Q: I am a very conscientious doctor and have never been sued. Do I even need to worry about someone coming after me?
A: Absolutely! Even in low-risk specialties, more doctors get sued than not – some multiple times. More often than not, a doctor’s performance or competence has little to do with their risk of being sued. Doctors, even the best doctors (maybe especially the best doctors) make rich targets for litigation, regardless of how well they’ve done their jobs for three reasons:
Doctors almost always have insurance, plus there is a perception (often accurate) that doctors have deep pockets.
The stakes are higher in medicine than in most other fields. Mistakes can come at a much higher cost to the patient, including disability, disfigurement, or death. Even if everything is done perfectly right, not all patients have the outcome they desire, and when they don’t get better as soon as, or as much as, they hoped, the doctor gets the blame.
Doctors can be held accountable for the actions and inactions of those working underneath them, including nurses, physician’s assistants, medical transcriptionists, and others. It’s a legal doctrine called Respondeat Superior, or vicarious liability. The law recognizes that in some circumstances, the person who is not at fault is nonetheless legally responsible.
Q: I am doing business as an LLC or Corporation. Doesn’t that protect me?
A: Not really, unfortunately. Indeed, one of the highlights of setting up a separate business entity is the division of personal and business assets. In most cases, an entity’s creditor cannot come after your personal assets. As a doctor, however, your entity is typically not the one incurring liability. It’s you. You are the one recommending treatment, performing the surgery, signing the prescriptions, and touching the patient. Your entity isn’t capable of doing any of that. If a patient perceives an injury at your hands, they’re coming after you, not your entity. This means your entity provides zero protection.
Q: I have medical malpractice insurance. Doesn’t that protect me?
A: Medical malpractice insurance protects you, but only to a degree. Like all insurance, it covers you in the event of an insurable loss, up to the coverage amount. As long as no settlement or verdict exceeds the amount of coverage you purchase, you won’t have to dip into your pocket to satisfy it. But insurance does nothing to protect you from being reported to the National Practitioner’s Data Bank (“NPDB”—a national registry of “bad actor” doctors). Realistically, it’s the insurance protection that gets you reported. Once your insurance covers a loss for you, your name goes on the NPDB forever. This could increase your cost of insurance, make it harder (or impossible) to get credentials and privileges, cause health insurers to stop covering your services, or even result in the suspension or loss of your license. While malpractice coverage protects some of your tangible assets, it does so at the expense of your most valuable assets: your reputation and your license. There are, however, exceptions written into the reporting requirements that make it possible for a doctor to settle a case without getting reported.
Q: I have a 401(k) or other defined contribution/deferred compensation plan, so I don’t need to worry about my retirement, right?
A: That depends on your goals for retirement. If you don’t mind writing the government a blank check every time a contribution is made to your retirement account—one they get to cash in the form of taxes when you start withdrawing—then your government plan might be just what you need. If you are like a growing number of medical professionals who realize that the 401(k) and other qualified plans are literally sections of the tax code, as in 26 U.S.C. 401(k), you may want to find an alternative. Remember, the tax code has one job: to take money from you and put it in the government’s coffers. When you think about the fact that we are at a historical low for taxes, and the government consistently spends more than it collects, there is little doubt that taxes will be higher when you retire. So, do you really want to put your future paycheck in an account where your tax debt—the one you avoid now by taking deductions—grows out of control? There are much better ways to save for retirement.
Q: But I will be in a lower tax bracket when I retire than I am now, so aren’t I better off paying taxes later?
A: There are precisely two factors that determine what tax bracket you’re in: your income and your deductions. To be in a lower tax bracket, you would either have to have a lower income or more deductions, assuming that the tax brackets do not change between now and some point during your retirement. If you plan to have a lower income during retirement than you have now, then you have a terrible plan.
When you finally have all the time to do what you want to in life, don’t you want to have the means to do it?
You certainly can’t count on having more deductions. Those deductions you enjoy now—mortgage and student loan interest payments, child tax credits, and business-related deductions—will all be gone during retirement when your mortgage and other debts are paid off, children are out of the house, and you’re no longer operating your business. In other words, as far as taxes are concerned, you’re probably going to be much worse off during retirement than you are now. If you have tax-free income, though, it won’t matter what the tax code says. You’ll have met your tax obligations long before.
Q: How do I create a tax-free retirement?
A: It all has to do with the tax wrapper you use for your investments. A 401k, SEP, IRA, and all other qualified plans are just tax wrappers. They determine how your investment is going to be taxed. In the case of a qualified plan, you are taking your deduction now to be taxed later—at an unknown, unknowable, and probably higher rate. Other investment vehicles exist that have a different tax wrapper: take your medicine now and never feel any tax symptoms again. If you wrap your investments in an Investment Grade Insurance Contract, or IGIC™, for example, you can make after-tax contributions, invest in absolutely anything you want using funds from cash-value collateral, put your returns back into the insurance contract, and then never pay taxes. Your principal is guaranteed against loss, is guaranteed to grow, and will grow tax free. Why would you ever invest in anything taxed when you could invest in those same things tax free?
Q: Is this like a Roth IRA?
A: Only insofar as all the growth is tax-free. Unlike the Roth IRA, you can invest in anything you want without having to adhere to a prohibited transactions list. The IGIC gives you the ability to invest in items that benefit you directly, such as your business, your residence, and collectibles. More significantly, with an IGIC, you aren’t limited to contributing $6,000 per year. You are also able to continue contributing, even if your income exceeds $139,000. Plus, your growth in an IGIC is not locked up and subject to taxes and penalties if used before age 59½.
Q: I am not a business owner. I am an employee, and I don’t make very much yet and still have student loans. I am pretty much judgment proof. Does any of this apply to me?
A: Most certainly! Business owners are often more vulnerable not just because they typically have more to lose, but they have more areas of vulnerability, including from partners and employees. But even W2 (employee) doctors should be proactive. Their medical license and reputation (young and budding as it may be) are still two of their greatest assets and should be protected. Employees with debt and a limited income should be even more proactive about retirement planning than business owners. And amazingly enough, the IGIC can be used to pay off debt and save for retirement at the same time. In fact, in most cases, using the IGIC to pay off debt results in the doctor being able to pay off all their debts, including their mortgage and student loans, in 9 years or less, without spending a dollar more than they are currently spending.
Q: What if the tax law changes or the government decides to terminate this program?
A: First, although beyond the scope of this FAQ, that is very unlikely to happen. The treasury department suggested it in the 80s, and members of Congress overwhelmingly shut them down (see Chapter 23 of Unshackled if you want the full answer). Secondly, once something of this nature has been written and approved, you are “grandfathered” in, meaning you’re able to keep and maintain the program. This is even more of a reason to get started today!
Q: How does a structure provide better protection and tax savings than say just having a single entity?
A: If you have a company, especially a pass-through entity, all the liability and taxes fall on your 1040. Depending on the tax bracket you fall into, Uncle Sam is ready and willing to take anything he possibly can. Being able to move your money around and offset income tax through our upstreaming strategy will help you legally eliminate almost all of your state income taxes and increase possible deductions to reduce your federal income taxes. The methods that we use are virtually litigation-proof and ensure that your money is safe wherever it goes.
Q: Why has my CPA or Financial Advisor not spoken to me about this program?
A: It is a legal product and a specialty field. Most CPAs are not educated to the standards which are required to do structures. Most struggle to even file your taxes. Products of this nature force professionals to proactively create tailor-made strategies, and they are not equipped with the tools necessary to do so. There are many things your professional has not heard about, and this is one of the many that we offer.
Q: How do I get started?
A: We’re excited to speak with you! Click the button below to schedule an appointment.