asset protection for doctors

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Topic Author
floatingdoc
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asset protection for doctors

Post by floatingdoc »

I was wondering what other MD's on the board do for asset protection. I do not pay a lawyer for this but simply try to maximize what I can do on my own. I have done the following:
(by the way, I do live in New York)--> My net worth is darn close to 2 million
1. Practice very careful medicine and cover my ass liberally with consults and testing. So far it has kept me out of court going on 20 years.

2. Every personal asset not in an IRA or 401k is held in my wife's name who is not part of my s-corp medical practice although she is a paid employee of the practice. This includes the bulk of my 1.2M in investable portfolio. The medical practice building is in both of our names. The house is in both names.

3. Have a 1M/3M malpractice policy

4. Increased my auto liability to 2 million.


Question:

I was reading allstate's unbrella policy and it EXCLUDES ANY COVERAGE related to your business. I have heard unbrella policies touted endlessly on talk shows and here as global protection from lawsuits. It appears not to be the case for us in riskier professions. What other non business asset risk is there out there for me besides auto accidents? What else can I do to protect what we have worked so hard to accumulate in my 45 years from the bottom feeders out there?
xerty24
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Re: asset protection for doctors

Post by xerty24 »

What about adding some sort of DB plan to your practice? Those let you save much more for retirement, and are covered under ERISA for legal protection purposes. You could save $100-200k/year pretax this way, and if you're not actually looking to save that much, you could spend your more vulnerable taxable savings down (essentially converting taxable money to retirement money). I don't know enough about your business to know if a DB plan would be relatively cheap or expensive (which depends on the other employees and their ages, basically).

I think I read in Freakeconomics or similar that people sue doctors they don't like, and that matters much more than doing the right or wrong thing from a medical perspective. Things always go badly (can't fix/cure everyone), but when bad stuff happens, people tend to sue doctors that they don't like personally. working on your bedside manner, reading up on how to win friends and influence people, etc, is probably the cheapest best protection you can buy.
Last edited by xerty24 on Tue May 22, 2012 7:56 am, edited 1 time in total.
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dhodson
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Re: asset protection for doctors

Post by dhodson »

yes umbrella doesnt cover your medical liability.

i dont agree with your stance on extra tests or consults. I dont believe there is much protection and ive never seen it proven to work. I realize many of us do it but i do not. I order what i thinks is appropriate. Nothing more and nothing less.

While there are schemes to put things in trust, off shore, or to use crappy insurance products, none of this is worth doing in my book. Id raise my malpractice coverage to 3mil/5mil if i were you and call it a day.
paulsiu
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Re: asset protection for doctors

Post by paulsiu »

Check about your protection on the IRA in your state. The protection is often not as good as a 401K/pension. In some states, the protection is the same. In other state, you have less protection. See:

http://www.irafinancialgroup.com/selfdi ... ection.php

If IRA protection is not as good as 401K and your 401K has good fund and low expense, you should consider doing a rollover on your deductible portion to the 401K. Once in the 401K, I believe it's generally protected from creditors. The only few ways of losing is if you get divorce (your spouse is entitled to it), if the government garnish you for back taxes, and fraud (ex: your investment was run by Madoff). Remember OJ Simpson still had his pension after all of those lawsuits.

Paul
Topic Author
floatingdoc
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Re: asset protection for doctors

Post by floatingdoc »

I certainly do order what is appropriate but you cannot tell me that additionally, you have not practiced defensive medicine. What specialty are you in, Pathology? Good luck with that approach. I would rather say I ordered it than give up my life savings for something so noble.
DaveS
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Re: asset protection for doctors

Post by DaveS »

I remember 30 years ago in Anchorage, there was a Doctor who was so paranoid about lawsuits that he put everything in his wife's name. She took off down the Alcan Hwy with it all shortly thereafter. Dave
dhodson
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Re: asset protection for doctors

Post by dhodson »

im a mohs surgeon and again there isnt any evidence that what you are doing will protect you. For instance for me there is no evidence that ordering any additional tests on asymptomatic superficial melanomas has any benefit to the patient. There may actually be some evidence its harmful. Thus i stopped doing it. There is still a small percentage of those people who die but i cant detect who they are yet ahead of time and i explain upfront why i dont order additional tests. Could some family member attempt to sue me bc i didnt order CT scans? Sure. Would they win? Not likely since it isnt standard of care and evidence shows it isnt helpful. If i had ordered the CT scans would they have found the mets earlier? no and the family still could sue me if so desired but again i havent done anything wrong.

in case you didnt realize it, your wording would imply to most people that you are ordering and consulting more than what you think is medically necessary.
Topic Author
floatingdoc
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Re: asset protection for doctors

Post by floatingdoc »

Your liability in dermatology is minute compared to family medicine. I am open to it all, thus asset protection is of prime importance to me. Thankfully, my marraige is excellent but yes, that is a risk also. You can only attempt to mitigate risk, just as in medicine, sometimes the disease state will progress despite our best efforts. I will openly admit that thanks to the bottom feeder lawyers, yes I practice plenty of cya medicine. People who say they don't are not being 100% truthful, IMHO.
dhodson
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Re: asset protection for doctors

Post by dhodson »

considering i only do cancer, i dont think my risk is as low as you claim and certainly my insurance provider doesnt think im in the same risk as typical dermatology.

well if you can think of an area where im being defensive then please let me know. i try to provide the best care period. There will always be things im doing wrong but im only doing them wrong bc im not aware of it/the literature doesnt show it at this point. For instance i used to stop aspirin on all patients prior to surgery. more recent evidence shows that makes patients more likely to have a stroke or heart attack. I changed my stance and dont stop blood thinners. It makes my day longer sometimes and i occasionally get people complain of bruising and there is the risk of lawsuits from wound problems (which have happened to some mohs folks although currently not statistically shown to be an issue). At the moment it still appears to be the right thing to do.

and as i said just change to 3mil/5mil
paulsiu
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Re: asset protection for doctors

Post by paulsiu »

One other factor in reduction in malpractice is to have good people skills. Studies have shown that doctors with high malpractice are often not worse than those who have low malpractice. By having bedside manner, you reduce your chance of getting sued, but it won't make it go away.

Paul
dognose
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Re: asset protection for doctors

Post by dognose »

As xerty24 suggested, I would shelter my assets through a big defined-benefits pension plan. My family once owned a relatively small but extremely lucrative retail business, and we had an outstanding DB plan in place. Such plans typically allow you to pump in relatively huge amounts of money each year. Because your wife is an employee of your practice, it obviously helps to include her in this plan as well. Such plans are virtually "bullet-proof" from lawsuits. I realize that you already have an IRA and 401(K), but I would at least look into the possibility of starting a DB plan as well.
dhodson
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Re: asset protection for doctors

Post by dhodson »

The DB plan is only going to work out for him if he has few to no employees. Otherwise costs are such that its to expensive. I work as a contractor and thus have my own 401k and DB plan. Atlhough expensive, its okay bc im the only employee so i dont have to provide a pension to anyone but myself.
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gasman
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Re: asset protection for doctors

Post by gasman »

Best protection is often the simplest:

-lots of liability insurance - in excess of required minimums.
-Practicing in a tort reform state or an institution that has sovereign immunity and avoiding places that are bad actuarially for medmal.

When I go to a part time job in a few years, there are many desirable locations that I will not even consider because of the medical liability climate unless I work for government instituion that confers sovereign immunity.
BruDude
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Re: asset protection for doctors

Post by BruDude »

You may find this chart helpful, depending on what state you live in - http://www.assetprotectionsociety.org/p ... ummary.pdf

Main website is here - http://www.assetprotectionsociety.org/
Topic Author
floatingdoc
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Re: asset protection for doctors

Post by floatingdoc »

This is some scarry crap. Are you saying that my solo 401k with just my wife and I who elected to participate is not exempt under erisa in nys?? I so can't wait to get out of medicine in 7 years (or less!) Why get up and go to work everyday when some dirtbag can swipe it from you for an innocent mistake such as an auto accident.
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gasman
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Re: asset protection for doctors

Post by gasman »

jenny345 wrote:
dhodson wrote: Then there is the OJ SImpson story -

http://www.lodmell.com/oj-simpson-teach ... protection
They still took and sold off his personl property including his Heisman trophy. If OJ had the ability to earn an income as a football player or talk show host or as an actor subsequent to his lawsuit, his income could have been garnished.
The same is true for doctors: Unless you satisfy a charging order, future income can and will be garnished. So unless you are ready to retire, you are still on the hook for a big judgement. Oh, and by the way, while assets in defined contribution plans are likely protected to $1 million, DISTRIBUTIONS from these plans are not. So while they can't get at your 401k, you can't either unless the judgement is satisfied.
smackboy1
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Re: asset protection for doctors

Post by smackboy1 »

floatingdoc wrote:1. Practice very careful medicine and cover my ass liberally with consults and testing. So far it has kept me out of court going on 20 years.

2. Every personal asset not in an IRA or 401k is held in my wife's name who is not part of my s-corp medical practice although she is a paid employee of the practice. This includes the bulk of my 1.2M in investable portfolio. The medical practice building is in both of our names. The house is in both names.

3. Have a 1M/3M malpractice policy

4. Increased my auto liability to 2 million.


Question:

I was reading allstate's unbrella policy and it EXCLUDES ANY COVERAGE related to your business. I have heard unbrella policies touted endlessly on talk shows and here as global protection from lawsuits. It appears not to be the case for us in riskier professions. What other non business asset risk is there out there for me besides auto accidents? What else can I do to protect what we have worked so hard to accumulate in my 45 years from the bottom feeders out there?
Here, read this:

http://www.assetprotectionbook.com/foru ... f=99&t=312

The first line of defense is going to be to have adequate insurance coverage both personally and professionally i.e. homeowner, auto, umbrella, commercial premises, med mal (occurrence), business E&O etc.. My wife is an OB/GYN and we live in an area infamous for handing down the biggest jury awards in the nation. We have many friends who are doctors. Many have been sued for malpractice, some have been sued multiple times, some for over 1 MM, some have lost or settled. Same thing with slip and falls. Not a single one has ever exceeded their insurance coverage and lost personal assets. However, quite a few have fallen prey to bad investment advice, failed business ventures, or financial scams.

The biggest creditor a physician will likely ever face is his/her spouse. Also, it's unlikely, but not impossible that your wife accidentally injures somebody. Do not own a dog or a swimming pool.

The second line of defense will require retaining a lawyer who specializes in asset protection (but not a trust mill).
Disclaimer: nothing written here should be taken as legal advice, but I did stay at a Holiday Inn Express last night.
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GregLee
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Re: asset protection for doctors

Post by GregLee »

floatingdoc wrote:I so can't wait to get out of medicine in 7 years (or less!) Why get up and go to work everyday when some dirtbag can swipe it from you for an innocent mistake such as an auto accident.
Retirement has other advantages, too, like not having to work.
Greg, retired 8/10.
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White Coat Investor
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Re: asset protection for doctors

Post by White Coat Investor »

I max out retirement accounts, which unlike my house and taxable accounts, are protected from creditors in my state. I also have large liability limits and a umbrella policy. Put risky assets in LLCs as well (think rental properties.)
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Topic Author
floatingdoc
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Re: asset protection for doctors

Post by floatingdoc »

I would read that umbrella policy very carefully. The one that I read from allstate insurance says it specifically EXCLUDES any damages related to your BUSINESS ACTIVITY. I am sure a good many physicians think this umbrella protects them from "all hazards" when that is clearly not the case, at least for allstate. Can someone share what they have so I may check with their carrier? Why have one if I have 2m liability on my autos? I have a separate business liability insurance (btw, i better check those coverage limits), malpractice insurance in the standard 1M/3M arrangement. I am in New York.
investor
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Re: asset protection for doctors

Post by investor »

There is a FREE publication
"Asset Protection for Physicians and High Risk Business Owners" by Robert J. Mintz, ESQ copyright 1999
(was/is) FREE available upon request at his website: The book makes for interesting reading.

from his book: rjmintz@rjmintz.com. .phone

I am not a physician and no way involved with the individual mentioned. I just find it an interesting read.

investor
Muchtolearn
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Re: asset protection for doctors

Post by Muchtolearn »

dhodson wrote:yes umbrella doesnt cover your medical liability.

i dont agree with your stance on extra tests or consults. I dont believe there is much protection and ive never seen it proven to work. I realize many of us do it but i do not. I order what i thinks is appropriate. Nothing more and nothing less.

While there are schemes to put things in trust, off shore, or to use crappy insurance products, none of this is worth doing in my book. Id raise my malpractice coverage to 3mil/5mil if i were you and call it a day.
I agree db. It is rare to lose a case because of not doing a test. I have heard of cases (but not seen them directly) where people have lost suits for too many tests, particularly if one is inappropriate.
jonbonjovy
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Re: asset protection for doctors

Post by jonbonjovy »

You are doing the right things, fully fund you and your wifes IRA/401 whatever, dont do a defined benefit plan bc you have to 1) do it for every employee,2) you must make up any difference if the market value drops which can be hurtful. Keep everything in your wifes name you can, keep house and property in you and your wife deeded as joint tenancy in common "with right of survivorship", check with lawyer make sure that it right, where both of you own the entirety, keep the patients sweet, 99% lawsuits against docs have defendant verdict, but it surely sucks to be in a lawsuit.

You may even check to put everything or parts in a irrevocable trust, but definetely need legal advice to do it that way. If in that kind of trust, the trust owns everything not you.
smackboy1
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Re: asset protection for doctors

Post by smackboy1 »

floatingdoc wrote:The medical practice building is in both of our names.
Consider changing ownership of commercial RE to limited partnership or LLC separate from the medical practice. Would want to protect it from outside creditors i.e. personal tort judgment unrelated to the building. But at the same time also protect your other assets from a creditor of the building owner i.e. victim of a slip and fall in the building.
Disclaimer: nothing written here should be taken as legal advice, but I did stay at a Holiday Inn Express last night.
Jack
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Re: asset protection for doctors

Post by Jack »

smackboy1 wrote:Consider changing ownership of commercial RE to limited partnership or LLC separate from the medical practice. Would want to protect it from outside creditors i.e. personal tort judgment unrelated to the building. But at the same time also protect your other assets from a creditor of the building owner i.e. victim of a slip and fall in the building.
An LLC is unlikely to protect you in either case.

If you are sued for medical malpractice, the real estate LLC is just another asset you own that can be attached, just like a bank account that you own. Your real protection is adequate malpractice insurance.

If you are sued for negligence by a tenant, the real estate LLC does not protect you. Your real protection is liability insurance.

LLCs don't provide the protection that you think they do.
subrosa
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Re: asset protection for doctors

Post by subrosa »

I do not pay a lawyer for this but simply try to maximize what I can do on my own.


What is the logic for this approach? You are not going to get anything actionable from an internet board or a popular publication book. Period.

Invest a few thousand dollars in consultation with a lawyer that actually does this for a living. Invest a few more if needed. Do whatever they say and just be done with it.

You'll end up sleeping better and spending less on ulcer treatments anyway so you'll make it up in the end.
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staythecourse
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Re: asset protection for doctors

Post by staythecourse »

subrosa wrote:
I do not pay a lawyer for this but simply try to maximize what I can do on my own.


What is the logic for this approach? You are not going to get anything actionable from an internet board or a popular publication book. Period.

Invest a few thousand dollars in consultation with a lawyer that actually does this for a living. Invest a few more if needed. Do whatever they say and just be done with it.

You'll end up sleeping better and spending less on ulcer treatments anyway so you'll make it up in the end.
100% agreed. It is ridiculous to state how worried one is about getting sued AND wanting to do everything possible to protect themselves, but not want to spend a few thousand on consulting with the actual experts.

Go find a reputable lawyer in the field of asset protection with knowledge of your state and experience working with physicians. The one's who focus on physicians are likely to know your special needs and will want to make sure they don't "screw" you to make a buck as their referrels are very much by mouth.

Good luck.
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Re: asset protection for doctors

Post by bobamis »

floatingdoc wrote:I would read that umbrella policy very carefully. The one that I read from allstate insurance says it specifically EXCLUDES any damages related to your BUSINESS ACTIVITY. I am sure a good many physicians think this umbrella protects them from "all hazards" when that is clearly not the case, at least for allstate. Can someone share what they have so I may check with their carrier? Why have one if I have 2m liability on my autos? I have a separate business liability insurance (btw, i better check those coverage limits), malpractice insurance in the standard 1M/3M arrangement. I am in New York.
Umbrella policies do not cover professional liabilities, only personal.

Most umbrella policies have a minimum required underlying coverage, after which the umbrella coverage kicks in (for instance, I have State Farm and the underlying coverage is $100,000). You should have a large umbrella and reduce your 2m liability on the auto to the minimum required by your umbrella. What you save in having only the required minimum on your auto, house, etc. often covers a large part of the umbrella premium.

Besides having a large umbrella with minimal underlying coverage and your professional liability, you may wish to consider liability coverage for specific issues, such as employment related issues (sexual discrimination/harrassment, discrimination in hiring or discharge, age, etc.) and claim or regulatory issues (this covers the legal costs of defending coding issues, billing, etc. It will not pay judgments, but pays for your defense. It's no fun to be innocent and win the trial but lose in the end with the costs of defending yourself). These special insurance coverages may be available through your professional organization's insurance provider or they can direct you where to find it.
SGM
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Re: asset protection for doctors

Post by SGM »

I was surprised that my malpractice insurance sales rep advised against increasing the limits of my liability above the standard $1MM/3MM coverage. He gave me the rates for additional coverage but felt it was not necessary in this locale. He seems very knowledgeable, and I felt a lot better after talking to him.
"Let us endeavor, so to live, that when we die, even the undertaker will be sorry." Mark Twain
dhodson
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Re: asset protection for doctors

Post by dhodson »

Their logic is usually that big money or big limits attract more lawyers. While true, the problem becomes what to do if you have a case over those lower limits against you.
smackboy1
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Re: asset protection for doctors

Post by smackboy1 »

SGM wrote:I was surprised that my malpractice insurance sales rep advised against increasing the limits of my liability above the standard $1MM/3MM coverage. He gave me the rates for additional coverage but felt it was not necessary in this locale. He seems very knowledgeable, and I felt a lot better after talking to him.
Depending on your specialty, patient demographic and med mal environment he may be correct - or not. The people that would know are the med mal defense lawyers who see this everyday. The lawyers are also the best people to advise physicians on how best to mitigate med mal lawsuits e.g. how to take better notes, testing, bedside manner etc..
Disclaimer: nothing written here should be taken as legal advice, but I did stay at a Holiday Inn Express last night.
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neurosphere
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Re: asset protection for doctors

Post by neurosphere »

jenny345 wrote: For the ERISA 401K protection you have to have at least one other employee in the plan and my pension guy told me that there are certain restrictions on who that employee can be to count. He said spouses, kids and parents do not qualify....

...Solo 401Ks will not give you ERISA protection but may be covered by state laws.
This is potentially very important information, and information which I did not come across when starting my solo 401k. I had always assumed that a 401k would be an ERISA plan subject to protection from creditors, and in fact was one (small) reason I am moving money from our IRAs into our new solo 401k. In new york state, roths/iras (and I ASSUME solo 401ks?) are exempt as far as I know. But one never knows which state's law one might be subject to in the future, so I figured that all things equal, having money in a 401k was better than an IRA.

Thanks for pointing out this possible difference in solo 401ks vs a "regular" 401k. I almost feel using the term 401k for a solo plan is not then correct, if it does not otherwise share the same features as other 401ks. In fact, Fidelity refers to their solo 401ks as "profit sharing Keoghs". So I wonder if what category a Keogh plan falls into as far as state/federal creditor protection is concerned.

NS

[edited to add this document: http://www.sbca.net/PTXL0802-Altier-Naegele.pdf, which is a compilation of sorts of the rules/laws governing various retirement plans, and which further emphases that plans which are set up by an individual and cover only owners or an owner and spouse DO NOT receive ERISA protections. Keogh plans are specifically mentioned as not likely to enjoy the protections under ERISA rules. Thus, I do not consider my new solo 401k a 401k at all, as this is a significant difference compared to a "real" 401k. Of course, yes, I understand that from a tax standpoint, it works very much like a 401k. Also, now I wonder if any employer plans accept rollovers of these "individual 401ks". I doubt I would ever find an employer plan with costs/options as good as I can find in a Fidelity/Vanguard solo 401k, but if so, it might be worth it someday to convert this individual 401k back into an ERISA-compliant 401k. Not that I think I am at a very high risk of needing extra creditor protection, but as a physician it's on my mind. ]
If you have to ask "Is a Target Date fund right for me?", the answer is "Yes" (even in taxable accounts).
smackboy1
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Re: asset protection for doctors

Post by smackboy1 »

Jack wrote:An LLC is unlikely to protect you in either case.

If you are sued for medical malpractice, the real estate LLC is just another asset you own that can be attached, just like a bank account that you own. Your real protection is adequate malpractice insurance.

If you are sued for negligence by a tenant, the real estate LLC does not protect you. Your real protection is liability insurance.

LLCs don't provide the protection that you think they do.
While it is true that the first line of defense should be liability insurance and an adequately capitalized business entity, the rest of this information NOT completely accurate. Depending on state law, a properly established corporation, LLC or limited partnership can provide asset protection benefits.

If the medical practice and RE ownership are properly separated, a med mal judgment creditor of a doctor is limited in their remedies against the doctor's RE LLC membership interest. They may only be able to obtain a charging order, or maybe in a creditor friendly state, have the power to foreclose or force a dissolution of the LLC. IIRC in NY creditors have the power to foreclose or dissolve, but in either event it is more legal hoops for a creditor to jump through (and that assumes the LLC wasn't created with choice of law limiting the charging order as the exclusive remedy as well as creditor defeating provisions).

A tort creditor of the RE LLC would be able to levy against the building and LLC assets, but would be limited as the personal assets of the individual LLC members. In this case the doctor could be a non-managing member which would insulate his personal investment portfolio from liabilities of the RE LLC. The wife could be the managing member or maybe a separate entity is set up as the managing member e.g. trust, another LLC.

http://www.nolo.com/legal-encyclopedia/ ... rders.html

http://www.assetprotectionbook.com/foru ... ?f=5&t=713

Are LLC's or LP's or even corporations 100% creditor proof? No, nothing is 100% - that is not the goal. From a creditor protection point of view a proper LLC or LP structure is going to be better than naked personal ownership in virtually all situations. And that makes it more uncertain and costly for creditors and places more power in the hands of the debtor doctor.
Disclaimer: nothing written here should be taken as legal advice, but I did stay at a Holiday Inn Express last night.
Jack
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Re: asset protection for doctors

Post by Jack »

smackboy1 wrote:Are LLC's or LP's or even corporations 100% creditor proof? No, nothing is 100% - that is not the goal. From a creditor protection point of view a proper LLC or LP structure is going to be better than naked personal ownership in virtually all situations. And that makes it more uncertain and costly for creditors and places more power in the hands of the debtor doctor.
In making things more difficult for creditors, you also make things more difficult, complicated and expensive for yourself. And after it all, you still only have marginally better protection.

I like to keep things simple, buy adequate insurance and be done with it. Rather than participating in an expensive legal arms race that you ultimately might lose anyway, I prefer to avoid legal complications rather than play legal games. I have much more important things to do in my business. Your mileage may vary.
am
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Re: asset protection for doctors

Post by am »

What if assets are in both spouse and physician's name? Can they go after 1/2 the money only.

From what I have heard, it is very rare for lawyers to go after physician's personal assets. Usually this means years of appeals if the jury award is over policy limits. Most just take the limit of the policy and stop.

Most doctors practice defensive medicine. That is why my specialty (radiology) has been doing so well recently :D

Why can't those politicians get it through their thick skulls that if they really reform medmal than they will save tax payers tons of money, lower insurance premiums, make it better for all people as they will have to endure less tests and bs? Guess the lawyers are too powerful.
kaneohe
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Re: asset protection for doctors

Post by kaneohe »

gasman wrote:
jenny345 wrote:
dhodson wrote: Then there is the OJ SImpson story -

http://www.lodmell.com/oj-simpson-teach ... protection
............... Oh, and by the way, while assets in defined contribution plans are likely protected to $1 million, DISTRIBUTIONS from these plans are not. So while they can't get at your 401k, you can't either unless the judgement is satisfied.
I thought protection was unlimited in ERISA plans. I have often wondered about last point so thanks for posting it........is there a time limit or does that apply forever?
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gasman
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Re: asset protection for doctors

Post by gasman »

-401ks likely unlimited protection.
-IRAs probably safe to $1million. Possibly more
-distributions from these plans-varies by state law.
always check with asset protection specialist in YOUR STATE.

Again just to show you that these plans are not the bullet proof things that many docs think.
getRichSlower
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Re: asset protection for doctors

Post by getRichSlower »

floatingdoc wrote:This is some scarry crap. Are you saying that my solo 401k with just my wife and I who elected to participate is not exempt under erisa in nys?? I so can't wait to get out of medicine in 7 years (or less!) Why get up and go to work everyday when some dirtbag can swipe it from you for an innocent mistake such as an auto accident.
If you kill someone, maybe you deserve to be wiped out, if not for punishment, at least to compensate the victims' family. Further, I don't see how they're the dirtbag if you're responsible for the auto accident. However, you're probably overestimating the financial risks from auto accidents. I doubt you can find a single person on this board with an umbrella policy who had an auto accident where the judgment exceeded the policy limits and their personal assets were garnished.
adave
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Re: asset protection for doctors

Post by adave »

Move to Texas. Med mal is basically dead here.
Bruin1996
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Re: asset protection for doctors

Post by Bruin1996 »

Interesting topic of discussion here. I live in California where thankfully there is medical tort reform. My wife and I are both physicians with a large HMO (or is it now an ACO?) here in California that self-insures for liability. We are maxing out our retirement contributions (401k, back door roth IRA, and a Keogh after partnership). We also have auto/home/umbrella insurance policies.
Is there anything I should do with my taxable accounts to help with asset protection? We are thinking about investing in rental income properties as well.. any asset protection issues we should consider with real estate? I am going to try to take a look at some of the books suggested in this thread. Thanks again.
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LH
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Re: asset protection for doctors

Post by LH »

529s offer good protection after 2 years. But 20 years out you may be out of window.

I don't know about MOHs surgeons but ER, our risk management advice has been to test.

A dead patient, with a disease one could ct and detect...

http://www.nejm.org/doi/full/10.1056/NEJMsa1012370
Each year during the study period, 7.4% of all physicians had a malpractice claim, with 1.6% having a claim leading to a payment (i.e., 78% of all claims did not result in payments to claimants). The proportion of physicians facing a claim each year ranged from 19.1% in neurosurgery, 18.9% in thoracic–cardiovascular surgery, and 15.3% in general surgery to 5.2% in family medicine, 3.1% in pediatrics, and 2.6% in psychiatry. The mean indemnity payment was $274,887, and the median was $111,749. Mean payments ranged from $117,832 for dermatology to $520,923 for pediatrics. It was estimated that by the age of 65 years, 75% of physicians in low-risk specialties had faced a malpractice claim, as compared with 99% of physicians in high-risk specialties.
Some statistics on malpractice risk. Which confirms what I was taught, expect to be sued.
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zzcooper123
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Re: asset protection for doctors

Post by zzcooper123 »

Accounts Receivable is one of the first assets attorneys go after. Adkisson wrote a book on protecting AR by Factoring. In California I believe single member LLC's have lost most of their asset protection. A HELOC is highly protective of the equity in your home and can be used on contingency basis as it is recorded in the RE office. Consider "cross-collateralization" to protect RE assets. Go to apbook.com or read Adkisson's book.
For W-2 doctors garnishment of your wages is the simplest path for your creditors. Very difficult to protect.
Generally put risky assets (boats, rental RE) into LLC's. Safe assets i.e. stocks, bonds go into LP's. Protection is state-by-state tho.
Not sure if practicing good Medicine and great documentation helps protect you. Med Malpractice is all about the Big Payoff and the System is stacked against you.
Remember the last patient you see on the last day you practice can take everything from you, even after death. Since neither your attorney or the plaintiff's will have any incentive to end the case, remember legal fees constitute a huge expense. Malpractice insurance companies are obliged to pay fees on a 250k policy as much as a 6M one.
Your biggest financial risk however (and Adkisson will attest to this) is not medical malpractice...it is bad business deals, divorce, partnerships gone bad.
subrosa
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Re: asset protection for doctors

Post by subrosa »

Your biggest financial risk however (and Adkisson will attest to this) is not medical malpractice...it is bad business deals, divorce, partnerships gone bad.
Its almost certainly taxes. Something to keep in mind when comparing the costs of almost any type of planning.

For example ERISA protection is more psychologically comforting when thought of as a means of asset protection vs. the very rare lawsuit that achieves a personal judgement, but less comforting when thought of as a means of almost monopolistic exposure to one's single greatest and most powerful creditor.

I'm not one and in no way giving advice or in a position to do so but theoretically I'd think a question like "how to I best preserve my hard earned dollars from loss to taxes, creditors, bad deals, divorces, etc." is sort of like "how do I live the longest and healthiest life while maintaing a high level of enjoyment and quality".

For the latter I wouldn't get my answer from daytime TV or amazon.com, I'd work with an accomplished professional physician who is willing to put his/her signature behind recommendations specific to my own situation and goals, and expect sometimes the answers cost a little up front for a payoff down the road, and also that sometimes the answers change with new developments and research. Because of these changes my doctor might even want to see me a few times down the road, and this might cost me some significant time and effort and money down the line. In fact I'd expect this.

So I'd seek the same level of professional help in finding the best answer to the former question if I thought the answer was of any real importance to myself or my family.

These sorts of questions strike me as very different from simpler ones like "are FA worth the cost" or "does active management best passive".
Last edited by subrosa on Sat May 26, 2012 9:14 am, edited 1 time in total.
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letsgobobby
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Re: asset protection for doctors

Post by letsgobobby »

I suppose I'm spoiled because I'm an employed physician in a multi-specialty group. But I almost had a heart attack when I saw your low mal limits of $1/$3 million dollars. Mine is $5m/$30m and I'm a psychiatrist for pete's sake. I would definitely raise my limits (having said that, I don't know how much that would cost you).

Be a really nice guy, as others have said. That really does make a difference, most of the time.

Be a good doctor. Read a lot.

You need a lawyer. It's really really silly not to have done that. (OK, I haven't done it either. But I have that $5m/$30m coverage...)
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floatingdoc
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Re: asset protection for doctors

Post by floatingdoc »

I did find out that despite my solo 401k having only my wife and I as participants, it is fully protected in new york state, despite the 401k not meeting ERISA protections. This was a relief. Anyway, 1/3 M is a standard in malpractice coverage. I will have to call and find out whether the carrier recommends more. Actually, I have never heard many physicians carrying 5/30. Any one else can chime in with their limits to see if I am out of line here.

thanks.

Floatingdoc
dhodson
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Re: asset protection for doctors

Post by dhodson »

as i mentioned above, im 3/5...

many people actually carry 1/3. id bet this is actually the most common amount purchased. i personally dont know of many people with coverage larger than mine.


while i understand that case reports give people pause to order more tests, id like to see real study showing it does protect you. given the amount of data available, it should be something that could be actually proven if true.

while taxes are important, focusing exclusively on this will get some people to make horrible decisions like insurance products.
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6miths
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Re: asset protection for doctors

Post by 6miths »

adave wrote:Move to Texas. Med mal is basically dead here.
Or join us in the Great White North! :happy
'It ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so!' Mark Twain
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floatingdoc
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Re: asset protection for doctors

Post by floatingdoc »

bumping for responses as to how much other folks carry for policy limits. I always thought 1/3 was the norm and that was about it. Will be checking with carrier on tuesday. I certainly do not want to be the prettiest horse in the glue factory with the highest limits in a group of defendants, guess who they are going to focus on??
subrosa
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Re: asset protection for doctors

Post by subrosa »

Hi dhodson

Malpractice insurance simply is buying another form of those "horrible insurance products" the cost and use of which is very location, individual, state dependent.

Which is to say, (completely without actual data), I expect the number of doctors who will financially benefit from purchasing extra millions in malpractice coverage relative to their specialty is on par with the number who will benefit from using those extra funds to instead buy life insurance as an investment, if not less, when judged properly in the context of lifetime wealth preservation on an after tax basis.

I agree we all (physician and non-) have our preconceptions of what is likely and useful and scary. Most doctors (people) probably do not know how approach this on a holistic basis and, if they have enough worth protecting, should seek consultation with a reputable battle tested expert and simply do/buy what the expert recommends. I have no idea what insurance products, if any, that would include, but its probably good advice if it does.
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dhodson
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Re: asset protection for doctors

Post by dhodson »

Sorry I wasn't more clear.

I was talking permanent life insurance.

Some of these "experts" will try to convince u to purchase this for protection but it's a horrible idea.

I could go over this in detail if desired but no its not on par with mal practice limit changes. It sounds like you have been suckered on the tax angle. Dont feel bad if so, so was i and i should add that doesnt mean you should surrender a policy. Once purchased it frequently isnt smart to just surrender these things without carefully considering your options.

Just briefly however,
If you get sued early on then you will be forced to surrender the policy for a huge loss bc you dont have the amount necessary to put into the large premiums.
If you get sued later on when trying to take tax free loans from the policy then this isnt protected and now you are taking money out at a 8% loan, possibly collapsing the policy, and even a worse return if you were puting money into this monthly bc of the 5-7% finance charges not to mention the huge costs of commissions/fees. You need to keep in mind how the insurance company makes money on investing primarily in us bonds/treasuries and the extreme costs their products contain.

Bottom line with permanent life insurance for docs is dont buy it unless you need a permanent death benefit or if you really want one knowing that if you live a normal lifespan you probably are giving less even after taxes with current tax laws. You cant tax harvest, you dont get step up tax basis, you are forced into a situation where the bulk of the monetary benefit will only come when you die and not sooner if really desired/needed.

The tax angle and the protection angle dont work out financially. This doesnt even take into consideration that most people either by choice or bc of other factors dont keep a policy until death. Less than 20% of policies are in force at death and almost all the 80% lost money.
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