The 10 Biggest Legal Mistakes Physicians Make When Attempting to Use State Exemption Laws to Shield Assets

By Patricia Donlevy-Rosen, Esq.


Executive Summary

All states provide some degree of asset protection through their state exemption laws. Many physicians attempt to implement asset protection on their own by using state exemption laws that shield certain types of assets, such as a homestead, wages, annuities, life insurance, and retirement funds. In doing so, physicians often invest in assets that provide neither the maximum return nor the optimum asset protection. In addition, investments in exempt assets are often made without proper estate tax considerations. Therefore, physicians need to proceed with caution and seek experienced advice before attempting to utilize state exemption laws.

Mistake 1            Not Getting Advice of Experienced Counsel Before Attempting to Use a State Exemption

Mistake 2            Not Knowing the Exemption Laws That Apply to the State of Current Residence

Mistake 3            Attempting to Convert a Nonexempt Asset into an Exempt Asset at the Wrong Time

Mistake 4            Moving One’s Principal Residence from One State to Another

Mistake 5            Losing the Exemption by Titling the Asset Improperly

Mistake 6            Relying on a State Exemption When Other Investment Properties or Vehicles Would Better Suit Physicians’ Goals for Asset Protection, Estate Planning, and Investing

Mistake 7            Using Life Insurance or Annuity Contracts As a Primary Investment or an Asset Protection Vehicle

Mistake 8            Placing Title to a Physician’s Life Insurance Policy in a Spouse, Children, or Other Family Members

Mistake 9            Purchasing or Owning a Life Insurance Policy on One’s Own Life and Making One’s Estate the Beneficiary

Mistake 10          Relying on Tax-Qualified Retirement Vehicles in Order to Be Protected from the Claims of Creditors



The above has been excerpted from the SEAK text, The Biggest Legal Mistakes Physicians Make and How To Avoid Them