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Learn how to protect your personal assets

Article-Learn how to protect your personal assets

Key iconKey Points

  • While we can't control the economy, each investor can control his or her personal economy.
  • Physicians can optimize personal investments by considering taxes associated with those investments
  • Have your investments in different "buckets."

David Mandell
Anyone who's tried to closely follow the economy and stock market in 2008 likely needs chiropractic adjustment for whiplash...not to mention something to help deal with the emotional stress and anxiety that may be associated with the economic volatility.

Certainly, all those trying to operate profitable businesses have been challenged. And cosmetic surgeons are no exception. But while there's plenty of advice flying around about protecting businesses and business assets, how much do you hear about protecting personal assets?

David B. Mandell, J.D., M.B.A., of O'Dell Jarvis Mandell, LLC, Fort Lauderdale, Fla., has made advising medical professionals on personal asset protection his expertise, and he has some specific advice for physicians in today's rocky economic environment.

TEAM APPROACH Cosmetic surgeons, he advises, should "use this wake-up call as a motivation to build a relationship with a multidisciplinary planning team," one that can effectively address the variety of financial issues that impact the strengths and weaknesses of personal assets.

In Mr. Mandell's practice, for example, there are in-house asset protection specialists, CPAs, portfolio managers, insurance specialists and others very familiar with the particular financial situations of the medical profession. This enables, in essence, "one-stop shopping" where physicians have access to a multidisciplinary approach to their asset management.

Unfortunately, such an approach is atypical, often with—if not outright deleterious—less than optimal personal asset management for the physician. While a physician might have a lawyer, an insurance representative, and a money manager, often these parties do not interact and so, are not coordinating with each other. Therefore, all aspects of the physician's assets are not necessarily in sync, "and if you're going to be financially efficient," Mr. Mandell says, "you have to have coordination. There's just no two ways about it."

In the absence of this kind of team, there are still a number of steps you can take to improve the outlook of your personal portfolios, Mr. Mandell counsels. The first, he says, is to realize that, while no one can control the national economy, each investor can control his or her personal economy.

TAX STRATEGIES First, Mr. Mandell says, physicians—or anyone—can optimize their personal investments by considering the taxes associated with those investments.

For example, he points out, mutual funds—a very common investment vehicle—have, on average over the last 20 years, "lost an average of between 17 percent and 44 percent of their gains to taxes." This loss is more, he explains, than what most investors could expect to lose in the worst "crash" of the market. Yet few take measures to minimize the tax drain on their investments.

"If you're losing 17 to 44 percent of your gain to taxes," Mr. Mandell points out, "That's going to make a huge impact on your retirement."

So, what could you do to minimize the taxes you pay? For one thing, Mr. Mandell says, have your investments in different "buckets," as he calls them. Don't rely solely on one's qualified retirement plan, he advises, because by the time most cosmetic surgeons, retire they will be in the top tax brackets.

Consequently, they will pay the maximum tax on distributions from their qualified plans.

Don't abandon those qualified plans, he suggests, but do use additional buckets. Diversification is key, he says, not only in terms of what to invest in, "But it's also about diversification in terms of the tax treatment:

Have some in a qualified plan, where you're betting the tax rates in the future will stay the same or go down.

Have some in your own name, where you're betting that capital gains tax rates will stay the same.

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