Most medical professionals face the double whammy of being perceived as high wage earners and, simultaneously, high risk for malpractice lawsuits.
Because of the risks and income potential, it is essential that medical professionals consider asset protection to shield their assets. In many cases, the settlement of a lawsuit or claim turns on the value of the assets available to a successful plaintiff. Today’s litigious society dictates a defendant’s ability to protect himself or herself from a high-dollar judgment or claim by maintaining a low cash value and protecting assets. Asset protection can take many forms. Generally, a good plan requires layering various components to decrease the risk of asset loss.
While each asset protection plan should include creating different components and the strategic layering of such, a standard asset protection plan starts with the following:
1. Limiting the assets held by the medical professional outside of an entity. Assets held in individual names or otherwise not properly protected should be minimized. Asset plans should utilize trusts, limited liability companies and limited partnerships to protect assets. Although contributing assets into an entity is important, knowing which assets to separate into different entities creates important protection.
2. Utilizing proper contracts to shift liability away from the assets. Entity formation to hold assets and shift the liability away from the assets is essential. However, if the entity holding the assets also has an obligation to protect others from a lawsuit or accepts legal obligations for acts of others, the protections provided by placing the assets into an entity can be destroyed.
3. Understanding that cash, brokerage accounts and other liquid funds should be treated as an asset. Liquid funds not contained in a protected account should be moved to a protected account or treated as an asset. A contingency attorney seeking to recover monetary damages will move quickly toward cash or assets easily turned into cash. Removing these assets from your individual name increases the difficulty in accessing these assets by a third party.
4. Maintaining the proper insurance and at the correct level. Although not necessarily part of the legal asset protection plan, insurance plays a vital role in any solid asset protection plan. Insurance policies must include a listing of all of the proper entities and include an acknowledgment by the insurance company recognizing responsibility for claims brought against each of the various entities. Failing to list each of the properly named entities on a policy may allow an insurance company to refuse coverage. Because an insurance policy is a contract, and the obligations of the insurance company are only those stated in the contract, the details contained within he policy are essential.
Too many times medical professionals fail to protect their assets and leave the assets at risk. While a properly executed plan requires time to create and proper implementation, the value in asset protection far exceeds such negatives.
James Rosenblatt has been President of Rosenblatt Law Firm and Chair of the transactional section of the firm since it opened in 2005. For the past 14 years, he has been providing legal and business consulting in the areas of asset protection, business, construction, contracts, employment, estate planning, mergers and acquisitions, oil and gas, real estate, and trademarks. For more information, call Rosenblatt Law Firm at 210-562-2900 or visit rosenblattlawfirm.com.