Asset Protection for Physicians
Physicians are constant targets of malpractice lawsuits. Generally, they have a high level of annual income as compared to most other people. Detailed required medical record keeping creates an ideal paper trail for any trial lawyer. Despite these challenges, physicians remain the highest earning professional group. Most physicians will accumulate significant business and personal assets that should be protected from the many liabilities that face the medical practitioner. This is where asset protection for physicians is absolutely critical.
So what exactly is asset protection? Well, it is a hybrid between traditional estate planning and advanced planning strategies. This hybrid approach helps to lower your financial profile so that you become a far less attractive target for litigation while still ensuring your assets are invested properly. So, at the time of your passing, your loved ones will be taken care of.
As mentioned above, a key to asset protection for physicians is to protect yourself from litigation and that includes malpractice liability insurance coverage. It is essential that you team up with an insurance professional who specializes in healthcare liability. Why? Because it is impossible to provide asset protection planning without addressing malpractice liability coverage issues. Speaking to an insurance professional is important because the number of malpractice liability providers is dwindling, and you need to be sure you’re selecting the proper type of malpractice coverage. For example, the amount and type of coverage you need can fluctuate dramatically just based on where you practice. In Washington, D.C. there is no cap on damages for a malpractice suit while in Virginia, there is a $2.1 million damage cap for both economic and non-economic damages. Simply moving your practice across the Potomac could save you thousands of dollars in malpractice coverage premiums.
Another strategy is to divide assets within your practice entity. For example, you could try to purchase your practice building under a limited partnership. This would allow you to pledge the assets of the practice as additional collateral for a building loan. The result is that if the medical practice becomes insolvent, proceeds from sale of assets are used to pay down building loan.
An advanced asset protection strategy is to set up Family Limited Partnerships (FLPs) or Family Limited Liability Companies (FLLCs). In general, an FLP will consist of a general partner, who normally owns one 1 percent interest, along with one or more limited partners. Typically, the general partner is a corporation or limited liability company controlled by the client. The limited partners may include the client, other family members, charities, or trusts. Essentially, the goal is to separate ownership while maintaining control of your business. Again, this will help lower your financial profile to help deter litigation.
To learn more about asset protection for physicians, contact our Ashburn estate planning firm, or a estate planning firm in your area. An important takeaway from this article is to understand how important asset protection is, and the importance of getting guidance from an experienced estate/business planning attorney. You don’t want to be over-exposed and subject to a myriad of lawsuits which could drain both the value of your business and your personal assets.