Asset Protection for Doctors

Posted by Digital_Zone on March 17th, 2023

According to the U.S. Department of Justice, approximately one-half of all medical malpractice lawsuits are filed against surgeons,

[1] even though surgeons represent 14.5% of all practicing physicians.

[2] Surgeons, particularly plastic surgeons, are perceived by plaintiffs'attorneys as desirable litigation targets because they earn on a nationwide average double what general practitioners earn.

[3] Higher earnings result in greater wealth, and plastic surgeons find themselves facing numerous malpractice lawsuits. A large proportion of those lawsuits are frivolous (a plaintiff succeeds in only 1 out of each and every 4 medical malpractice lawsuits),

[4] but given the sheer amount of lawsuits filed surgeons are justifiably concerned about dr. hadden lawsuit which could exceed their insurance coverage or that may possibly not be covered by malpractice insurance.

Asset protection is a subject of law that relates to structuring asset and business ownership to produce it either impossible or at the very least extremely expensive for a plaintiff to reach the assets of a defendant. In case a doctor's personal assets are impossible or too difficult to gather against, a plaintiff's attorney will either not file the lawsuit in the first place, or is a much more ready to settle on terms favorable to the doctor.

Asset protection does not deal with secrecy or hiding assets because a sensible and determined creditor can be in a position to unearth hidden assets. A properly structured asset protection plan would utilize commonly used structures such as trusts and limited liability companies in a fashion that could legally, ethically and effectively shield a doctor's assets from any lawsuit and any creditor. A doctor implementing an asset protection plan will be able to sleep soundly, comprehending that whether he's hit with a malpractice claim or is involved in an auto accident, his assets is going to be safe and unreachable.

Once the plaintiff obtains a legal judgment against a doctor in a malpractice lawsuit, the plaintiff becomes a creditor of a doctor, and a doctor becomes a debtor. The plaintiff is now able to utilize the judgment to gather and attach just about any and every personal and business asset of the doctor. Consequently, the focus of all asset protection planning is to get rid of the debtor-doctor from legal ownership of his assets, while retaining the doctor's control over and beneficial enjoyment of the assets.

There's no “magic bullet” asset protection strategy. With regards to the assets owned by a doctor, the aggressiveness of the plaintiff and certain other factors different structures is going to be used to safeguard a doctor's assets. The timing of the planning is essential as well. While it is definitely possible to engage in asset protection planning, even after case has been filed, the planning is a lot more efficient and simpler when implemented before a malpractice claim arises.

Personal Residence

No asset is more vital that you shield from creditor claims than a personal residence. Personal residences represent the bulk of many people's fortunes, and have great sentimental value.

Creditors don't pursue the residence itself, but the equity in the residence that can be converted into money by way of a foreclosure sale of the residence. There are two equity stripping techniques.

Along with stripping out the equity, it is also possible to safeguard the residence by transferring ownership but retaining control and beneficial enjoyment. This can be carried out in numerous ways.

An option to an overall sale could be the sale and leaseback of the residence to an agreeable third-party on a deferred installment note. This allows a doctor to transfer the ownership of the residence and never having to move out. This structure works only as long as a doctor can establish the legitimacy and the arm's-length nature of the sale.

Certain state statutes require LLCs or limited partnerships to truly have a business purpose, and there's no business purpose in holding an individual residence in a legal entity. Other downsides may include the increasing loss of the 0,000 gain exclusion on the sale of the house, the increasing loss of the homestead exemption, and the triggering of the due for sale clause in the mortgage.

Rental Real Estate and Other Non-Liquid Investments

Some of the techniques discussed above may be used to safeguard rental property, businesses, intellectual property, collectibles and other valuable assets. These assets might be transferred into irrevocable trusts, sold for money or on installment basis or encumbered. However, for assets other than a personal residence there's a much better and simpler way to achieve as much or more protection: an LLC or a limited partnership.

As a functional matter, LLCs and limited partnerships produce a formidable obstacle to the creditor's collection efforts and usually force the creditor to drop his collection efforts or even to settle. These entities should be considered by doctors for many valuable assets with the exception of their personal residence, and, as discussed below, liquid assets.

Liquid Assets

Liquid assets might be protected through lots of the techniques described above, including LLCs, limited partnerships and irrevocable trusts. Along with these techniques, liquid assets may also be protected with a foreign trust.

These foreign countries erect the following obstacles in the plaintiff's path:

(1) They will not recognize a legal judgment from some other country, like the U.S. This means that a malpractice judgment obtained against a doctor in the U.S. becomes useless to the plaintiff.

(2) As the plaintiff's attorney isn't licensed to practice law for the reason that foreign country he will have to hire local attorneys to litigate for him, which really is a extremely expensive proposition.

Over the years foreign trusts are becoming a well liked planning technique for many doctors and other debtors. These structures are perfectly legal, tax neutral and extremely effective in protecting assets from lawsuits.

It ought to be noted that many debtors believe that only moving money to an offshore bank-account will serve as sufficient protection from creditors. As the plaintiff could have an arduous time enforcing his judgment in a foreign country and levying on a foreign bank-account, the doctor-debtor won't ever have trouble withdrawing the cash if the account is directly in the doctor's name. Consequently, the plaintiff may petition the court to direct the debtor to withdraw the cash from the foreign account and pay it over to the plaintiff. With a foreign trust that will never be described as a problem, because a doctor technically does not own the assets of the trust.