Insurance vs asset protection:
Because many physicians have witnessedthe impact of the litigationexplosion, there is a widespreadperception that professionalswith accumulated savings are easy targetsfor frivolous lawsuit claims. The outcomeof every case appears random,with unpredictable jury verdicts andastronomical damage awards. Manyinvestors are turning to asset protectionto minimize lawsuit risks and shield personalwealth. Is asset protection a reasonablealternative to insurance?
Protect Your Assets
Wall Street Journal
As the malpractice insurance crisiscontinues unabated in much of the country,more investors are implementingasset protection plans. In fact, asset protectionplanning is becoming as commontoday as wills and estate planning. Whileestate planning involves preservingassets and passing on property afterdeath, asset protection deals with theimmediate need to protect assets duringone's lifetime. The growing popularity ofasset protection was recently the subjectof a article.
The article cited a survey ofindividuals who had more than $1 millionin assets. In 2003, 35% of those surveyedhad some form of asset protection plan,compared with just 17% in 2000. Of thosewho did not have an asset protection planin place, 61% said they were now interestedin creating one. While a properlydesigned asset protection plan shouldeffectively protect your personal savings,investments, and medical practice assets(eg, accounts receivable), there are limitationsthat you need to be aware of.
Know the Facts
An asset protection plan will notaccomplish your goals if it's established todefeat someone who has a claim againstyou. Regardless of whether a lawsuit hasbeen filed, if the claim exists at the timeyou transfer property, you will be committinga fraudulent transfer. Every state prohibitstransfers that are made with theintent to defraud a creditor or which leaveyou unable to meet your obligations. Aplan that is established too late can be setaside by a court, leaving you with no protectionin place.
Physicians who choose not to insuregenerally hold their savings in a trust forthe purpose of paying litigation expensesif the need arises. The belief is that assetprotection will discourage any lawsuitbefore it begins. This is generally true, butnot always the case. While a successfulplaintiff may be unable to collect againstyour accumulated assets, they mayattempt to garnish or seize future incomeor collections. That threat may make thecase valuable to the plaintiff and forceyou to incur large defense costs.
The most conservative approach is tocombine whatever insurance coverageyou have with appropriate asset protectionplanning. Asset protection closesthe holes in your insurance coverage.Once established, it will be there in thefuture, regardless of the gyrations in theinsurance market. If you're unable toobtain insurance coverage right now andwant to continue operating your medicalpractice, an asset protection plan is arealistic alternative. Make sureyou're saving a sufficient amount in aprotected trust to meet future legalexpenses if litigation is unavoidable.
Robert J. Mintz, JD, is the authorof Asset Protection for Physiciansand High-Risk Business Owners.To receive a complimentary copyof the book call 800-223-4291 orvisit www.rjmintz.com.