Asset Protection for doctors that focuses solely on their fear of a medial malpractice claim is ineffective and incomplete. Understanding all the legal risks doctors face, both personal and professional, is key to any professionally drafted plan to preserve your wealth.
In recent articles we’ve discussed the single greatest asset protection mistake most doctors and their advisors make as well the failures of do it yourself asset protection planning based on bad advice, or more commonly, no advice at all. Another common fatal flaw of asset protection planning by doctors in particular is failing to look at yourself as the three dimensional individuals you are. You are more than “just” a doctor. Just a few of the masks you may wear you often include you being a business owner, an entrepreneur, an executive, a parent, a spouse, an investor, a compliance officer, a board member, a landlord, and many other things to both yourself and others.
A continued failure to look beyond your medical malpractice risk will leave you exposed to the majority of the exposures that could adversely affect your wealth and your future. The following is just a partial list of the risk factors that I help identify and proactively manage for physician clients across the U.S. As you can see, they are not exotic, and apply to most readers.
Asset Protection Self-Exam Part One: What Are All Your Risks?
1. Do you have professional liability? This could be for any professional service your render including traditional medical malpractice risk.
2. Do you own (or lease) a home and/or drive a vehicle? You have significant liability for both, including the actions of your family members, guests, and invitees.
3. Do you have employees? Employee related liability, including both lawsuits against you and your practice by employees and the vicarious liability you assume for their interactions with each other and the public are both statistically likely and dangerous in terms of awards. This risk is heightened for those of you that have domestic employees like nannies and housekeepers and at least triple if you pay them cash, under the table.
4. Do you have “Directors and Officers” liability? This could be for an executive role you hold in your practice like CMO, president, secretary, medical director or treasurer, etc. as well as for your service as an officer or board member for a school, foundation, or corporate board.
5. Do you own investment real-estate? This valuable income-producing asset also gives you significant liability for the tenants and their guests and invitees, whether commercial or residential. Holding such assets in your own name is almost always the wrong move.
6. Do you have children, spouses, and other family members whose acts and omissions you may be both legally and financially responsible for? This liability may be of the traditional variety or may refer to cases where you as a higher-earning professional end up taking care of a variety of expenses for others including parents and adult children in some cases.
7. Do you have a legal duty to protect the medical, identifying and financial data of others? As a medical professional, you often have all three and are responsible for the acts and omissions of all your employees if you own or lead a practice.
8. Do you have significant financial liabilities for things like personal guarantees on real estate, business loans, taxes, fixed personal and business overhead? Have you made specific legal and financial representations that others have relied upon in a business context?
9. Are you the sole or primary breadwinner for your family?
10. Do you have partners for whom you may have vicarious liabilities either in a medical practice or some other business venture? Are you the “promoter” or an authority holder in a business venture with other investors?
11. Do you engage in hobbies/activities that carry significant liability like flying a plane, owning or using a boat or other recreational vehicles or have an “attractive nuisance” that you and others use like a cabin, beach or lake house?
As you can see from these examples, the idea that all you need is a corporation and an umbrella policy to protect your assets is laughable and probably malpractice if advice from a professional. Review your individual risk factors today and join us again as we address how to manage each one of these risks in our next discussions.