Do Doctors Need an Asset Protection Plan?
The medical professionals are among the highest compensated employment sectors in the U.S., unfortunately, these professions are also among the highest in terms of potential liability from legal claims. Any wealthy or highly paid professional should seriously consider their asset protection needs, but for doctors this might be especially true. Despite their best efforts, for many doctors it is a matter of “when” a legal claim will arise and not “if”. The higher risk of a medical malpractice claim on top of the potential personal liability can be a serious concern for successful doctors.
Unfortunately, the details of effective legal protection are not widely known amongst doctors and as result many medical professionals leave themselves exposed to a potentially devastating lawsuit. The good news is that legitimate and effective asset protection solutions exist that can greatly improve the position of doctors and other medical professionals if a lawsuit were to arise. This article will discuss how physicians, dentists, chiropractors, and other professionals in high-risk medical practices can benefit from asset protection strategies that can help safeguard their wealth.
Why Should Doctors Not Rely on Insurance Alone?
Malpractice insurance is probably the most prevalent and important form of asset protection for doctors. In any legal claim, malpractice insurance is always the first line of defense. Many claims will be covered partially or completely by insurance. In addition, malpractice insurance should cover the costs associated with the legal defense of the claim as well. For this reason, insurance can be a fantastic tool and we generally recommend our clients maintain their malpractice coverage even after they have funded an asset protection trust.
Having ample policy limits and ensuring that malpractice insurance policies stay effective and up to date is a must for any medical professional. However, malpractice insurance alone does not provide sufficient protection in today’s highly litigious society. Malpractice insurance policies can be helpful asset protection measures, but they are not a replacement for a fully-fledged asset protection plan. Some claims may not be covered and other may go beyond policy limits. There are other powerful asset protection solutions that can help protect assets even if a claim exceeds policy limits or falls outside the scope of the policy.
Asset Protection Strategies for Physicians
Limited Liability Companies are separate legal entities that distances the business structure from its owners. We strongly recommend that any physician who owns their own practice form a single member Limited Liability Company to hold business assets such as medical equipment. The limited liability business entity means that the owner is not fully liable for claims against the business entity, only those assets inside the Limited Liability Company are exposed. The owner can pay himself a salary to help reduce the amount of funds held by the company. In addition, once the funds are paid to the owner, they can be transferred to an asset protection trust to help minimize and distribute the risks among several different legal entities.
Single member Limited Liability Companies are easy to form and manage. Standing alone they do not provide complete asset protection, but they do help reduce liability exposure. When integrated into a full asset protection plan, a Limited Liability Company can be an important part of very powerful asset protection plan. When used appropriately, a multimember Limited Liability Company can provide a higher level of protection than a single member business entity. By placing assets into a multimember Limited Liability Company, the owners can maintain full control over distributions. Since they are much harder to reach than individually owned assets, properties held by a multimember Limited Liability Company reduce or eliminate the economic incentive for a plaintiff’s attorney to continue to pursue their client’s case.
Asset Protection Trusts for Physicians
Finally, the backbone of any good asset protection plan should be an asset protection trust. An asset protection trust can be a formidable legal solution that can help safeguard personal assets as well as business assets. A domestic asset protection trust is a legal structure recognized under multiple states in the U.S. that shield any assets inside from liability. Due to the simplicity and flexibility of Domestic Asset Protection Trusts, they have grown increasingly popular. Unfortunately, Domestic Asset Protection Trusts are not recognized by the laws of every state. At present, fewer than half of all U.S. states allow people to setup this type of trust in their state. This opens up these types of trust to liability if a person is sued in the court of a state that does not recognize Domestic Asset Protection Trusts, or in federal court.
Sophisticated clients looking for the highest degree of legal protection opt for an asset protection trust that is domiciled in an offshore jurisdiction. Foreign asset protection trusts can provide the most effective asset protection strategy available on the market today. With a foreign asset protection trust, the management of the trust takes place in an offshore jurisdiction such as The Cook Islands, Nevis, or Belize. This means the trust assets are beyond the reach of U.S. court orders. If a potential claimant wanted to reach assets inside an offshore trust, they would need to litigate their claim in the courts of the foreign country from which the trust is managed. That means litigating in an unknown, distant location and having to hire local attorneys within that jurisdiction.
For these reasons, an offshore trust can be a tremendous asset protection vehicle. While this type of legal solution might sound complex, in reality, it is not much different from a traditional trust, but it offers a much higher degree of legal protection. Offshore asset protection trusts can also work together with other legal entities such as limited liability companies to form a formidable protection structure for your personal assets. Of course, offshore trusts are completely legal for U.S. persons and others, provided there is a legitimate purpose for creating the trust structure, such as the need for asset protection.
An offshore trust can hold a variety of different assets such as bank accounts, investment accounts, cryptocurrency and other digital assets, limited liability companies, real estate, intellectual property, and other assets. The assets held by the trust do not necessarily need to sit in the trust’s home jurisdiction, they can be deposited in financial institutions located in Switzerland or elsewhere. The most important part of offshore asset protection is to remove the assets from the U.S. in order to keep the assets beyond the reach of its jurisdiction.
Things You Should Not Do
The practice of medicine can be an extremely rewarding one, but it is not without its dangers. Definitively, the worst thing a medical professional could do is ignore the legal risks associated with the occupation. Physicians should not fail to carry adequate malpractice insurance or allow their policies to lapse for any reason. That being said, relying completely on malpractice insurance can also be a risky course of action. If a claim were to exceed their policy limits, then their personal assets could be exposed. Self-employed doctors should avoid practicing without the legal protections of limited liability business entities such as professional corporations or limited liability companies. Finally, for doctors looking to find effective asset protection, they should not overlook the benefits that an asset protection trust can offer.
Contact Blake Harris Law
It’s not just malpractice claims that asset protection plans can help protect from. They also provide protection from legal complaints, traditional creditors, and a host of other financially consequential events. Blake Harris Law can answer all your questions regarding offshore trusts and other asset protection strategies. Our firm can help every step of the way when assessing your asset protection needs and putting together an asset protection strategy that works for you. If you are ready to protect your wealth, contact our team at Blake Harris Law by filling out our online form to speak with an experienced attorney.