I constantly come across articles and information trying to scare physicians into buying complex asset protection schemes like at this site.
I get calls periodically from physicians that attend medical conferences at which “asset protection specialists” detail expensive offshore trusts and “Nevada trusts” and “interlocking LLCs”. They want to know if they should be moving forward on these moves.
Asset protection is a vital part of financial planning for physicians. I learned this with my one lawsuit in the 1990s. Being faced with the potential loss of retirement and other savings definitely focuses on the mind.
It is vitally important to understand that most lawsuits (malpractice, auto liability, etc.) are at the state level. Therefore each state has different laws that govern both creditors and debtors rights. It is crucial to understand the laws in your particular state when trying best to protect your savings from creditors. For example, in Florida (and some other states), ownership of assets “as tenants by the entireties” can be an excellent and free way to protect against individual targeted lawsuits. Florida also offers excellent asset protection for one’s home. Other states may leave almost all assets open to creditors. As another example, the US Supreme court ruled several years ago that Federal protection from lawsuits did not extend to Inherited IRAs, as they were not considered the retirement plan for the person inheriting them. Some states (again, Florida) then passed specific legislation to provide asset protection for Inherited IRAs, but most did not. If you live in a state without such protection and expect to inherit a parent’s IRA, you should consider asking your parents to leave the IRA instead to a trust for your benefit.
In most cases, insurance is the first line of defense and every physician should have a large umbrella liability policy to cover non-malpractice judgements. Covering potential large malpractice judgements is more difficult, as obtaining a large malpractice insurance policy is both difficult and expensive.
The title under which you own property, especially your office and your practice, can be very important in some states, and not in others. Regardless of titling however, you will always be personally responsible for any malpractice or other action that injures others.
Many if not most of the “one size fits all” schemes I mentioned above do not work to produce good asset protection. This issue should be best discussed with a knowledgeable financial planner or even better, a good estate planning attorney in your state.