Wealth Matters for Physicians

Article4 Key Strategies for Protecting Your Personal Assets

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According to findings published in The New England Journal of Medicine, the higher-risk a physician’s specialty is, the greater your chance of being sued during your medical career. Potential penalties are severe, and malpractice liability insurance costs can be astronomical.

You may be under the impression that your personal assets are safe if you’re sued by a patient because the lawsuit is work-related, but that may not always be the case. Highlighted below are some recommended steps you can take as a physician to protect both your personal and professional assets.

 

1. Malpractice Insurance

This coverage is foundational protection for your practice, should a patient or his or her family sue for malpractice. But be aware: it may not necessarily protect your personal assets. For example, if you have a policy offering $10 million in malpractice insurance and you get sued for $12 million, the remaining $2 million could be coming out of your pocket. You also might be forced to sell or leverage your home or another large asset to cover the cost.

 

2. Excess Liability Insurance

Another active step you can take to protect your assets is to obtain a personal liability umbrella policy, also known as a PLUP. These policies cover liabilities you might incur in the course of your life outside your profession, beyond auto and homeowner’s insurance. Think of PLUP as being layered on top of those insurance policies for “above and beyond” circumstances or damages that might lead to someone suing you in an attempt to attach your future earnings or home to meet the liability. A single lawsuit unrelated to your practice could potentially bankrupt your family.

Examples of common scenarios that, in the extreme, might activate your PLUP coverage are:

  • A catastrophic car accident on the road
  • A person injures themselves in your pool
  • Your child destroys another’s property

For a relatively low annual premium and the ultimate value it delivers, excess liability insurance is definitely worth the investment for any medical professional.

 

3. Titling of Assets

You can adjust titles to your home or other properties to protect your assets, as well.

In New York State, for example, a married couple may own a home as “tenants by the entirety,” which means that one spouse’s creditor cannot put a lien on the home if it’s owned by both of them in this way. (This benefit is only available for married couples in the state.)

Additionally, a medical practice should be owned in some form of corporate entity, whether an LLC (limited liability company) or PC (professional corporation). A PC has the ability to be structured as an S-Corporation, which provides for various taxation advantages, although an LLC would generally provide greater creditor protection.

At the least, these structures put creditors another step away from tapping in to your personal assets.

 

4. Safeguard Your Assets with a Trust

We may also suggest establishing an irrevocable spendthrift trust as an additional way to shield your assets, should you be sued. This type of trust can help by eliminating the wealth owner’s unfettered control over the assets and by preventing a creditor from accessing these funds.

 

Getting Started

Your time as a physician is precious. Consulting with a financial advisor who has estate planning and asset protection expertise can help alleviate any concerns that you may not be appropriately covered, so you can focus more on your patients and life outside your practice.

 

Schedule a complimentary consultation at this link or contact Aron Lenkowsky at alenkowsky@altfest.com or (212) 406-0850.

 


 

This article was designed to complement the discussion and should not be a complete resource for this topic. Altfest Personal Wealth Management does not provide tax, legal, or accounting advice. In considering this material, you should discuss your individual circumstances with professionals in those areas before making any decisions.

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