Most physicians will face a lawsuit at some point in their careers. Thousands of them are filed every year. According to a Medscape report from 2017, 87 percent of physicians say that they were surprised by their lawsuit. When a lawsuit comes, it will likely be unexpected. You should prepare for it now. A physician who takes the right steps to protect their assets can avoid some of the serious asset protection mistakes that so many others make. Those mistakes include:
1. Inadequate Umbrella Liability Insurance
No physician should be without a personal liability umbrella insurance policy. A personal umbrella policy will not be sufficient to provide protection from claims related to malpractice or data breaches. A physician should have a policy that provides no less than seven-figure coverage. Keep in mind that a common error is to cover only the value of assets. The value of assets and the amount of a claim are two different things. It is important to cover risk exposure, not assets.
2. Not working on Asset Protection Soon Enough
Some physicians make the mistake of waiting to get sued before making an asset protection plan. The problem is that waiting until a claim has been filed to protect assets means that you run the risk of committing a fraudulent transfer. A fraudulent transfer is an attempt by a debtor to keep an asset away from a creditor with a valid claim.
3. Failing to Title Property Correctly
When one spouse has greater risk exposure, they may be able to protect their assets by transferring the title over to their partner. Another option is to use a transmutation agreement to partition community property and make it separate properties. Because Texas is a community property state, debts incurred by either spouse can be satisfied with community property. Correct titling can shield some assets. Obviously, the effectiveness of this method depends on the strength of the marriage.
If you are a physician and want to learn more about asset protection, contact us today.