Lawsuit Insulation

[interleukin2]

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Hello:
I recently graduated medical school and even though I was taught a great deal about medicine only once did an attending address the issue of malpractice, and it was kind of an aside discussion. My point is that as a medical student I felt quite insulated from an honest discussion about what impact our current litigious environment has on our practice of medicine. The specific question I would like to address in this thread is the use of various legal entities such as trusts, LLC, offshore account holdings. To offer some protection in addition to your malpractice insurance. Also please comment on when one should seriously think about talking to an attorney. For instance as I understand it most states require you to set up these instruments (trusts etc,) well in advance of any pending lawsuit against you otherwise if you try to set one up once a lawsuit is filed you may be charged with fraud. As I understand it some states require 3y buffer. I am not trolling or trying to incite animosity, I am genuinely curious about what us starting physicians can do now to protect ourselves in the future, I gave up waaaay to many weekend nights to loose it all to some overzealous ambulance chaser! Thank you very much!!

 

[clift]

The laws of each state are different, Many state have statutory protections of special classes of assets that can not be taken by your creditors. For example, several states have homestead laws, which protect all or part of your interest in your home from your creditors. Pension plans, insurance policies, and annuities and many other types of investments or assets are protected from creditors in many states. You would be wise to max out those special classes of assets in your state, before spending lots of money on elaborate trusts or corporations, that are expensive and difficult to maintain properly.

See entry below from previous thread on this subject.

First, understand your state laws. In my state your homestead, retirement, cash value life insurance policies, and educational funds (ie 529's) are exempt from creditors. Check your state laws. Therefore, in my case, it makes sense to "max out" all of these investments. It makes a lot of sense for a doctor to "put money into his home" for asset protection even though this may be ridiculous advice for 99% of the populace. You must remember that you are not "the populace".


The first part is a no brainer. After this it gets fun and creative. Many people adopt different strategies. Some of the popular ones include combinations of trusts, FLP's, and multiple corporate strategies (ie usage of ccorps and scorps in concert). Get a good advisor. PM me if you have specific questions. You can be more creative if you are not a W2 employee and actually own your practice.

Cash value life insurance is something to consider as well. There are pros and cons:
Cons: Very high insurance premium in any industry that is flooded with unscrupulous insurance agents

Pros: 100% protected in those with large assets and tax free growth. This is important for most of us who are all in the 33-35% bracket.


Going back to the LLC question, I agree with those who say that there is not much benefit to creating this structure if you are a W2 employee. Concerning asset protection, you can rest assured that a good lawyer can pierce one of these without even breaking a sweat.


Good luck........

 

[interleukin2]

thank you very much for the advice! and for taking the time to answer.