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what are the attendings doing for asset protection?
do you use a CPA, lawyer, MBA?
offshore stuff?
LLC?
do you use a CPA, lawyer, MBA?
offshore stuff?
LLC?
what assets?, everything I got is owned by the bank - and my cash flow all goes to pay off the bills. Heck - I probably have less spare change now than I did as a resident.
Lots of insurance.
If you are a very high income individual (which likely includes most attendings on this forum), cash value insurance is a very very good asset protection device for many reasons. It grows tax free which helps to offset the higher commission that you will have to pay. It also provides a very good shield from creditors.
Do not believe the hype that you hear from many financial programs. Suze Orman preaches buy term life insurance and invest the difference. This is good advice for the vast majority of americans but not for high net worth individuals. You will find that most advisors are not aware of how to protect high net worth individuals. It is imperative to hire a good advisor.
FLP's, LLC's, trusts, and other specialty vehicles also make sense in some situations.
Finally, you need to find what assets are protected in your state of residence. In my state cash value life insurance, 529's, your homestead (if residing there for more than 40 months), and retirement plans are all protected. My friends in North Carolina are not as lucky (call it the John Edwards effect). Obviously, you want to max out contributions into these entities before going to more expensive models. Good luck.
How are you defining that term?
1 million of assets not including your home?
5 million
10 million...
I am sure that you qualify military....
I define it one of two ways...
1) Income in the top 0.1 percent which equates to over 350K
and/or
2) Net worth of greater than 3 million dollars
what assets?, everything I got is owned by the bank - and my cash flow all goes to pay off the bills.
mille125, since you mentioned the importance of a good advisor, I thought i'd ask. I met with a group advisors whose business was exclusively physicians. they seemed very sharp and very reasonable, but their cut on mutual fund growth is 5%. this seems REALLY high. is it worth this rate to, as you say, have a good advisor who can service the unique needs of a physician and/or a high income earner?
mille125, since you mentioned the importance of a good advisor, I thought i'd ask. I met with a group advisors whose business was exclusively physicians. they seemed very sharp and very reasonable, but their cut on mutual fund growth is 5%. this seems REALLY high. is it worth this rate to, as you say, have a good advisor who can service the unique needs of a physician and/or a high income earner?
SSHH, connect the dots... dual citizenship, caribbean, blue water sailboat and >$10,000. Regards, ---Zippy
If you are a very high income individual (which likely includes most attendings on this forum), cash value insurance is a very very good asset protection device for many reasons. It grows tax free which helps to offset the higher commission that you will have to pay. It also provides a very good shield from creditors.
Do not believe the hype that you hear from many financial programs. Suze Orman preaches buy term life insurance and invest the difference. This is good advice for the vast majority of americans but not for high net worth individuals. You will find that most advisors are not aware of how to protect high net worth individuals. It is imperative to hire a good advisor.
FLP's, LLC's, trusts, and other specialty vehicles also make sense in some situations.
Finally, you need to find what assets are protected in your state of residence. In my state cash value life insurance, 529's, your homestead (if residing there for more than 40 months), and retirement plans are all protected. My friends in North Carolina are not as lucky (call it the John Edwards effect). Obviously, you want to max out contributions into these entities before going to more expensive models. Good luck.
Cash value life insurance has drawbacks too. If you don't contribute maximally yearly, or miss payments, you forfeit the cash invested. If you hit hard times and need the cash for other purposes, not good. Also, those tax-free withdrawals wont be happening until many years down the road, and those are dependent on you making a profit on the investments over those years.
dont forget that the majority of the first year's premium goes to you financial advisor. And that they get a percentage of your yearly contribution after that.
Id seriously consider investing your money other ways, and sheltering it in different ways, other than insurance.
Still disagree. Buy term insurance. Payoff debt, max 401K, put lots of cash in 529 plan, Buy tax efficient investments like tax managed mutual funds, ETFs, municipal bonds. Cash value life insurance is sold not bought. I have read extensively on this subject and am totally comfortable with my strategy.
"
I am a high net worth individual and am completely comfortable with my strategy. I recommend a young doc fresh out of training buy a 25 year level term policy for 2.5-3 million use the extra cash to pay down debt, invest in tax efficient vehicles.
You sound like an insurance salesman or someone who has one in the family or someone who drank the Koolaid (got taken and is in denial)
1. I plan to be self insured (as far as life insurance goes) sometime in my mid 50s.
2. $8 million medical liability policy. $5 million umbrella liability policy. Well funded 529 plans.
3. My investment portfolio is a 60/40 mix of stock/bonds. Heavy tilt to small, value, international. Taxable accounts are DFA and Vanguard tax managed funds and a few ETFs. Like everyone else I have taken my lumps. Been rebalancing and tax loss harvesting all the way down.
Still waiting for YOU to respond to the following:
1. "Cash value policies only work over the VERY long term (more like 20 years) I just don't think that you are adequately compensated for tying up your money that long (liquidity premium) Why don't you tell us how long the average person who takes out a whole life policy ACTUALLY winds up keeping the policy in force and actually earns on their returns? Why don't you tell us what actual cash surrendur values are after 1 year, 3 years or 5 years, in case you change your mind?"
2. How about policies being written NOW in the current interest rate environment? I am willing to bet that the guaranteed minimum return is a a lot lower. How have the Variable Life or Variable Universal life policies done over "the last 10 years?" What are the guaranteed minimum returns like on those?
Responses:
My question #1.........It is obvious that you plan to self insure because you will not be able to get more term insurance without paying the price. I dont know your situation but it would appear to me that you might be in your peak earning years in your mid 50's. If you die at that time would your family need insurance. Only you would know the answer to this. Some people in that situation might need insurance.
My question #2.......All I can say is wow. 8 million of malpractice and 5 million of umbrella. You must be in a high risk state. How much is this costing you? I would think that it would be very expensive (on the order of tens of thousands of dollars)? This is one approach to protect your assets but there are others. In my state no one has more than 1 million malpractice and few have more than 2 million umbrella. In fact you cannot get anyone to write a policy with your limits. 529's are good ways to pay for educational expenses.
My question #3......Again what is it costing you to make your investments. What is your fund charging you? It is likely not as much as you would pay for cash value life insurance but it is not zero. All I am saying is that when you add the administrative fees of your funds to the amount of tax that you pay it is likely more than the administrative fee you would pay for the insurance (and thus a lower return). In addition I would have insurance and your would not.
Your question #1.....Some people who have cash value are under insured. If you would like, I could give you two similar scenarios for both "buy term and invest the difference" vs buy cash value. Again it is based on assumptions but I think that you would be surprised at how well the cash value pathway does comparatively speaking.
Your question #2....If you pick a good company, the guarantee minimum return approaches 5% with no tax.
Every situation is different. I do not know all of the details of your situation. Perhaps the buy term and invest the difference approach works best for you. However, many will find that the cash value approach is superior for them especially if you are in the highest tax bracket. Dont take my word for it. I encourage all to find a fee based financial advisor who does not sell insurance products. Get an opinion from such a person. You should do so as well, Dr. Doze.
1. I plan to be self insured (as far as life insurance goes) sometime in my mid 50s.
2. $8 million medical liability policy. $5 million umbrella liability policy. Well funded 529 plans.
3. My investment portfolio is a 60/40 mix of stock/bonds. Heavy tilt to small, value, international. Taxable accounts are DFA and Vanguard tax managed funds and a few ETFs. Like everyone else I have taken my lumps. Been rebalancing and tax loss harvesting all the way down.
Still waiting for YOU to respond to the following:
1. "Cash value policies only work over the VERY long term (more like 20 years) I just don't think that you are adequately compensated for tying up your money that long (liquidity premium) Why don't you tell us how long the average person who takes out a whole life policy ACTUALLY winds up keeping the policy in force and actually earns on their returns? Why don't you tell us what actual cash surrendur values are after 1 year, 3 years or 5 years, in case you change your mind?"
2. How about policies being written NOW in the current interest rate environment? I am willing to bet that the guaranteed minimum return is a a lot lower. How have the Variable Life or Variable Universal life policies done over "the last 10 years?" What are the guaranteed minimum returns like on those?
I dont think that I answered your bolded questions. First of all anyone who knows anything about cash value life insurance will tell you that if you buy this policy and cash it in within five years, you will have made a very very poor investment (you will see this on the illustration that I am attaching below). Also roughly 10-20% of customers do allow their whole life policies to lapse in the first five years. Again, this is the reason why those with limited means should not be involved in this situation. No one in a high income bracket is going to allow their policy to lapse or miss paying their premiums.
Lets look at an illustration. Keep in mind that all illustrations use projected numbers. In the cash value column I am including all commissions associated with the policy. I am using New York Life which is a very good company. In the invest the difference column I am assuming a rate of return of 4.6% (this does not include taxes). Keep in mind that the market has given an average return of 0.5% over the last ten years. The whole life policy is a $100000 policy as is the term policy.
Yr 1 Whole life premium $1178 Cash value 0
Term premium $137 Invested value $1089
Yr 3 Whole life premium $1178 Cash value $857 (return -19%)
Term premium $138 Invested value $3414
Yr 5 Whole life premium $1178 Cash value $3738 (return 12%)
Term premium $143 Invested value $5950
Yr 10 Whole life premium $1178 Cash value $11569 (return 7%)
Term premium $152 Invested value $13337
Yr 15 Whole life premium $1178 Cash value $20818 (return 6%)
Term premium $194 Invested value $22457
Yr 20 Whole life premium $0 Cash value $28363 (return 6%)
Term premium $217 Invested value $28363
Of note whole life premiums will stop at year 17. At year 20 both average annual returns are at 4.6%.
I think that this is an interesting illustration. I heavily weighed these projections to favor the investing group. Every commission and fee is already taken out of the cash value group's projections. I did not remove any administrative fees or any tax from the investing group (both of which would occur in the real world). Also at the end of the twenty year period the cash value group still has a life insurance policy and the investing group does not. The cash value group also has money in an asset protected vehicle and the investing group does not. If you use these projections and use the rate of return over the last 10 years from investments, then the investment group definitely comes up with the short end of the stick. The annual return in the cash value group are -10.7% at 5 yrs, 2 percent at 10 years, 3.7 percent at 15 years, and 4.6 % at 20 years.
Obviously this isnt for everyone but it does have a place in asset protection and wealth management in the wealthy.
8 Million malpractice insurance!!So you have an 8 million dollar malpractice policy and a five million dollar umbrella. At what point does one have so much malpractice insurance that they are no longer protecting themselves but are becoming a target. I dont know where you live or what most of the other physicians have for coverage, but if you have a large excess of protection compared to your peers you are in a risky situation. Attorneys go after deep pockets. Why do you think that the parent gets sued if an adult child crashes the car into someone? They go after deep pockets. If you have an 8 million dollar policy and three other doctors in the lawsuit have a 1 million dollar policy, who do you think the attorneys will target. Many times you may not even be at fault. Your strategy is fraught with risk.
Concerning your point about protecting your ability to earn a living in a lawsuit in excess of your limits, there are some strategies that you can employ. One is accounts receivable factoring where another entity actually "owns" your accounts receivable. This will protect your accounts receivable in such an event. Cash value life insurance will not protect your accounts receivable but neither will your approach.
Finally, I would like to ask why you do not feel that I am not comparing apples to apples. An accurate comparison would include the following:
Cash value approach: Rate of return minus administrative/setup fees
Term approach: Rate of return minus cost of term insurance minus administrative fees for investing difference minus taxes.
I did not include mutual fund administrative fees or taxes in the analogy. So I agree that I did not compare apples to apples. I tried to make the term approach more appealling (unrealistically so). I am glad that you like your approach as long as you realize that it is not perfect and that there are other approaches out there that can yield results equal to or exceed your current strategy. That is all that I am saying. I am not trying to convince you to change as you are happy. For those that are undecided or just entering practice, learn about both philiosophies and see which one suits you.
8 Million malpractice insurance!!
You might as well walk around with a big bull's eye on your back.
Having more malpractice insurance does not protect you it only makes lawyers come after you.
how did you choose your financial advisor/accountant.
any suggestions.
please PM me if you are not comfortable sharing on open forum.
thank you.
4.5% seems really low for invest portion. Especially when you are guaranteeing 5% for the cash value investments.
You may be right about 0.5% return on stocks the last 10 years. However, your goal was 20 years. The dow 20 yrs ago was 2.000. Now its 8000. someone smarter than me can do that calculation to be sure. But that's far better than tht 4.5% you are quoting.
to be fair, in 1968-1988 the return was worse. in '68 it was roughly a 1,000. So it only doubled over 20 yrs.
Anyhow, I still think that 4.5 is low, especially considering how low stocks are now.