Physicians and Asset Protection

By Matthew Waterhouse, Intern, Shepherd Financial Partners

Physicians may be viewed as highly compensated individuals and subsequently be a possible target for frivolous lawsuits. According to a recent survey done by the American Medical Association, 60% of physicians over the age of 55 have been sued at least once. Should this happen to you, both your assets and reputation may be on the line, and there could potentially be financially crippling consequences.

It is best to figure out early in your career how to protect yourself and make it difficult to be a target. Take a few simple steps now to reduce the likelihood of being sued and help keep you from being harmed both professionally and financially.

Insurance

Professional Liability Protection

This is where every physician should start the asset protection process. Many employers will require you to have medical malpractice insurance however professional insurance alone may not be enough. While this type of insurance is still extremely useful to have, there are many other circumstances that could still hurt you financially.

Personal Liability Protection

As a highly compensated individual, it is also important to have adequate personal insurance to protect you from common civil suits, such as having sufficient auto, and homeowner’s insurance. Obtaining an umbrella policy, which provides a great deal of extra liability coverage to supplement your auto and homeowner’s policies, is an extra layer of coverage and can usually be obtained at a very minimal additional cost. Speak with a property and casualty insurance agent to make sure you’re properly insured for whatever comes your way.

Transfer Assets

An intra-family transfer is one of the simplest asset protection methods. Transferring an asset to a spouse, child, other family member, or even a trusted friend. Any asset with significant value can be transferred so if a plaintiff is ever attempting to sue you, the assets that you have moved are no longer legally owned by you, and therefore cannot be easily taken. However, it is important to use this technique with caution since transferred assets may be difficult to get back should your marital or relationship status with the transferor(s) change.

Retirement Accounts

Your company’s 401(k) or 403(b) plan, for example, are also excellent ways to keep your assets protected since they are afforded Federal protections under ERISA laws and offer protection from creditors and lawsuit judgments.

Limited Liability Companies*

Transferring your assets into a limited liability company, or LLC, can add yet another layer of asset protection. Limited liability is a concept whereby a person’s financial liability is limited to a fixed sum, most commonly the value of a person’s investment in a company or partnership with limited liability.

Trusts*

There are many different types of asset protection trusts that may be set up for your benefit. Some are straightforward, and some maybe more complex: options include both domestic and offshore trusts. However, just like most other methods mentioned, the common goal of asset protection trusts is to limit the interests of beneficiaries in such a way so as to preclude creditors from collecting against trust assets.

Conclusion

Nothing you do is bulletproof but the goal of asset protection is to set up as many walls as you can and have a large percentage of your assets in a form that creditors cannot easily access.

“Once a would-be plaintiff knows your assets are tied up, he may be less inclined to sue you,” says New York asset protection attorney David Mandell, co-author of Wealth Protection: Build and Preserve your Financial Fortress (John Wiley & Sons, 2003). “Or if he sues and wins, he may be more willing to settle for the amount that insurance will cover. You get these advantages even with asset protection plans that creditors can theoretically unravel—it takes them more time and money than they’re willing to spend.”

Consult with our financial advisor specializing in advising physicians and members of the medical community for more information on how you can better protect your assets as part of your financial plan by clicking here: http://www.shepherdfinancialpartners.com/2017539265.

* http://www.mosessinger.com/site/files/Protecting_Your_Assets_from_Malpractice.pdf