What to you mean by Living Expenses?

[WealthyDoc]

CM wrote:

WealthyDoc wrote:

I loved the A = L + E comment earlier and the questions it started.  Don’t confuse doctors with accounting facts!

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Come on now.

ifonlyFI simply meant that as TotallyBroke earns money and applies it to debt, his/her net worth will increase, which is correct.

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True.  But I think what Johanna was pointing out (using accounting principles) is that it is the earning of the money that increases the net worth.  If they didn't pay off debt and just stacked up the cash their net worth would climb that way too.  Adding an asset is the same as subtracting a liability as far as the change to net worth.

[RogueDadMD]

Ah, thank you for the additional info.

I went through the initial estate planning phase years ago of making sure I had an appropriate will, revocable trust, etc.  Our types of assets and plans have not significantly changed since then, however it may be worth revisiting things w/an estate planning attorney to discuss this spousal trust that I had not heard about.

I can't say I'm worried, as I think I have a fairly typical situation with a typical current setup, however it would be helpful to learn a little more.

[jfoxcpacfp]

CM wrote:

jfoxcpacfp wrote:

WealthyDoc wrote:

I loved the A = L + E comment earlier and the questions it started.  Don’t confuse doctors with accounting facts!

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LMAO – it is E = A + L

I guess you proved your point

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LMAO?

Assets equal Liabilities plus Equity (i.e., left side of balance sheet equals right), as Wealthy Doc noted. https://www.accountingcoach.com/balance-sheet/explanation/4

Also, Equity equals Assets minus Liabilities. This is just a rearrangement of terms.

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LMAO at myself, now. Of course, you are right. I can't believe I did that. I need to get back into bookkeeping again or just stick to taxes...BIG ops:

[CM]

WealthyDoc wrote:

I loved the A = L + E comment earlier and the questions it started.  Don’t confuse doctors with accounting facts!

Click to expand...

Come on now.

ifonlyFI simply meant that as TotallyBroke earns money and applies it to debt, his/her net worth will increase, which is correct.

[CM]

jfoxcpacfp wrote:

WealthyDoc wrote:

I loved the A = L + E comment earlier and the questions it started.  Don’t confuse doctors with accounting facts! 

Click to expand…

LMAO – it is E = A + L

I guess you proved your point  

Click to expand...

LMAO?

Assets equal Liabilities plus Equity (i.e., left side of balance sheet equals right), as Wealthy Doc noted. https://www.accountingcoach.com/balance-sheet/explanation/4

Also, Equity equals Assets minus Liabilities. This is just a rearrangement of terms.

[CM]

Rogue Dad, M.D. wrote:

but it sounds like you’re saying there is some advantage to putting the primary house (and not just rental property or something) into something else.

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I'm certainly not an asset protection lawyer, but in your home state of Missouri (and some other states) married couples can own their home as Tenants by the Entirety. If you title the home in this way, then it is protected from creditors unless they have a claim against both you and your wife. That is, the home is protected against a medical malpractice suit targeting just you.

Apparently, Missouri offers even more asset protection for married couples: http://www.wealthmanagement.com/estate-planning/missouri-makes-dramatic-change-asset-protection-law-married-couples.

If you're worried you would probably benefit from a meeting with a good estate planning attorney. The best time for that is always now, because if you wait until there is a bad outcome at the hospital then the planning won't work (b/o fraudulent conveyance, I believe).

[StarTrekDoc]

Rogue Dad, M.D. wrote:

StarTrekDoc wrote:

That is one real reason to have property in LLC — out of a physician’s name.  and the primary house trust that’s not  Dr. X and spouse Y Trust dated 1234. 

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We have a revocable trust, and I’ve been too lazy to put the house into that trust, but it sounds like you’re saying there is some advantage to putting the primary house (and not just rental property or something) into something else.

I have’t spent a ton of time learning about this  in a nuanced way — are you recommending that a primary house be in an LLC?  Or is there some trust mechanism that should be used specifically for a house that provides some sort of asset protection?  I imagine an irrevocable trust would work, but that doesn’t seem like a great idea given the downsides, but I’ve not taken the time to learn learn about any other types.

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Discovery more than asset protection for the Trust.  --ie don't make yourself an easy target by a simple search of Dr. X and pulls up your primary house, value, and victim of any sorts of potential crimes.   By naming the a generic Trust "Nothing to see here name, Dated 2017", the ambulance chasing cons won't be hitting you as easily --- a standard living trust doesn't provide asset protection.  Putting the primary house in an irrevocable trust is not easy nor fun and probably not worth the hassle anyways, IMHO unless its free+clear title.

[jfoxcpacfp]

Rogue Dad, M.D. wrote:

StarTrekDoc wrote:

That is one real reason to have property in LLC — out of a physician’s name.  and the primary house trust that’s not  Dr. X and spouse Y Trust dated 1234.

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We have a revocable trust, and I’ve been too lazy to put the house into that trust, but it sounds like you’re saying there is some advantage to putting the primary house (and not just rental property or something) into something else.

I have’t spent a ton of time learning about this  in a nuanced way — are you recommending that a primary house be in an LLC?  Or is there some trust mechanism that should be used specifically for a house that provides some sort of asset protection?  I imagine an irrevocable trust would work, but that doesn’t seem like a great idea given the downsides, but I’ve not taken the time to learn learn about any other types.

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Coincidentally, our October newsletter is about this topic (it's our real estate issue). Michelle is doing a vlog with real estate asset protection tips. I'll post links when it comes out this week.

[RogueDadMD]

StarTrekDoc wrote:

That is one real reason to have property in LLC — out of a physician’s name.  and the primary house trust that’s not  Dr. X and spouse Y Trust dated 1234.

Click to expand...

We have a revocable trust, and I've been too lazy to put the house into that trust, but it sounds like you're saying there is some advantage to putting the primary house (and not just rental property or something) into something else.

I have't spent a ton of time learning about this  in a nuanced way -- are you recommending that a primary house be in an LLC?  Or is there some trust mechanism that should be used specifically for a house that provides some sort of asset protection?  I imagine an irrevocable trust would work, but that doesn't seem like a great idea given the downsides, but I've not taken the time to learn learn about any other types.

[jfoxcpacfp]

WealthyDoc wrote:

I loved the A = L + E comment earlier and the questions it started.  Don’t confuse doctors with accounting facts!

Click to expand...

LMAO - it is E = A + L

I guess you proved your point  

[q-school]

Zaphod wrote:

CM wrote:

Zaphod wrote:

Re3iRtH wrote:

CM wrote:

Re3iRtH wrote:

My question to you is: what possessed you to get and pay for an umbrella insurance policy when you have a negative net worth?

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One can be sued and lose whether net worth is positive or negative.

An umbrella policy provides lawyers to defend OP, and funds to cover adverse judgments up to the policy limit.

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He has NO ASSETS that any lawyer can go after. I wouldn’t even consider an umbrella policy until reaching $1-2M in net worth.

For the same reason, if person A has $1M of properties owned free and clear, and person B has $1M of properties but owes $900K in loans, person A is clearly more compromised and at risk. No litigator would bother spending the time and energy to go after person B if they are sued, because they have NO NET WORTH / no skin in the game to collect. Its simple math.

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I have a negative net worth and a 5 million dollar umbrella policy. For one thing, its dirt cheap, like 534/yr. I have a rental property and that means possible litigation. If some tree trimmer falls and gets paralyzed or anything else, its totally worth it. You can still lose the judgement and have to pay in some way shape or form.

Its simply too cheap not to buy, doesnt make sense to worry about.

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Just a note of caution: Your umbrella policy may not cover you if you hire a worker and he is injured on the job on your property. Mine doesn’t, and I couldn’t find one that does when I looked. (Admit I didn’t look far and wide.) You should clarify this with your agent with very specific language with written correspondence. (I use email rather than the phone.)

When you hire contractors you should always ask to see copies of their current general liability insurance policy and their worker’s comp policy. That is your best protection.

The umbrella policy should cover you if your guest falls on your snowy driveway, or if your lawn mower throws a rock that hits your neighbor walking by, or if your dog bites someone. It’s cheap because it covers unlikely events that usually don’t incur big judgments.

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Good lord. Now other issues. The PM hires people, and they are always licensed and bonded/insured. Sometimes why not DIYing things makes sense.

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https://www.youtube.com/watch?v=Bzd8WtVJVfc

[WealthyDoc]

Good point Johanna,

Umbrella insurance is cheap.  The public thinks all doctors are "rich doctors."  Future income will likely be significant.  This combination supports buying some protection.

I loved the A = L + E comment earlier and the questions it started.  Don't confuse doctors with accounting facts!

 

[jfoxcpacfp]

Re3iRtH wrote:

You must not have ventured into the real world.
While I am aware that someone can be sued who is homeless and poor.. in practice how often do you think this occurs? Attorneys are like vultures in that they choose very carefully WHO gets sued, with the basic criteria being how much money can we get out of this person. This is the case with every type of law. Corporate, divorce, family, etc. There is only so much time, and time is money for lawyers just as it is for anyone else. They go after individuals or insurance companies who have the means to pay, not the -400K$ net worth folks. I think convincing yourself otherwise is living a pipe dream.

While I agree that umbrella insurance is dirt cheap, that in no way negates what I just described. People buy all sorts of insurance because they “heard it was a good idea”.

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With all due respect, I would never suggest that a newly-minted attending client with $300k in student loans, no assets, and a mid-6-figure contract bypass an umbrella policy just because they do not currently have a buff balance sheet. Having the means to pay for many years into the future is quite likely and, at least in my real world, attorneys have caught on to the possibility.

[StarTrekDoc]

Net worth isn't everything -- future earnings is just as suspect.  That is one real reason to have property in LLC -- out of a physician's name.  and the primary house trust that's not  Dr. X and spouse Y Trust dated 1234.

[Re3iRtH]

You must not have ventured into the real world.
While I am aware that someone can be sued who is homeless and poor.. in practice how often do you think this occurs? Attorneys are like vultures in that they choose very carefully WHO gets sued, with the basic criteria being how much money can we get out of this person. This is the case with every type of law. Corporate, divorce, family, etc. There is only so much time, and time is money for lawyers just as it is for anyone else. They go after individuals or insurance companies who have the means to pay, not the -400K$ net worth folks. I think convincing yourself otherwise is living a pipe dream.

While I agree that umbrella insurance is dirt cheap, that in no way negates what I just described. People buy all sorts of insurance because they "heard it was a good idea".