Travis Bowen is president and founder of Bowen Law and received his law degree, cum laude, from Brigham Young University. In 1985, Travis founded Bowen Law, and over the last three decades, he’s focused on designing and implementing advanced tax and estate planning strategies for high net worth individuals. Travis talks about the importance of having a system to coordinate all the moving parts involved in a physician’s tax, legal,insurance and asset protection life and he stressed the importance of:
- Having the end in mind whatever the venture is and then build the plan to reach that goal
- Making sure you have a plan in place to maintain your risk management
- Building a wall between investments and personal assets so they are not at risk in the event of a liability
Josh Mettle: Hello and welcome to the Physician Financial Success Podcast. My name is Josh Mettle, and this is the podcast dedicated to advising physicians how to avoid financial landmines. Today, we’ll be talking with Travis Bowen from Bowen Law Professional Group in Salt Lake City, Utah. Travis is the president and founder of Bowen Law and received his law degree, cum laude, from Brigham Young University. In 1985, Travis founded Bowen Law, and over the last three decades, he’s focused on designing and implementing advanced tax and estate planning strategies for high net worth individuals.
Travis, thank you so much for your time today and welcome to the show. How are you?
Travis Bowen: Hey, Josh. I’m doing really well and I appreciate the opportunity to chat with you this morning.
Josh Mettle: Well, we appreciate you taking the time and quite candidly, we’ve been looking for some legal advice for our listeners, and I’ve been searching for the right person to come on the show for about a year since we started the podcast. I was just impressed with sitting down with you and your firm and the concepts that you had, and so I am very excited to uncork what you have to share with our listeners today.
Travis Bowen: Well, I look forward to talking and sharing with you some of the things that I’ve experienced over the last almost 30 years.
Josh Mettle: Well, let’s get started then. A few weeks ago, we had a chance to break bread, and I got to visit your firm and I appreciate your hospitality in doing that and you shared with me a story that I found compelling and it was the story of your first job as an attorney. If you wouldn’t mind, I’d love to just have you kind of share that and how that first experience in the law profession guided you or shifted towards where you are today and the firm that you’ve built.
Travis Bowen: Good. I told you I grew up in a ranch in Idaho, and the unique thing about the ranch was there wasn’t any pretending that went on up there. It was up in Idaho, and the notion was, “You do the job, you do it right, and oh, by the way, there’s a right way to do every job.” I thought everyone grew up that way, and so I always wanted to be an attorney. I graduated from law school. I got a position with a large law firm in Salt Lake office, my own office on the 12th floor. I thought I had died and gone to heaven. I started work on a Monday, and the following Wednesday, a gentleman called up and said, “Hey, I’ve had my planning done there a couple of months ago. I’d like to just come in and make sure everything is in order.”
I thought to myself, “Salt Lake City, the capital of the universe, big law firm. Hey, I’m sure everything is going to be perfect.” I went to the file room, found his file, found the binder with his documents in it, started going through those. Impressed, it was a beautiful binder and started going through various documents, got the trust. I went through it. Everything seemed to be in order until I came to Schedule A, where normally the assets are listed. Well, the Schedule A was a blank. No assets had been identified. No assets had been listed. No assets had been transferred, and so right then and there, I realized that what this gentleman thought he had accomplished two months ago had not been accomplished, and it was going to be my responsibility on Friday when he came in to tell him that was the case. And so, as I looked at it, I thought, “Well, maybe that’s just on the estate planning side.” When I start working with these business owners, that’s where we’re going to find things done and done correctly. Frankly, Josh, there’s probably a bigger gap in what someone thinks they’ve accomplished business-wise than even their estate planning.
Josh Mettle: Well, that scares me because as you know and as we discussed, my family has real estate and real estate holdings and assets. I feel that we sort of kind of blindly trust the advice that we’re given by so many of the professionals that we deal with because it’s just beyond the scope of our expertise, and I think that’s particularly true in the case of physicians. The reason I think that is because in my experience, there’s so much that goes into practicing good medicine and moving your family across the country to where you’re going to be located to practice medicine and being a parent and being a spouse and maybe taking care of yourself in the process. That’s about as many hours as there is in the day for most, and so, the idea of being thoughtful in this enough to choose a professional to represent you, at least know that you don’t have all those answers and then to not have good advice given – that’s a scary idea to me.
Travis Bowen: I think it is. I think part of the problem and it goes with the analogy of the physician is that physicians are as you say are busy. They’re preoccupied with a number of things, and so it’s not atypical for a physician to call up an attorney with what we would call a self-prescribed prescription, walk into the attorney’s office and say, “Gee, I heard I need an LLC and I need a trust.”
The attorney says, “Well, we do those.”
The physician says, “I need one of each of those.” He gets that and walks out, kisses his or her spouse and think that they’ve accomplished something. You may remember the first time you and I met. You came to my office, Josh, and let’s pretend that you would have called me that morning and said, “Gee, Travis, could you give me directions to your office.”
I would said, “Gee, Josh, I’ve been here in the Valley 30-plus years, absolutely ‑ provided, Josh, you can give me one input and that is, where are you?”
And that’s the challenge is that so many physicians go to attorneys with their self-prescribed prescriptions. Those prescriptions are filled and the physician and his or her spouse think, “Gee, honey, are you glad we’ve got that taken care of?” Well, the problem is that before they walked in there, they didn’t know much risk they have. When they finished that process, they didn’t know what the risk was, and so, that’s the challenge is determining where you are or where a physician is on a broad-based level, across all of their professional or their practice and personal affairs.
I remember a physician that we worked with that had a great practice and decided he would venture off into the mother of business ventures, and so, he bought four yogurt franchises. Well the way that he separated that from his practice and from his personal affairs and from one location to the other was to simply go to the bank and open four checking accounts, and by segregating those activities into four checking accounts, he thought he had protected himself.
Josh Mettle: Halfway there, wasn’t he?
Travis Bowen: Exactly. Exactly.
Josh Mettle: Well, you know you bring up an interesting point, and I think there’s a parallel in your profession and mine that oftentimes someone will come to us with the prescription already written, self-written.
Travis Bowen: Yes.
Josh Mettle: And they kind of want us to fill the prescription, and I think the difference between a real professional and someone that has a fiduciary responsibility and the consumers’ or clients’ best interest in mind is sometimes it’s our job to challenge that thinking. Instead of just complying with, “Yes, we’ll create the will or the trust.” Or, “Yes, I’ll do the loan that way or this way,” is to say, “Okay. Well, have you thought of all the pieces here? Have you thought about this over a longer period of time? Have you thought about how this affects your heirs?” I think that’s what you’re describing. What you’re describing is when someone comes to you with a self-written prescription, your job and my job is more than just to fill the prescription but to analyze and to challenge them if we think the prescription is inaccurate. I think that’s a great lesson to highlight.
Travis Bowen: I think so, too. I think what we try to do in the first instance is to ask and answer four questions. The first one is, “Okay, doctor, where are you are today from a risk standpoint?” Oftentimes, they have no idea. Let’s determine where you are today from a risk standpoint, as well as where you want to be because each person has their own risk appetite. But let’s start by figuring out where you are, then where do you want to be, how we would move you from where you are to where you want to be and exactly what it would cost in terms of time, money, and effort to move you to that preferred state of protection.
Josh Mettle: So I think this is going to just dovetail perfectly into my next question, which is I think, where we’re headed here, and I thought the way you described it so clearly was brilliant. You talked about the risk gap, which is I recall you describing it and correct me if I’m wrong, is essentially the gap between what the clients perceived risk or exposure is and their actual risk and exposure. So maybe I can just invite you to tell us a little bit more about the risk gap and specifically how that would pertain to a typical physician client of yours.
Travis Bowen: Thank you. I think what we want to focus on is again the notion of three levels of risk. One is the desired, so a physicians and spouse to sit down and say, “Gee, honey, as we looked at our practice, we look at these other activities in which we’re involved. We looked at our children and the things that are going on. What’s the level of risk that we desire to have?” They think about that, “Okay, so that’s what we would like to have. But then, they think about those teenage drivers. They think about that, that nurse or that assistant that’s doing this or that or this troublesome patient, and they soon recognize that their perceived risk is greater than the desired risk. Then, oftentimes why they come to us is because something has happened, and now, they recognize that their actual risk is even greater than their perceived or the desired –
Josh Mettle: Right.
Travis Bowen: Risk. And so, we think just like a good physician, if you’re going to address this, if you’re going to attack it, you’ll have to do it systematically, and there has to be a method to doing that, to answering those four questions.
Josh Mettle: Yeah.
Travis Bowen: And so, to do that, we think of it much like a physician would. We use different terminology. But in terms about risk assessment, let’s answer those four questions and then, just like creating a building or creating a treatment plan, recognize that anything of value is going to have three phases to it: It’s going to have a design phase, it’s going to have a build phase, and it’s going to have a maintenance phase. And so, as a tax boutique firm, we take on the responsibility to recognize that tax is so pervasive, you really can’t do anything without understanding the tax ramifications. But then, for the physician, there’s the business side, so let’s do the business plan, but how could we do the business planning if we don’t recognize the implications for the estate planning?
Josh Mettle: Yeah.
Travis Bowen: Or vice versa. How could you do the estate planning for a physician without understanding the business or the practice ramifications all under that umbrella of tax. Does that make sense?
Josh Mettle: Yeah. They’re all interlinked, and unfortunately, at least in my own situation, sometimes the communication between those links is not that great.
Travis Bowen: That’s correct, too, and so it comes down to a system, having a system. Without a system, I think what you find and I’m sure you’ve seen it, Josh, is the fact that without a system, you can have random acts of excellence one day and random acts of chaos the next day, but if you have a system, then you have predictability, and so our system, we call it an asset protection system. What it really is, is just a risk management model that allows us to determine where a person is, where they want to be, and how to move down to that again, desired state of protection.
Josh Mettle: And so that asset protection system is actually a trademarked system that you have created. Essentially just so I’m following you, it’s essentially the process or the system to ascertain where a client is today in terms of risk, where do they want to be, how to move them from point A to point B, and then the cost associated, is that right?
Travis Bowen: Exactly, and that’s really the first step, and then, as I said, like building a building, “How do you design it?” Well, the only way you could design it is if you understood the clients’ objectives, the clients’ risks, and the clients’ assets. That’s what’s interesting is I think the gap exists between what someone thought they had accomplished and what in fact they accomplished is because there is confusion between what are the means and what are the ends. If a physician walked in and said, “I need an LLC” and that was his objective or her objective, then they’ve accomplished it.
But if you change the conversation a bit and say, “Doctor, hold on just a minute. You’ve said you wanted this LLC and trust. What is it that you want those to accomplish? If those are the means, what are the ends that you’re trying to achieve?” And that changes the conversation completely.
Now, you can start looking at, “Well, I want to be protected from frivolous lawsuits. I’d like to reduce my federal income and employment tax, estate tax, avoid probate,” and so, there would be a number of objectives that we would identify, so that, “Okay, now doctor, we know exactly what you’re trying to accomplish.” We should be bright enough, resourceful enough, tenacious enough to say, “If those are your objectives, doctor, this is how we would accomplish those.”
Josh Mettle: Right. Let me throw a real-life example at ya -
Travis Bowen: Okay.
Josh Mettle: that we see all the time, and I’m sure this is going to fit somewhere into your system, but I would say about 95 percent of the time, when I see a real estate purchase agreement come across our desk, it’s in the physician’s personal name. For the purpose of achieving financing through Fannie Mae or Freddie Mac or one of the most common and lowest cost type mortgage product, that it’s important that they do have the offer in their personal name, for most of those loans they require it. But when I ask the question, “What is your intention to hold title to the property after you’re entitled? How are you going to hold the title going forward?” Most if not all have not thought through that and have not had advice from either legal or even their financial advisor on that. Tell me how you would walk someone through the process if they were to come to you and you knew that they were about to purchase a home, and it was their intention to keep that in their personal name.
Travis Bowen: Okay, excellent. As you said, we have to be very careful in terms of what the lender is going to require as far as the title is concerned, and so probably we’ll let’s talk about what are the objectives then. So we’ve got the home. What is the physician and his or her spouse trying to accomplish? Well, if we have that conversation, they would say in my experience is then, “Gee, I don’t want to lose that house in a frivolous lawsuit. I want to make sure that I am holding it in a way that I can deduct the interest.”
Josh Mettle: Yep.
Travis Bowen: I want to make sure that if something happened to me or to my spouse that it would go to the appropriate place. And so, first, we would talk, “All right, it’s a given. We have to have it in your name to begin with, but let’s talk about these objectives. So, we list the objectives. We prioritize the objectives, and then we say – alright, I’ll make up some facts, so let’s say it’s the husband is the physician or the wife is a homemaker. So what we’re trying to do? We’re trying to protect the home. From what? Well, we want to protect it from a malpractice claim. We would say, to hold that in joint tenancy is not a good idea. If we transfer that to your wife, if we transfer that to a trust owned by your wife or settled by your wife, if we transfer that to an LLC owned by your wife’s trust, all of those would be superior to holding that in joint tenancy.
The degree to which we did that would again depend upon the spouse. If the spouse is what we would call a safe haven spouse and has very limited liability, which is quantifiable and insurable, or is the spouse likewise a physician? It becomes very fact-intensive, but the process is always the same. Let’s determine what the risks are, what your objective are, and what your assets are, and then sit down and design it with the proper inputs, build it completely, i.e., let’s make sure that not only we create this vehicle to hold the house but we actually transfer it into the house. Now, from a liability standpoint, you would still be obligated to the lender ‑
Josh Mettle: Sure.
Travis Bowen: through that payment, but if you were sued for malpractice, that home would be protected from those kinds of frivolous lawsuits. Then, from a tax standpoint, making sure that it’s held in such a way that you, again, can continue to deduct the interest. If you were to sell it, that you would be able to have the one-time exemption and get step in basis upon the death of the first spouse. Does that make sense?
Josh Mettle: It makes perfect sense. There’s so many moving pieces to this, but what I’m hearing you say is you start with the end in mind and then you build it. You reverse engineer it from there and‑
Travis Bowen: Absolutely. You know the other thing, Josh, too, is we talked about the home, but there are a number of physicians that are buying the practice facility and the same issues are there, only in more abundance. Well, how do I own that? Do I put that in my name? Do I put it in my practice? Do I form an LLC and own that with my spouse? Again, it’s all, as you said, let’s begin with the end or ends in mind. What is it we’re trying to accomplish? Now that’s clearer, let’s own it and or structure it in a way to accomplish those objectives.
Josh Mettle: I would think it would even be more complicated in that situation because oftentimes, you’ve probably got partners, and so now, you’ve not only your own asset protection and your own liability, but you’re bringing in the liability of your partners in practice. I would imagine that could get pretty complicated in structuring correctly.
Travis Bowen: Absolutely. It just so happens this afternoon, I’m going to meet with two physicians, two partners. They have a practice in one city, a practice in another city, and a third practice in the two cities they’re partners, and they own the real estate in both locations. They have a third partner in a third location, and he owns the real property, and so it can become fairly complex that’s why you have to have a systematic way to assess it, a systematic way to identify what is it we’re trying to accomplish, and then systematically do that.
Josh Mettle: As it pertains not just directly to real estate, I would assume the same process is immediately applicable if you have a physician who’s looking to partner up with another physician and there are no real estate assets, real property assets, but just simply going to start an entity together. They’ve got to have the same risk considerations and goals and then precautions in place, correct?
Travis Bowen: Absolutely. You know one of those would be if we’re going to be partners, do we have a buy-sell agreement that says, “In the event of a death, disability, what’s going to happen to this practice?” You’ve got issues with respect to, you may not be buying the building, but you’re paying for the leasehold in three months and you’re buying the equipment. How do I that most cost-effectively or better yet, how do I optimize the tax situation with respect to that? We like to think of it as a client having a pool of assets. For analysis and planning purposes, take that pool of assets and divide it into practice-operating assets and practice-capital assets, individual investment, and personal assets and build a wall between those investment and personal assets, so they’re not on the table in the event of liability. And then, separate the operations where I’m hiring and firing staff and treating patients from any land, building, equipment intellectual property, leasehold improvements that I have, so that those are also protected from liability are being taxed in a more favorable rate from an income tax standpoint. We do see the employment tax, there are a host of things that can be done if it’s done correctly.
Josh Mettle: All great points and that really kind of brings me down to my next question that I had in mind for you. We talked a bit about the different services that your professional group offers because I know it’s evolved to more than just law. Maybe we could talk a little bit about your vision for how the advisors from tax, legal, insurance, how all of those pieces kind of fit together and how you orchestrate that for clients so that it’s kind of a seamless affair.
Travis Bowen: Sure. I think that the paradigm that exists out there is that here is the estate planning team. It’s somewhat of a misnomer to begin with, but here’s this estate planning team and to change the analogy, it looks like this where the physician is the owner and the general contractor. As the owner and general contractor, he takes responsibility to go out and interview and hire a series of subcontractors ‑ the attorney, the CPA, the insurance, the investment advisors, the banker. Everyone is seeming to think that the physician has the time and the expertise to do that. Well, we talked about the gap that exists between what the physician thought he accomplished legally and what in fact he had.
Our experience has been, and it’s been borne out of almost every week for my whole practice is that, Josh, there’s oftentimes as big or bigger gap between what the physician thought his insurance did and what in fact it did, same thing with his investments. “Gee, I thought I had this portfolio,” and this was the correlation or lack of correlation and it’s not the banking, the accounting. Sometimes the accounting, again everyone is well intended. Everyone I think is trying to do their best job, but what we find from an accounting standpoint is somehow the bookkeeping was never set up correctly, hence the accounting is wrong, and what is called tax preparation is really trying to clean up the bookkeeping and accounting so a return can be filed.
Well, when we saw that, we thought, “Maybe what we ought to do is raise our hand and audition for the role of general contractor.” So, physician, you be the owner and you’re certainly the boss. But why don’t you let us take the responsibility to coordinate these other disciplines so that everyone is on the same page, everyone is working in concert, so that we don’t have these gaps that otherwise exist because the physician really doesn’t have the time and/or the expertise to do that on an ongoing basis.
Josh Mettle: And so, how does that look? I mean I completely understand the way you’ve described that and I see the need for it. How does that look within your firm? Are you then, if a physician comes to the table and let’s say they have a team where they’ve gotten insurance and their financial advice and their accounting and you may recognize a gap there, are you rolling them into your team that does those things or do you just come aboard as you mentioned, as the general contractor and team captain and coordinate everybody?
Travis Bowen: You know, Josh, it’s a little bit of both. First of all, we have the expertise within the firm and through our affiliated entities and strategic partners to review that, so that we can look at that malpractice insurance and know exactly what it does or doesn’t do. We can look at the bookkeeping, the accounting and taxes, and see if it does what it was intended to do. Once we look at that, then we can make an informed decision with the physician, “Boy this has been done well, you’re in good shape, we’ll just continue to coordinate that.” Or it might just be the opposite where, “Gee, I know that everyone was well-intended, but the way that you’re structured, the way that the books have been kept and so on and so forth is really inconsistent with any and all your objectives. And so, we need to make a change.” And that change can be a third party that can be someone within our organization. The critical thing is that it’s done and done correctly.
Josh Mettle: I think there’s three big takeaways. Number 1 for me is to take the time in our busy lives to start with the end in mind, whether it’s buying a home, building a practice, whatever that venture is, start with the end in mind and then build the plan. I think that’s very important. I think it’s brilliant. I think the coordination between all the players is paramount. I know in my own life that we’ll get to the end of the year and we’re going to meet with the CPA and did you allocate the right amount of capital to your tax-free qualified retirement plan or tax defer, and I would, “Geez, I don’t know. Let’s call the financial advisor.”
Travis Bowen: Yeah.
Josh Mettle: And there’s more question marks than there is periods or exclamations.
Travis Bowen: That’s the truth. In fact, it’s interesting, Josh, if you ask someone, “Well, does your attorney, your CPA and you – do the three of you have a list of all of your assets that is reconciled, or in other words, do you have the same lists?” Invariably they don’t.
Josh Mettle: Right.
Travis Bowen: They don’t, and that just underscores what you’re saying.
Josh Mettle: And that brings me to the last of the three points that I thought that you brought up that was so important and that’s the maintenance phase. I know in my life, you know I’m in my late 30s, and things have changed so fast. We buy investments, we sell investments, we have children ‑ we don’t buy and sell children ‑ but we‑
Travis Bowen: Well, sometimes you feel like doing that, you know.
Josh Mettle: Sometimes you do, yes, momentarily, but there’s so much that changes that if you let six months or a year go by and you haven’t taken a look at the assets protected that you put in place or the plan, it’s probably left you exposed and there’s holes in that puzzle, so three great takeaways, Travis.
I really want to thank you for your time and for so clearly articulating the discrepancy between perceived risk and actual risk and the risk gap and then also the three big takeaways that I have from our time together. I’m sure that our listeners are going to want to find out more about this information, where would be the best way for them to (1) get general information about what we’ve discussed today, maybe from a website, and then (2) if they’re compelled to reach out to you, how do they best reach you?
Travis Bowen: Okay, good, thanks, Josh. Our website is bowenlaw.com. Our toll-free number is (800) 617-2873, and then our local number is (801) 364-0123.
Josh Mettle: Travis, thanks again. I really had a lot of fun and you talked‑
Travis Bowen: Josh, thank you.
Josh Mettle: I look forward to communicating and keeping our relationship continuing.
Travis Bowen: Likewise. Thanks so much to you.