Doctors are at risk for being sued. They are targets for litigation. Sure, insurance provides a defense. But, it doesn’t take much imagination to see how a judgment can exceed policy limits.
And the risks go beyond professional liability.
How about a car accident? Slip and fall at your house? Worker on your roof falls off?
Asset protection plans help mitigate the risk. Insurance is still a dominant component of such plans. But, judicious structuring with the help of talented professionals can wall off some financial risk from your nest egg. Not every professional needs an expensive asset protection plan. But, depending upon how many assets you do have, you do need some plan. A failure to plan is a plan for failure.
The good news is some assets are already protected. In some states (Florida and Texas, for example), your homestead is protected from creditors. Federally, some retirement vehicle are protected as are some insurance policies.
Now to one asset protection plan, done on the cheap, that failed. Robert and Katalin Soley married in 1990. Robert deeded a property to his wife. The couple divorced. The property was sold for $170,000. Robert then wanted half of that asset (or is value) back.
In his affidavit to the court, Robert wrote: he made the transfer of the property to Katalin “with the specific understanding by both parties that the sole purpose of the transfer was to avoid [his] creditors and that Katalin * * * would deed the property back to [him] upon demand.”
In other words, the sole purpose of the property transfer was to cheat creditors out of money lawfully owed to them. The property was never intended as a gift to his wife. You can guess how a court reacted to this asset protection plan. The husband was skunked (in appellate court).
For many physicians, divorce is a higher probability risk than being sued for greater than policy limits. If you transfer all assets to your spouse to remove them from a creditor’s tentacles, you may solve one problem at the expense of another. Here, the husband was out $85k (half of what he likely would have been entitled to). But, had he transferred everything, he would have left the marriage with zip.
Asset protection plans are legal and viable, if set up and maintained properly. Choose a qualified, experienced professional to help you with such matters. I’m not sure if this book exists “Asset Protection for Dummies.” If so, steer clear.
BTW, I’ve written on this topic before, and one counterargument I heard was that asset protection plans may be ignored by courts in specific instances. That’s true. But the same can be said about many risk mitigation programs. Health insurance will not work in all instances. Professional liability will not work in all instances. Nor will flood insurance. You’re still better off with a plan than no plan.
What do you think? Share your comments below.
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It is illegal in most states to try to “shield assets” from the courts in cases where a judgment has occurred against the party with assets. Others have tried to deed property to their spouses, in both stable marriages and divorce or death of spouse. Courts almost universally reject such attempts.
I still believe that adequate insurance is the best protection for assets. You cannot ignore this issue even if retired. I live in Nevada.
Here in Nevada, if you are involved in ANY motor vehicle accident, even if you are not technically at fault, if you have alcohol in your system, the entire metric is changed. If there is an injury involved and you were drinking, you might very well be considered entirely liable.
This can affect you even if you are retired and no longer practice medicine. Anyone with an estate should have umbrella insurance beyond their regular policies. There is no substitute for it.
And if you are in a highly litigious state like NV, you really should NEVER drink and drive.
Michael M. Rosenblatt, DPM
Not sure – plaintiffs attorneys tend to go for the opportunity of maximum exposure at face value. They think deep pockets. The shallower the pockets the less they would claim. Same with med mal insurance. Thus do not own a house, get only car insurance as low as state law would allows! Insurance companies and their agents are in on that game , always trying to sell us big umbrella policies. I’m not buying it. Just increases temptation of frivolous legal action.
“The first thing we do, let’s kill all the lawyers.” –Shakespeare, Henry VI, part 2.
After 400 years, nothing has really changed, has it?