4 Key Strategies for Shielding Yourself & Your Practice from Creditors
The potential penalties for dental malpractice can be severe, especially in our current litigious society. Protecting yourself and your assets from unnecessary risk is vital to the financial stability of your family and your practice.
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 dentist to protect both your personal and professional assets.
1. Dental 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 $2 million in malpractice insurance and you get sued for $4 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 occurs 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, a PLUP – or 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.
Consulting with a financial advisor who has estate planning and asset protection expertise can help alleviate any concerns that may not be appropriately covered, so you can focus more on your patients and life outside your practice. Altfest is proud to be the preferred wealth manager for members of the New York State Dental Association (NYSDA) since 2010. Learn more about our comprehensive financial wellness services for dentists at altfest.com/dentists.
Schedule a complimentary consultation at this link or contact Aron Lenkowsky at firstname.lastname@example.org or (212) 406-0850.
The foregoing content reflects the opinions of Altfest Personal Wealth Management and is subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct.
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