The physician is not the average American—there are many factors that make them unique.The average American family earns less than$45,000 a year, while the average physician's income isconsiderably higher. Financial advice offered by radioand television stations, books, and magazines, and theInternet all have the average person in mind. For example,most Americans will never be sued because ofwork-related activities, unlike physicians who mustconstantly be aware of malpractice issues, so there is noneed for the general media to address protection fromcreditors and lawsuits.
Advice for a Broad Audience
What this means for you is that the financial andlegal advice you get from these venues is typically notappropriate for you. These advertisers or advisors arenot well versed in the financial needs of physicians, asphysicians have specific financial and insurance needs.One such need is shielding wealth from lawsuits againstyou, your partners, or your employees. In addition tothe medical malpractice risks, which may be covered inpart by insurance, you have other risks that are neveraddressed in medical school, residency, or fellowship—like business risks. You are not only a skilled specialist,but you may also be an employer, a leaseholder, or alandlord. And because of these additional responsibilities,you must deal with state and federal rules and regulations(eg, Medicare and HIPAA) that many non-physiciansare unaware of. In the medical field, theactions of others can directly affect your professionaland financial well-being. You have employees whoseactions can cause you lawsuits. You have partners whocan cause lawsuits. This makes your situation different.
Additional Steps to Take
As a result, you should be very wary of an advisorwho says that you should not consider organizingyour medical practice as a corporation. Though thecorporation does not protect your personal assetsfrom medical malpractice actions, it does protect youand your personal assets from both the medical andnonmedical legal actions of your partners or employees.There are also tax benefits that can be achievedthrough a corporation that cannot be realized by asole proprietor or general partnership.
Also, you should avoid owning assets in your ownname or jointly with your spouse. Although this is themost common ownership structure for real estate andbank accounts, as a physician, you have potential lawsuitrisk, probate fee liability, and estate tax risk. If youdon't want to lose assets to lawsuits or leave your childrenwith unnecessary probate fees or estate tax liabilities,you need to consider alternative ownership structures.Be sure to speak with a trustworthy financialplanner to discuss your options.
You owe it to yourself, your family, and your retirementto meet asset protection challenges by becomingmore educated about sophisticated techniques designedspecifically for successful doctors.
Christopher R. Jarvis, MBA, is a lecturer and author of WealthProtection, MD. He is also a cofounder of the Wealth ProtectionAlliance, a nationwide network of elite independent financial advisoryfirms whose goal is to help clients build and preserve theirwealth. Charles P. KinCannon, JD, LLM, is a certified wealth consultantwith the Heritage Institute, and provides sophisticated business planningto physicians around the country. Both authors welcome questions or commentsat 800-554-7233. For a 50% discount on Jarvis & Mandell's new book, WealthProtection, MD,or for an audio CD on Asset Protection, please call 800-554-7233or e-mail email@example.com.