Wary of having a large taxable account (asset protection)

[okayplayer]

PhysicianOnFIRE wrote:

Vagabond MD beat me to it. I’d rather have assets at a very small risk than no assets to risk.

We have titled our 7-figure taxable account as joint tenants by the entirety.

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PoF, how did you go about this (bonus points if your taxable account is through Vanguard)?

[janettebournes]

okayplayer wrote:

PhysicianOnFIRE wrote:

Vagabond MD beat me to it. I’d rather have assets at a very small risk than no assets to risk.

We have titled our 7-figure taxable account as joint tenants by the entirety.

Click to expand…

PoF, how did you go about this (bonus points if your taxable account is through Vanguard)?

Click to expand...

It's a pain at Vanguard.

You have to open a new account titled as joint tenants by the entirety (I had to call and get a paper application. I don't believe it's on their online application since not all states allow for titling in that manner)

You then transition your old account into the new account.

As others have mentioned, the downside of doing this at Vanguard is that taxable accounts that are titled as joint tenants by the entirety cannot have beneficiaries (not sure if that has changed since I last looked into it)

[White.Beard.Doc]

My tax deferred account is over 3 times as large as my taxable account.  At my stage of life, nearing retirement age, I very much wish it was the other way around.

We are quite comfortably well off with 4 buckets of asset classes, tax deferred accounts, taxable accounts, an investment real estate portfolio and a business we own.  I love my taxable account the most, because all of it belongs to us. Too bad the taxable bucket of assets is the smallest of the 4 buckets.  For the other three buckets of assets, the state and federal government own a significant share of these assets in the form of capital gains upon sale of the business, capital gains and depreciation recapture taxes for the real estate, and income taxes for the distributions from the tax deferred accounts.

The only thing better than a taxable account is a Roth account.  Sadly I have exactly zero assets in a Roth account.

My recommendation, keep building that taxable account. If your future self is anything like me, you will be very happy to have more in taxable than in tax deferred.

[bean1970]

asset protection is state dependent. once you have all your tax advantaged space maxed out, it really is what you are comfortable with. most physicians run into liability issues with things OTHER than malpractice. In our state we have had very large suits against physicians for auto injury, way above what a $5 mil umbrella would cover.  Other options once you have a hefty taxable account you could consider (and each may be protected different depending on state) are real estate (if protected), a whole/universal/LIRP policy (ugh), variable deferred annuities (no commission at least and its also tax sheltered), irrevocable trusts, charitable trust, etc.

[treesrock]

bean1970 wrote:

asset protection is state dependent. once you have all your tax advantaged space maxed out, it really is what you are comfortable with. most physicians run into liability issues with things OTHER than malpractice. In our state we have had very large suits against physicians for auto injury, way above what a $5 mil umbrella would cover.  Other options once you have a hefty taxable account you could consider (and each may be protected different depending on state) are real estate (if protected), a whole/universal/LIRP policy (ugh), variable deferred annuities (no commission at least and its also tax sheltered), irrevocable trusts, charitable trust, etc.

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I've actually wondered, would a whole life, universal life, etc policy protect the money held inside of it in a lawsuit?

[PhotonsRGR8]

So dumb question but do you need Joint Tenants by the Entirety if these accounts are already listed in Revocable Living Trust?

[bean1970]

treesrock wrote:

bean1970 wrote:

asset protection is state dependent. once you have all your tax advantaged space maxed out, it really is what you are comfortable with. most physicians run into liability issues with things OTHER than malpractice. In our state we have had very large suits against physicians for auto injury, way above what a $5 mil umbrella would cover.  Other options once you have a hefty taxable account you could consider (and each may be protected different depending on state) are real estate (if protected), a whole/universal/LIRP policy (ugh), variable deferred annuities (no commission at least and its also tax sheltered), irrevocable trusts, charitable trust, etc.

Click to expand…

I’ve actually wondered, would a whole life, universal life, etc policy protect the money held inside of it in a lawsuit?

Click to expand...

asset protection is state dependent...generally whole/universal life is a protected asset which is one of the "sales pitch" lines. comes with high commission, fees, little return, etc, but for some with absolutely no where else they are comfortable putting money it is an option for asset protection. I went to an asset protection seminar once and there was another option I forgot to list...basically some form of long term care where you lump in like 500K, the benefit is double and you can get your money back. it is just a place to park money with little return asset protected, but if you use it for long term care it worth twice.

[bean1970]

PhotonsRGR8 wrote:

So dumb question but do you need Joint Tenants by the Entirety if these accounts are already listed in Revocable Living Trust?

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revocable trusts do not provide asset protection.  what is in them is asset protected depending what state you live in and how they are titled. The trust has nothing to do with that. TBE will provide protection unless both parties are named in the lawsuit.

[FIREshrink]

Vanguard allegedly will allow beneficiaries to be identified for joint accounts if you have flagship status. We just finished up our estate plan so transferred our taxable account into our trust.

Also note the rules will vary depending on your state. Community property may be different than English law, etc.

[PhysicianOnFIRE]

okayplayer wrote:

PhysicianOnFIRE wrote:

Vagabond MD beat me to it. I’d rather have assets at a very small risk than no assets to risk.

We have titled our 7-figure taxable account as joint tenants by the entirety.

Click to expand…

PoF, how did you go about this (bonus points if your taxable account is through Vanguard)?

Click to expand...

Yes, it is with Vanguard. I don't recall the details, but it was simple to do.

As mentioned above, you lose the ability to name a beneficiary, which is lame, so try not to do at the same time as your spouse!

[jsmoove123]

PhysicianOnFIRE wrote:

As mentioned above, you lose the ability to name a beneficiary, which is lame, so try not to do at the same time as your spouse!

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Can you specify beneficiaries in a trust?