Asset Protection for Doctors: Qualifying Your Counsel

Last week’s discussion addressed a recent NPR piece on asset-protection planning that presented information this author found dubious, to say the least. We’ve covered a variety of related issues here in the past, including a basic primer on offshore asset protection planning for doctors  and a list of common fatal flaws of doctors’ asset protection planning. This week we provide some basic questions you can ask to help qualify your own asset-protection counsel and move towards being protected the right way.

Are you a lawyer?

This sounds obvious but many of the so-called asset protection planners you will find online and hawking seminars in your city at your meetings are not attorneys, even if their companies sound like law firms. This creates a serious exposure on several levels:

They are not bound by attorney-client privilege and any work they do or communication you have with them is likely discoverable in a legal proceeding. They have no professional oversight, malpractice coverage or liability for giving you bad, misleading, or illegal advice. If they do something that causes you to commit fraud or violate tax laws, it’s on you.

How many doctors have you done this specific planning for?

Be specific: The standard response provided by lawyers and non-attorney promoters alike typically sidesteps the question with misleading answers like “I’ve been an attorney for 20 years,” or the familiar “we’ve helped hundreds of clients.” Neither one of those is an answer to your question. You need to know exactly how experienced the practitioner is and how familiar he or she is with your business and its unique challenges and liabilities. A good analogy is asking a heart surgeon how many procedures she has performed and being told, “I’ve been a podiatrist for a decade.” Great, but not why you are there. General legal experience does not provide the necessary specialized training you need.

What kind of support does your planning include?

Anyone who has ever paid for a legal document knows that it can be frightening to buy a stack of binders you only partially understand and be sent out the door with a wish of good luck and a pat on the back. I work with physicians all over the United Sates and am continually surprised at how many people have expensive planning that they bought years ago and have never used in any real way because they didn’t know how. Merely buying the planning but not transferring assets into it, learning the rules, or having help in following the same legal and reporting formalities all other business entities must follow is like having a safe you never lock or an alarm you never turn on; a placebo that will ultimately hurt you.

What are your fees and what are the ongoing costs involved?

Some practitioners work on a traditional hourly basis, others work on a “fixed-fee” basis, meaning that most of their individual services have a specific fee or at least a very predictable fee range. I’ve used the latter method for nearly a decade because it allows us to provide clients with a very specific fee quote and a written list of the services we have determined they need and that we will be responsible for. Either way, get it in writing as part of the engagement letter they should provide. Beware of those who charge a “flat fee” (as opposed to the fixed fee outlined above) however, as it often indicates they have a package that they create and sell to everyone, regardless of fit for your particular financial nuances.

Ask specific questions about what kind of access and ongoing support is provided as part of the fees they charge. The first year is crucial, as that is the year you “fund” your plan (put the assets in the legal vault you wanted built) and need to learn what you should and should not do to preserve the protective value of the structures put in place. Look for lawyers who can provide a long-term relationship and ongoing guidance and be clear on exactly what that costs. Many practitioners have started competing on price, not disclosing all the additional fees and costs involved after the initial consultation or even after the work itself has been done to fund the plan.

This is just an introduction to the issues to consider and we often provide doctors and their advisors with a detailed list and some additional tips. It should however allow you to start your own due diligence and take an important first step towards protecting all your past efforts and your future success.