Surgeon's Bulletin Board

May 25, 2007
Surgical Rounds, September 2006, Volume 0, Issue 0

Find your ideal asset protection strategy

By Alan R. Eber, LLM The risk of losing personal assets is greater for surgeons than for nearly any other profession. Some common threats faced by surgeons include taxes, lawsuits, squabbling with a business partner, divorce, and malpractice. These risks must be taken seriously because they can jeopardize a surgeon's practice, assets, family finances, and retirement. Many surgeons believe they are protected when they are, in fact, vulnerable.

? Successful planning?The often-used professional corporation does not offer a surgeon protection against malpractice. Malpractice suits may have more to do with a surgeon's deep pockets than his or her culpability. Malpractice insurance offers no guarantees that your income is protected, since policies come with exclusions. Trust structures, commonly used by surgeons, also can be ineffective. When a grantor places assets in a living revocable trust, those assets are not protected. In most states, even an irrevocable trust may not provide complete protection.

For surgeons, wealth preservation and asset protection techniques should reach beyond malpractice insurance. Successful planning to protect your assets can decrease the threat of most lawsuits by removing a predator's economic incentive: the assets. Some plans call for multiple entities so that all the eggs are not placed in one basket. Dangerous assets, for example, can be segregated from safe assets. Or entities can be set up in multiple states to cause creditors additional headaches.

? Protection vehicles?It is important to consider organizational structures that offer significant asset protection. Family limited partnerships (FLPs) and limited liability companies (LLCs) are effective because they have two levels of ownership: the active level (ie, general partners and managing members) and the passive level (ie, limited partners and members). A general partner or managing member with 1% ownership controls his or her respective entity. Thus, a surgeon is able to give away 99% of the entity and still maintain total control.

Several key provisions incorporated in an FLP or LLC are what make them effective "family" protection vehicles. These provisions protect the FLP or LLC by keeping creditors from getting their hands on its assets, nor can creditors assume management control. FLP and LLC interests can also be discounted by about 35% for lack of marketability and control or if they are under minority ownership. This can save large amounts of estate tax. An LLC can also own and protect personal property such as your home. This strategy is especially protective when the home has been stripped of equity.

After a clear organizational structure is in place, it is important to implement a combination of trusts to protect surgeons and their families. The Heritage Trust is unequaled as a legal strategy because of its limitless possibilities. This trust is a mix of strategies and trusts designed to achieve maximum protection and minimum taxation for surgeons, relatives, and future generations. Common trust instruments used by surgeons as part of this strategy include living trusts, irrevocable trusts, irrevocable life insurance trusts, privacy trusts, and nonself settled trusts.

The ultimate asset protection approach for each surgeon uses many of the above strategies as applied to his or her unique practice, financial situation, and objectives. Consult an asset protection specialist to review and structure your own protection.

Alan R. Eber, LLM, is a pioneer in the asset protection field. He practices law in the fields of asset protection and estate planning, trusts, and business structuring. To request the new booklet For Doctors' Eyes Only: How to Protect Your Hard Earned Assets, call (800) 800-9191 or visit

For surgeons, wealth preservation and asset protection techniques should reach beyond malpractice insurance.

Protect your most valuable asset: Your identity

By Katherine B. Paal, MBA, CFP?, RFC, CTFA We all go to tremendous lengths to protect what is ours. We install sirens in our homes to frighten intruders. We set up alarm systems in our cars to scare off robbers. But all too often, we neglect to take steps to protect our identities?our most valuable asset.

Identity theft is becoming more common today as we exchange personal information in the mail, over the phone, and via the Internet. Surgeons, while not at greater risk than the general public, may seem like more appealing targets because of their higher incomes and good credit status. If you own a practice, you may be especially vulnerable to this white-collar fraud when dealing with health care billing and payment systems. Working at a hospital doesn't protect you either; you need to know how your personal information is handled in hospital and insurer records.

Surgeons often designate financial matters to outside people like accountants or bookkeepers, who may or may not be able to distinguish between valid and fraudulent charges. This provides more opportunities for a potential identity thief.

Maintaining control and ownership over your identity is as much a part of your financial well-being as staying debt free and purchasing appropriate life and disability insurance policies. Just like positioning those motion detectors and panic buttons in your home and car, there are simple, strategic ways to minimize the risk of someone stealing your identity. Here are some steps you can and should take:

??Order a credit report from each of the three major credit bureaus: Equifax [(800) 685-1111 or], Experian [(888) 397-3742 or], and Trans Union [(800) 916-8800 or trans].

??Shred materials that contain your personal information (eg, account numbers, passwords, birth dates, and Social Security numbers).

? When sharing sensitive information over the Internet, check for "https" at the beginning of the URL; the "s" indicates a secure site.

??Do not provide your Social Security number to companies that do not need it. When supplying personal information, first find out how it will be used.

??Avoid using easily guessed passwords such as your mother's maiden name or your birth date. Change passwords often.

? Stay alert of billing cycles and inquire about bills that do not arrive on time.

??Retrieve your mail when it arrives to prevent theft of correspondence containing private records. Use public mailboxes to send mail with personal data.

Adhering to these guidelines will certainly minimize your risks, but there is no sure-fire way to prevent identity theft. If you do have an identity theft crisis, report the crime to one of the three major credit bureaus immediately, which will notify the other two agencies. Ask the bureau to place a ?fraud alert' on your file and request to be notified if new accounts are opened in your name.

Identity theft may not be as obvious as a home invasion, but it can be even more tumultuous to rectify. Protect your name, and guard your credit. Put an alarm on your identity.

Kathy Paal is a CFP??at Heritage Financial Consultants in Lutherville, MD, and is an investment advisor representative, registered representative, and licensed insurance broker with Lincoln Financial Advisors Corporation, a registered investment advisor and broker-dealer. You may e-mail Kathy at

This information should not be construed as legal or tax advice. You may want to consult a tax advisor regarding this material as it relates to your personal circumstances. CRN 20060-1007393

Did you know...

1,000,000?Estimated number of homeowners who will see their house payments double over the next 2 years. (, 2006)

57%?Percentage of Americans who say parents should charge their college-graduated children rent. (Money, 2006)

55%?Percentage of college students who receive financial help from their parents for costs other than housing and tuition. (Newsweek, 2006)

1.23 cents?Cost for the US Mint to produce a penny, up 27% from 2005. (USA Today, 2006)

5.73 cents?Cost for the US Mint to produce a nickel, up 19% from 2005. (USA Today, 2006)

148 million?Number of gallons of wine France and Italy plan to distill into fuel or disinfectant to prevent a wine glut and maintain prices. (Time, 2006)

$2 billion?Amount the US Postal Service is expected to lose in fiscal 2006. (Time, 2006)

42 cents?Estimated price of a first- class stamp if a proposed rate hike takes effect in 2007. (Time, 2006)

20%?Percentage of baby boomers who begin second careers as a teacher or professor. (Merrill Lynch, 2006)

Entries & Exits: Visits to Sixteen Trading Rooms

Many investment books focus on one particular investment strategy, and ?most surgeon investors don't have time to read a dozen different books to learn the various lines of attack. Fortunately, Alexander Elder's new book Entries & Exits: Visits to Sixteen Trading Rooms (Wiley; 2006) tackles several of them in one volume. Elder takes his readers into the trading rooms of 16 highly experienced traders to look over their shoulders and soak up their expertise. Each chapter describes one trader's particular investment methods and begins with a biography of that trader. Following the biography is a fully annotated set of color charts that illustrate two real trades from beginning to end?one winning, the other losing. Elder presents the entry of each trade on the right-hand side of the page and challenges you to step into the trader's shoes and speculate whether the trade will make or lose money. After you make your prediction, turn the page and see how the trade worked out. Going behind the scenes, Entries & Exits addresses a host of issues from choosing the right trading method, selecting markets, and keeping records to deciding whether you should have other people manage your money. The book accelerates investment novices on the learning curve and helps experienced traders refine their game.

Many Americans headed?for an uncomfortable retirement

As a reader of Surgeon's Bulletin Board, it is hopeful that you have a good grasp on how to prepare for retirement so that you can live comfortably with few to no financial worries. Yet according to Standard & Poor's The Outlook, a Federal Reserve survey shows that the majority of Americans aren't taking the proper steps to save as much as they should to be secure in retirement. This consumer finance survey indicates that the percentage of American families who owned pooled investment funds (ie, mutual funds, hedge funds, and real estate investment trusts) decreased from 2001 to 2004, and families invested in more direct stock ownership instead. Standard & Poor's strongly suggests greater reliance on employee retirement plans and Roth IRAs for retirement savings. They recommend an asset allocation of 45% US stocks, 20% foreign stocks, 20% bonds, and 15% cash.

Look to India for the next booming foreign market

Move over, China. Surgeon investors looking for the next big thing in overseas investing should look no further than India, where an exploding mutual fund market is making foreign money managers giddy. According to the Wall Street Journal, managed money in India's mutual fund industry has nearly doubled over the past 3 years, to around $48 billion. The majority of this is being managed by firms with foreign ties. The sudden boom comes as a result of India's deregulation of its protectionist economy. This has had a profound impact on Unit Trust of India, a monopoly fund that used to control 80% of all mutual fund assets but now has command over only 12%, freeing up other funds to take a bigger chunk of the market. Economic changes by the Securities and Exchange Board of India have given foreigners the ability to invest directly in local business, resulting in soaring stocks. Subsequently, interest rates have plummeted, drawing increased interest to mutual funds, which show significant room for growth in the future.

Heat up your portfolio with growth stocks

As the weather has grown warmer, growth stocks have left value stocks in the cold. Standard & Poor's The Outlook states that growth stocks have outpaced value stocks over the past several months, a trend that seems likely to continue. Analysts say that growth stocks have shown strong 5-year profit, sales, and internal growth rates. They predict a strong earnings gain for growth stocks in 2006, while value stocks are expected to dip slightly. Standard & Poor's gives their ?strong buy' recommendation to the following growth stocks: Capital One (COF), Coach (COH), Colgate-Palmolive (CL), Danaher (DHR), Electronic Arts (ERTS), Eli Lilly (LLY), Home Depot (HD), Johnson & Johnson (JNJ), Kohl's (KSS), Microsoft (MSFT), Mylan Labs (MYL), Nabors Industries (NBR), PepsiCo (PEP), Procter & Gamble (PG), UnitedHealth Group (UNH), Valero Energy (VLO), Wal-Mart (WMT), and Wrigley (WWY).

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