Excerpted from The Biggest Legal Mistakes Physicians Make: And How to Avoid Them
Edited by Steven Babitsky, Esq. and James J. Mangraviti, Esq. (©2005 SEAK, Inc.)

Download Free 646 Page E-book: The Biggest Legal Mistakes Physicians Make and How to Avoid Them

Executive Summary

It is a common misconception that it is illegal for a U.S. citizen to hold assets offshore. Although moving assets offshore to hide income from the Internal Revenue Service in order to evade taxes is prohibited, the use of an offshore account to protect one’s assets from creditors is perfectly acceptable under U.S. law and is a common practice. Establishing an offshore account, however, requires care, and there are some common errors physicians make when moving their assets offshore.

Mistake 1      Not Considering the Option of Moving Assets Offshore

Physicians are often subject to lawsuits. A judgment or an out-of-court settlement for an amount larger than the physician’s malpractice coverage can mean personal and business assets will be seized to satisfy the remaining liability. Proper structuring of the physician’s business practice may reduce this risk, but many times that is not enough. In order to reduce the risk of assets being seized to satisfy a judgment, all physicians should consider moving their assets into an offshore account.

Action Step     Physicians should talk to an experienced professional about setting up an offshore account to protect both their business and personal assets.

Mistake 2      Not Planning Ahead

The best time to plan and move assets offshore is before a lawsuit is threatened or filed in court. Once a suit is pending, a physician may still transfer his or her assets offshore, but it is best to do so prior to a suit. If the assets are moved before a suit, they cannot be reached, especially if they are placed in a country that does not recognize the judgments of U.S. courts.

Action Step     Physicians should consult with an experienced professional as soon as possible to discuss the benefits of moving assets offshore before it is too late.

Mistake 3      Failing to Disclose and Pay Taxes on Offshore Assets

Physicians are one of the targeted groups for offshore tax schemes, according to the Internal Revenue Service. Every year, new “foolproof” ways to avoid paying taxes are marketed to unsuspecting physicians. Ignorance of the tax law is no excuse, however, and physicians who fail to disclose income and do not pay their taxes are subject to steep civil fines and criminal penalties, including jail time.

Action Step     Physicians should know that something that sounds too good to be true usually is. They should not fall prey to abusive tax schemes. U.S. citizens are subject to tax on their worldwide income, and they should disclose all income and pay the tax on it. When in doubt, physicians should consult a qualified tax professional.

Mistake 4      Expecting to Save Taxes by Moving Offshore

Physicians are deluged with information on how to avoid paying taxes on their income. Any reputable attorney will know that most offshore schemes will not reduce tax liability. Physicians who want to reduce their tax liability should talk to an experienced professional about how to do so legitimately.

Action Step     Physicians should not rely on offshore accounts to reduce their income tax responsibility. They should talk to an experienced professional about ways to legally reduce any expected tax liability.

Mistake 5      Using an Unqualified Professional

Physicians should not consult unqualified professionals when moving assets offshore. A licensed, qualified professional will have been practicing for years and will know the law in the United States and multiple offshore jurisdictions. An unlicensed, unqualified professional will not be trained in moving assets offshore. The consequences of using such a professional can range from minor ones (such as an increase in taxes due) to severe (such as mishandled funds or poorly structured transactions). In a worst-case scenario, a physician could lose all of his or her money to poor investments or illegitimate transactions. An improperly structured offshore account could result in assets being seized by creditors.

Action Step     Physicians should consult a licensed professional attorney or certified public accountant who has experience setting up offshore accounts. Physicians should ask for recommendations and references from people whom they trust. 

Mistake 6      Not Using an Established Jurisdiction

Physicians who want to move assets to offshore accounts should be sure to establish their accounts in a jurisdiction that has a reputation for honesty and security in business transactions. Countries that have steady governments and stable economies are recommended for offshore transactions. A licensed professional will be able to recommend the jurisdiction or jurisdictions that are most appropriate for each physician’s individual situation. Moving assets to an unstable or insecure jurisdiction may result in the assets being temporarily unreachable or sometimes permanently lost. Jurisdictions that are often recommended for moving assets offshore include the Bahamas, the Cayman Islands, Panama, the Cook Islands, and Bermuda.

Action Step     Physicians should be sure to establish their offshore accounts in countries that have good reputations for such transactions.

Mistake 7      Using a Disreputable Offshore Company

Physicians who want to evade creditors can go to one of many disreputable offshore firms and establish an account, and their name is not placed anywhere on the account. This account is great because, in name, the money is no longer theirs and cannot be linked to them by creditors or the Internal Revenue Service. This account is also a problem because, in name, the money is no longer theirs and cannot be linked to them. Such firms have been known to steal these funds from many an unwary physician, knowing the defrauded physician has nowhere to turn: since they removed their names from the account, they have no way of proving the money is theirs and the U.S. government has no power in another country.

Action Step     Physicians should use established investment and banking firms to set up their offshore accounts, and keep their names somewhere on the account.

Mistake 8      Failing to Protect All Exposed Assets

Physicians are often wary of moving all of their assets offshore. Physicians who leave exposed assets onshore and within the reach of creditors risk losing those assets if a lawsuit is ever brought against them. All of a physician’s assets do not have to be moved offshore, but eventually they should all be removed from the reach of creditors. A physician who is cautious about moving all of his or her assets offshore should consult a professional about alternative asset protection arrangements.

Action Step     For the best protection, physicians should be sure to protect all of their assets. Those who choose to move only some assets offshore should be sure to protect their other assets through alternative methods.

Mistake 9      Trying to Do It Alone

Physicians should not try to move assets offshore without the advice and assistance of a licensed professional. If done improperly, the assets will not be protected from the reach of creditors. Experienced asset protection planners are trained in moving assets offshore. They know how to structure transactions legitimately so that once the assets are moved offshore, creditors cannot touch them. Attempting to move assets offshore without the help of a licensed professional may result in exposed assets that creditors can seize.

Action Step     Physicians should visit a qualified professional as soon as possible rather than attempting to move assets offshore by themselves. Spending a little today might save a lot in the future.

Mistake 10    Leaving a Paper or Money Trail

To ensure complete privacy and to protect assets from being detected by creditors, physicians should not set up offshore businesses and then record their own name as officer or owner. Most reputable offshore companies allow investors to keep their name undisclosed and to use a nominee as the officer or owner. Some companies may even provide a name of a nominee for the customer to represent to the public as the owner or officer of the business.

Action Step     Physicians should appoint nominee officers to protect their privacy and disguise from creditors those who truly own and control the assets.


Physicians who avoid these mistakes when moving assets offshore will have protected assets that will never be reached by creditors.

Additional Resources

  • R. Mintz, Asset Protection for Physicians and High-Risk Business Owners (Francis O’Brien & Sons, 1999)
  • W. Reed, Bulletproof Asset Protection (Five Corners Publications, 2000)
  • Asset Protection Corporation, www.assetprotectioncorp.com
  • Offshore News Online, www.offshoreon.com

Written by:
James J. Everett, Esq.

Peer reviewed by:
Rex C. Leung, Esq.

Download Free 646 Page E-book: The Biggest Legal Mistakes Physicians Make and How to Avoid Them