Asset Protection For Doctors (Protecting Your Investments) #2 of a 3 Part Series For Physicians

– Hey, guys, Toby Mathis back again. I’m one of the partners at
Anderson Business Advisors, an attorney who specializes
in tax and asset protection, and we’re talking about your
investments in this section. In the first section, we
talked about your practice. These three videos are
specifically for doctors. So we talked about your practice, and in this one we’re gonna be talking about your investments. In the third section, we’re gonna be talking about your life. But for right now, we’re gonna
zero in on your investments. Now, whenever we’re
laying out investments, I like to look at
everything in a quadrant. So if you can imagine
a quadrant sitting here in front of me. You have your life up here. Right underneath it, and
on this side, by the way, my right side, your left, right? It’s gonna be your life, and underneath it’s gonna
be your active businesses. This whole side is active. On this side is passive. I like to use the old Warren Buffett quote that if you don’t learn how
to make money while you sleep, you’re gonna work till you die. This is where you have your passive assets that are kicking money over, and they really fall into two categories. Category one we put up on top
is called non-risk assets. That’s assets that do not create fires. They do not create fires of their own. That’s stocks, bonds, private placements, little investments you have that just owning them
don’t subject you to risk. If I own shares in Microsoft and Microsoft does something horrible, I don’t have to pay the
judgment of Microsoft. It’s separate from me. And all my risk is is my investment. So it’s sitting up here. I also fall this fire starter. It’s kindling. It’s not fire, but, man, is it flammable. If people know that
you have stuff up here, that’s where they like to try to go to because that’s a very attractive target. Cash and stocks, they’re
easy to turn into cash. Below that are the risk assets. We have non-risk assets, and
we have risk assets right here. These risk assets are
your rental, real estate, your multi-family, or your commercial. If you are investing in real estate, which I think is a great idea. I myself and my partner, we
have well over 150 properties. We have everything from
commercial to single-family, buildings, you name it. You want to put it inside of boxes. And when I say boxes, you’re gonna wanna use
limited partnerships or limited liability companies, some sort of box to put that
in so that it is isolated because we know it’s flammable. So the easiest way to look at this is if this is kindling and this is fire, by all means, put a box around the fire, but also put a box around
the kindling and hide it so nobody can come get it because this is where they wanna go. I actually call this a virtual safe. And so if we wanna use the
analogy, and I sometimes do. If you have cash and you have something
that could light on fire, don’t put it next to each other, right? Put this in a safe, in a fireproof safe, something that they can’t get, which means we don’t want
them to know it’s there. We don’t want them to be able to open it. And it needs to be able
to withstand a huge fire so that somebody never gets
in and takes our cash away. So we have our personal life. This is your kids. This is your personal house. And by the way, if you
have a living trust, that is not an asset protection vehicle. You have homestead exclusions. But we have to address this stuff, especially if you’re living in a state with a really small homestead
exclusion like California. They could still take your house. You have less than $100,000 of protection. Most of you guys are gonna have
much more expensive houses, especially in California. It’s like a million
dollars gets you a shack. You’re gonna have to make sure that you’re protecting those assets. Then you have your active business, you have your non-risk asset,
and you have your risk asset. Your business practice we’re
gonna isolate in a box. If your spouse or you
have a second business, so let’s say you have a
consulting business on the side, marketing, or your spouse
is a real estate agent or whatever, isolate that in its own box. Do not put real estate
business with medical practice. Can’t do that anyway. But don’t mix ’em up. You put boxes around each
business so it’s isolated. Those are firewalls. If all Hades breaks loose
and something inside there, if all heck breaks loose, they’re not gonna be
able to get through it and get, God forbid, up to our kindling or up to our personal assets or over here to our other risk assets. We wanna make sure that
we’re isolating ’em. If you know that you have risky assets, you want to isolate those
from each other as well. I don’t want two properties that have a lot of value
in ’em in the same box ’cause if something happens to one, they’re taking the second one as well. We don’t want them to take ’em both. And we definitely don’t
want them coming up into this quadrant of
where we have our cash and our stocks and our bonds
and our private investments. We do not want this to hop here. We do not want this to hop up here. We don’t want our personal
stuff to come over. And before you think, oh,
there’s really not much that could happen in my personal name, let me give you a few of my favorites. I work very closely
with a lot of investors, and some of those investors
own insurance companies. And they love to tell their stories of these huge claims
that come out of stuff that nobody saw coming. So I said to one of my friends, I said, “Do you have any examples
that you could give me “that I could share with doctors?” And she actually gave me
some really good advice. First off, if you are
ever in a car accident, do not say you’re a doctor. Do not say, “By the way, I’m a doctor,” because that is just
putting a big bull’s eye. You’re probably driving a pretty nice car. Again, if you got hit by a 1969 beater that was barely held together
with so much rust and Bondo, you’re probably not looking
at that person saying, “Man, I’d like to say.” You get hit by a G-Wagen that’s all pimped out and all crazy, you’re looking and saying, “That’s probably somebody who’s
got a little bit of money.” Or better yet, even a Mercedes. The S 560 hits you. You’re like, (chuckles) that’s probably, “Glad I got him by them,” right? No, you do not wanna volunteer
that, but I say that in jest. What she looks at is she said, “Yeah, here’s some great examples.” Number one, babysitters. Invariably, I had a daughter that went and babysat at the neighbor’s. I never thought twice about this. Of course, my assets over
here are pretty well-isolated, and my practice is isolated. But your family, you can never. This is always gonna be a fire starter. You drive, your kids drive. Your kids do stuff, you do stuff. You talk to people, you
interact with people. There’s always liability up here that we can never get away from. This was one that really
shook me up a little bit, and what it was was somebody
hired out somebody’s daughter, doctor’s daughter, to go be a babysitter. They went over there, and they had one of
those little jumpy seats where the little baby. It was a three-year-old
baby was in the jumpy seat. Baby was jumping,
jumping, jumping, jumping. Boom, falls over, nails head on tile. Traumatic head injury to the child. Who do they sue? Well, the babysitter was a teenage girl. Who did they sue? They sued Mom and Dad
for millions of dollars. That should be like, oh my God. Never thought about that, right? I never thought about that, and I sit here and I do
this stuff all day long. And I said, “Well, babysitting, yeah. “Oh my gosh, yeah, there’s
somebody’s responsible.” The other one was they
had a party at the house. No drinking or anything. But one of the kids said, “Hey, I’ll run and grab
pizzas at the grocery store.” Throws the keys. “Hey, do you have a car? “Yep, here, take my car.” Goes to the grocery store,
causes an accident along the way. Serious injuries. In other words, it was a
teenager driving too fast, boom. Multimillion dollar case. Who were they suing? You got it, the people where
the party was being held. Third one, this one kind of, I was like, this is kind of like why? This is a no-brainer one. But this was a beach party, and the doctor’s son went to the beach party and saw
there was propane tanks that they were using to do grilling. One of the tanks was
empty, so he tossed it. Where’d he toss it? Right into the bonfire. Thing exploded. Over $20 million of
damage. (mimics explosion) Just like that. Who’s responsible? Doctor is. Of course, everybody’s getting sued. They probably sued the
propane tank manufacturer. But in these days, there’s lots of damage, and there’s lots of money. They’re looking for the deep pockets. And so no matter what you do
up here, it’s almost impossible to get away from the liability up here. So what we do is we create
isolation around our practices, we create isolation
around our risk assets, and we create isolation
around our non-risk assets. That’s called outside liability. I don’t want someone to be
able to take away what is mine. And if you hold it in the
right type of vehicle. Not all LLC statutes are created the same. I use Wyoming and Nevada
for a reason up here ’cause nobody can ever
take it away from you. Sometimes I use asset
protection trusts over here that end up holding these other assets to make sure it’s separate from me. I gotta make sure that they
can’t jump those walls. Those are firewalls. And again, no different
than a fire on a ship. I gotta make sure that I can wall it off and say that’s what I’m willing to lose. If I have a fire in one of my homes and I have good insurance on it, there’s gonna be enough
insurance there to cover damages, but if they’re not happy and
they’re looking for more, they’re looking for fuel for their fire, I need to be able to wall it off. I need to be able to starve it of oxygen. In other words, most
lawyers don’t work for free, and these guys quite often
are on contingencies. So you need to wall it off to where they know that’s
the most I’m gonna get. It’s not worth it to try
to jump anywhere else. I will use up all my fuel, all the money, trying to get to something
I will never get to, and that will allow you to
settle these things much sooner. I don’t wanna be bleak,
but it’s just life. Now, the last thing is when
you are doing these investments and when you’re using these quadrants, there are some major tax
benefits that come along with putting these types
of structures together. A lot of you probably didn’t realize it. So for example, if I have a risk asset like a office building
and I have my practice and I’m renting my own office
building to my practice, that can be grouped as one activity. Even if they’re in separate boxes, I can treat it as one activity, and I can take a massive deduction on that building called
bonus depreciation, probably about 20 to 30% of
the value of that building, and write it off against
my practice income. I also have things like accountable plans and other tax benefits
that come out of this. I get huge depreciation benefits when I’m dealing with risk assets. That’s why people love ’em. Even though they cause fire, right, even though they’re a hot
asset and they’re flammable, they’re so attractive because
there’s so many benefits. You just need to be able to
control that fire to make sure, hey, I’m not gonna expose everything else. And then up here obviously
if you have good investments, quite often those benefits
can be tax beneficial. For example, if I did nothing but buy stocks in the stock
market, that’s all I did, and I wasn’t selling ’em, but I was just getting the dividend, A, that dividend is treated
as long-term capital gains and, B, those stocks are
not taxed until I sell ’em. So you have a ton of deferred income that’s rolling around out there
that’s gonna be beneficial. It’s not gonna be taxed at your rate. And so these things really
lend themselves well to tax planning. I love doing the tax planning. But for right now, we
just wanted to focus in on the investments and
how we can wall them off, and we’re gonna marry it all
together in the next section where we talk about your life and how you bring all
these things together and how your plan can
be built to benefit you and not just your kids,
but future generations. (bright music)

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