1. Form a Professional Corporation
Asset protection is critical for physicians who want to safeguard their financial future. One way to protect against business liability is to form a Professional Corporation. Although Professional Corporations do not provide professional liability asset protection, they can protect against liability from employees and other business-related issues.
For example, a group of physicians who owned an unincorporated medical practice were sued for an accident caused by an employee picking up lunch. The court upheld a $2.1 million judgment against the physicians. If the business had been incorporated, the corporation could have shielded the doctors from liability stemming from their employee’s actions.
If you practice in multiple locations, it is advisable to divide your medical practices into separate corporations. This way, if someone files a lawsuit against one location, it will not directly affect the other locations, allowing you to separate liability.
Another recommended measure is to establish a separate company, such as an LLC, to hold medical equipment. Your professional corporations can lease the equipment from the LLC. This way, in the event of a lawsuit, there will be fewer assets available for the plaintiff to seize. By implementing these measures, physicians can better protect their assets and financial future.
2. Form an Asset Protection Trust
One of the most effective means of safeguarding your assets is to establish an Asset Protection Trust. This type of trust offers the highest level of protection against legal judgments and can help shield your financial assets from potential lawsuits. By placing your assets in the trust, they become legally separate from you as an individual, providing an extra layer of security.
For the strongest level of protection, it’s advisable to set up an international asset protection trust. This is because local judges have jurisdiction over assets held in the USA, making them vulnerable to court orders. Offshore trustees, however, are not subject to such orders.
3. Transfer Risky Assets to Separate LLCs
To minimize legal liability, physicians can transfer assets that have the potential to cause harm or injury, such as a commercial building, boat, or rental property, to separate limited liability companies (LLCs). These LLCs should all be owned by a Family Limited Partnership to ensure maximum protection. Investment accounts, which are unlikely to cause physical harm, can be safely held within the Family Limited Partnership.
Limited liability companies offer protection in two ways: they shield the owners, or members, from lawsuits against the business, and they protect the assets inside from judgments against individual members. The law can prevent a creditor from seizing an individual’s ownership in the LLC and make it difficult to access the assets inside.
Three states, Delaware, Nevada, and Wyoming, offer asset protection to single-member LLCs. Wyoming is often preferred due to its low annual renewal fees. If a physician lives outside these states, establishing a Wyoming LLC and filing foreign qualification papers allows for doing business in the desired state.GOT QUESTIONS… JUST CLICK HERE!
4. Protecting Your Liquid and Real Estate Assets
To protect your liquid assets, like investment accounts, it’s best to hold them in a separate entity such as a Family Limited Partnership. This ensures that they are not mixed with potentially risky assets like income properties or vehicles, which should be held in separate LLCs. The goal is to avoid cross-contamination of legal liability. For added privacy and protection, some states offer enhanced privacy measures like the Wyoming office program, which provides a Wyoming address and shared telephone number. Nominee service can also be used to help shield your association with the company from public records. By making it harder for contingent fee attorneys to find information on you, they may be less likely to pursue a case against you. Remember, the key is to keep safe assets separate from dangerous ones, and take advantage of legal structures and privacy measures to safeguard your assets.
5. Securing Your Home Ownership and Equity
Asset protection is crucial for medical professionals, especially when it comes to protecting their personal residence, which is often their most valuable possession. To achieve this, a land trust can be set up to maintain privacy of ownership by transferring ownership into the trust without making it public. This can be done without permission from a mortgage lender as long as the property has four or fewer dwelling units. Additionally, equity stripping can be done by setting up a privately owned LLC and recording home equity lines of credit against the home and other real estate. The HELOCs are then payable to the LLC. In the event of a potential lawsuit, an offshore institution can buy the mortgage and place the proceeds into an offshore trust, effectively stripping the equity from domestic real estate. This provides a financial statement that can be presented to a judge to show that a third party has purchased the loan.
6. Protection of Assets Through Offshore Strategies
For physicians looking to protect their assets, offshore asset protection can be an effective tool. By converting real estate and bank accounts into liquid assets and placing them outside of the jurisdiction of local courts, physicians can shield themselves from court orders requiring them to relinquish their property or funds. This strategy effectively prevents creditors or other legal adversaries from seizing their financial resources, allowing physicians to retain control of them.