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  • Taxable account protection

    Background: wife is a member (part owner) of EM Physician’s Group which is a LLC. We have a taxable account that is joint tenure in my name (spouse) and her’s. Should we put this account in my name since I am not in a high litigation position? Account is with TDA. Is this something that is easy to do? She does have umbrella coverage, but wasn’t sure if assets like this would be protected. State of residence is CO.

  • #2
    Umbrella is important for other liability but does not cover malpractice.

    If CO permits tenants by the entirety for investment accounts, then this could provide protection against malpractice suits.

    Holding.in only one spouse's name is a lousy idea.

    Your best moves will be
    Making sure you have enough malpractice insurance.
    Consulting with an attorney about other steps.

    ​​​​​​ you probably do NOT want a lawyer that holds themselves out to be asset protection specialists. You want an expert in estate planning, with asset protection as part of that service

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    • #3
      LLCs are useful for business liability but not for malpractice. If your wife is sued for malpractice, the LLC will not help. If someone else in the group is sued or if there is business litigation against the practice then the LLC might be helpful in isolating your wife's assets from the case. It would depend a lot on CO law, how the LLC is set up and run and the nature of the suit.

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      • #4
        Above and assets in trust at least decreases visibility.

        ​​​

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        • #5
          Is your wife directly a part owner of the LLC or does she have a PA representing her share of ownership?

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          • #6
            You might find this CO case helpful to read. CO is not a TBE state.
            Our passion is protecting clients and others from predatory advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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            • #7
              Originally posted by jamesja View Post
              Is your wife directly a part owner of the LLC or does she have a PA representing her share of ownership?
              Directly. No PAs within the group. W2 employees do work with them, but all are MDs.

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              • #8
                I was asking if your wife runs her practice as a professional association (PA). That would provide some protection against lawsuits by isolating her individual assets from those of her practice

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                • #9
                  Originally posted by jamesja View Post
                  I was asking if your wife runs her practice as a professional association (PA). That would provide some protection against lawsuits by isolating her individual assets from those of her practice
                  I do not think so. She is a member of ACEP, but as far as I know the group is not set up as a PA.

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                  • #10
                    Originally posted by jamesja View Post
                    Is your wife directly a part owner of the LLC or does she have a PA representing her share of ownership?
                    TX is the only state I know of that defines PAs as a specific and separate legal entity. A few states use the term interchangeably with PC, but that is just semantics.
                    Our passion is protecting clients and others from predatory advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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                    • #11
                      What we did while I was still practicing was put assets in trusts for estate purposes and put the primary and secondary residences and taxable account into wife's trust for asset protection from litigation.

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                      • #12
                        Sounds like looking into setting up a Trust is in order. We don’t have a lot in taxable, but it is growing quickly. Just want to cover our assets in the event of a possible lawsuit. Thanks for your input.

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                        • #13
                          Originally posted by ShredtheGnar View Post
                          Sounds like looking into setting up a Trust is in order. We don’t have a lot in taxable, but it is growing quickly. Just want to cover our assets in the event of a possible lawsuit. Thanks for your input.
                          There are many downsides to setting up trusts. An RLT will not provide any asset protection. An irrevocable trust requires you to give up control and involves a lot of expense and ongoing administration. I'm not saying that trusts are a bad thing, I'm very much in favor with them in the right situations, but don't let asset protection be the driving factor, just one of the considerations.

                          When assigning ownership to one spouse or another, must also consider (hate to say it, but it's true) what the impact will be in the event of divorce, particularly in non-CP states. In the event of 2nd+ marriage with kids from prior(s), estate planning requires a very high level of concentration and thinking ahead to all of the "what if's?"
                          Our passion is protecting clients and others from predatory advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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                          • #14
                            jfoxcpacfp - yep choose wisely The RLT (Reversible Living Trust) does a middle ground IMO. Doesn't give up control; keeps taxation and admin 'simple' to current tax planning, gives probate direction for estates as they can and do get messy; and lowers a risk of opportunity exposure via 'stealth wealth'. Just don't go naming it Last Name Family Trust. If you do really do something bad, it's not going to protect, but it lowers the nuisance suits if they ever come trolling .

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                            • #15
                              Forgot to ask if this account is used to hold a lot of our emergency savings, will a trust be a problem? Hold a muni bond fund that is used for part of EF and future estimated tax payments.

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