professional liability assest protection debate

[MSmentor018]

anyone read the acep-now throw away newspaper lately? the subject is being sued and asset protection. it has 1 lawyer segan MD/JD arguing for assets protection, then you have frank a MD/JD from EMP group arguing against doing it and it's just a waste of money for us.

what are you guys doing? scare tactics? what's the reality, anyone know?

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[The White Coat Investor]

I'm no attorney, but I've written about the subject a bit. The truth is that both of those guys are right. If you read both articles, you'll realize it isn't really a pro/con piece. The first 90% of asset protection is easy, cheap, and effective. What is that?

1) Get a pre-nup or better yet stay married. You are far more likely to lose your shirt to your spouse than to your patient.
2) Insure against catastrophe, especially liability. That means malpractice and a big personal umbrella policy.
3) Figure out what is protected in your state. Tort law is all state specific. But you may find that your state protects a significant chunk of your home equity, retirements accounts, annuities, and cash value insurance. For most docs, the best way to protect their money from creditors is also the best way to have a great retirement (max out the 401(k).)
4) Title your home properly. The phrase you want is tenants by the entirety. That way a suit against you can't take the house away since your spouse owns the whole thing also.
5) Exotic asset protection steps (foreign trusts, family limited partnerships etc) probably aren't necessary.

Seriously, that's 90% of asset protection.

 

[TooMuchResearch]

WhiteCoat: What is the appropriate alternative in states without tenancy by the entirety? My Googling isn't on the right track.

 

[The White Coat Investor]

WhiteCoat: What is the appropriate alternative in states without tenancy by the entirety? My Googling isn't on the right track.

You could put it in your spouse's name if your main concern is malpractice and tenants by the entirety is not an option. But keep in mind that won't help if you're both sued (or if just the spouse is sued.) Keep in mind the likelihood of having a malpractice suit go over your limits is pretty darn close to zero. You're far more likely to get divorced and lose the house to your spouse.

 

[The White Coat Investor]

Maybe that didn't answer your question. Other options are sole ownership, joint tenancy, tenancy in common, and joint tenancy with right of survivorship.

 

[Old_Mil]

I'm no attorney, but I've written about the subject a bit. The truth is that both of those guys are right. If you read both articles, you'll realize it isn't really a pro/con piece. The first 90% of asset protection is easy, cheap, and effective. What is that?

1) Get a pre-nup or better yet stay married. You are far more likely to lose your shirt to your spouse than to your patient.
2) Insure against catastrophe, especially liability. That means malpractice and a big personal umbrella policy.
3) Figure out what is protected in your state. Tort law is all state specific. But you may find that your state protects a significant chunk of your home equity, retirements accounts, annuities, and cash value insurance. For most docs, the best way to protect their money from creditors is also the best way to have a great retirement (max out the 401(k).)
4) Title your home properly. The phrase you want is tenants by the entirety. That way a suit against you can't take the house away since your spouse owns the whole thing also.
5) Exotic asset protection steps (foreign trusts, family limited partnerships etc) probably aren't necessary.

Seriously, that's 90% of asset protection.

Like all financial advice, this depends on the individual and how they choose to live life. One of my attendings in residency was in debt to his eyeballs, owned a big house, nice cars that he replaced frequently and a lot of life insurance. His plan was to work till he died. He was leveraged to the point that exotic asset protection steps were pointless. But for the individual who wants to live like a resident for a while, save and invest like a maniac, and get out early advanced asset protection steps may make a lot of sense.

Consider that the malpractice suits that advanced asset protection steps are designed to protect you against are far more likely to happen to you (multiple times) than a serious car accident for which you would carry an umbrella.

Is it in the Bounce backs book where Greg Henry says that Rosen was sued six times in his career...and he wrote the book! (correct me if my citation on that story is a little off...)

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[The White Coat Investor]

Like all financial advice, this depends on the individual and how they choose to live life. One of my attendings in residency was in debt to his eyeballs, owned a big house, nice cars that he replaced frequently and a lot of life insurance. His plan was to work till he died. He was leveraged to the point that exotic asset protection steps were pointless. But for the individual who wants to live like a resident for a while, save and invest like a maniac, and get out early advanced asset protection steps may make a lot of sense.

Consider that the malpractice suits that advanced asset protection steps are designed to protect you against are far more likely to happen to you (multiple times) than a serious car accident for which you would carry an umbrella.

Is it in the Bounce backs book where Greg Henry says that Rosen was sued six times in his career...and he wrote the book! (correct me if my citation on that story is a little off...)

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You're missing an important point here. How many times was Rosen successfully sued for an amount above his limits. That is the question. I bet the answer is zero. Perhaps not, which would explain why he is out testifying against other emergency physicians these days.

 

[Old_Mil]

I'm not really missing anything. You can't use a retrospectoscope to determine the need for insurance or asset protection on the front end because you don't know how many times you will be sued, for what, and what those judgements will be.

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[The White Coat Investor]

I'm not really missing anything. You can't use a retrospectoscope to determine the need for insurance or asset protection on the front end because you don't know how many times you will be sued, for what, and what those judgements will be.

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Obviously that's true, but how much time, money, and effort are you going to spend to protect yourself against something with a 0.001% chance of happening? I'm already running risk far bigger than that all the time in my life. I find doctors become paranoid about getting sued above their limits, and that causes them to do things that are not only expensive, but set them up to be victims of scams and bad investments. How many docs are sold whole life insurance because they're worried about getting sued above their limits?