If you are a physician, you either have been sued or will be sued. It's not so much a matter of if, but when. What can you do now to be sure your assets are protected?
First off, let's clarify the problem. Different types of assets are exposed to different types of loss for different reasons. So there's no one-size-fits-all solution here, and most physicians will benefit from using multiple asset protection strategies together. You could be facing loss of assets due to accusations of malpractice, but your assets may also be exposed for more common reasons - your spouse files for divorce, your teenager is in an at-fault car accident, or you face a lawsuit unrelated to your profession. Because of the variety of risks, you need to consider a variety of asset protection solutions.
Okay, this one is admittedly a no-brainer. In any malpractice lawsuit, insurance is the first line of defense. It is almost certain you are already carrying this type of insurance, so we won't spend any more time on it. (Except to say this: If you're not carrying malpractice insurance, fix that problem now.)
02/Personal Umbrella Insurance
Just like malpractice insurance covers professional liabilities, an umbrella policy covers personal liabilities. Not every threat to your assets is going to come from your job. The good news is that umbrella policies cost far less (typically <5%) than their malpractice counterparts.
03/Domestic and Foreign Asset Protection Trusts
Asset Protection Trusts are specific types of trusts that, if drafted properly, hold assets in ways that are unreachable by creditors. Not every state allows for the creation of a Domestic Asset Protection Trust, but, luckily for you, Oklahoma does. In Oklahoma, this type of trust is called the Oklahoma Family Wealth Preservation Trust. For additional privacy and asset protection, you may also consider offshore planning with a Foreign Asset Protection Trust.
04/Spousal Lifetime Access Trusts
The Spousal Lifetime Access Trust, or SLAT, transfers assets into a trust for the sole benefit of your spouse during your lifetime. The primary downside with this type of trust is that it provides no protection over those assets in the event of a divorce (because they "belong to" your spouse), so you need to consider the state of your relationship before using this strategy. However, it provides strong protection in any number of other scenarios that expose your assets to loss.
05/Family Limited Partnerships
Family Limited Partnerships work for a simple reason: a creditor can't own an interest in your business. If certain assets are transferred to a family partnership, where you remain in control as the general partner, then the value stays with the family even in the face of lawsuits arising from professional or personal liabilities.
06/Limited Liability Companies
If you own business interests apart from your medical practice or investment properties - such as residential or commercial rental interests - it is best to insulate these by holding them in a separate entity, such as a Limited Liability Company. This creates a "wall" that protects LLC assets from your personal liabilities, and also protects personal assets from LLC liabilities. It is a simple, relatively inexpensive option that provides a great deal of asset protection.
Lastly (at least, last in this list), you should take advantage of the protections afforded by specific types of investments. State and federal laws provide asset protection for certain types of property owned jointly with your spouse, money in 401(k)s and IRAs, and cash values in whole life insurance and annuities. These types of assets, in many cases, need not be owned in irrevocable trusts or family businesses in order to be protected.
Here's the stuff we always put at the end: If you want to know more, we would love to talk with you. Best part, the conversation about how it could benefit you doesn't cost anything. Call us at (918) 770-8940, send an email to firstname.lastname@example.org, or click HERE to schedule a free consultation with a Tallgrass attorney.
Disclaimer: Reading this blog post does not create an attorney-client relationship, and it is not formal legal advice. This is for information purposes only. It is always best to speak with an attorney about your questions, assets, concerns, and needs.