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.