actually wasn't being sarcastic for once...it was really a great contract.

AXA had a similar one and has been trying to buy people out of it.

I know. I was being sarcastic because it was 666--devil was in the details

 

[DHK]

The M&E was a bit higher (1.85% from what I remember vs the more common 1.15% for their standard 7-year) and a 9-year surrender, but it was a great fit for this case for the benefits.