Asset protection: An ounce of prevention

Tags: wiewel, finance

By Brad Wiewel
The Wiewel Law Firm

Asset protection is something that many physicians, including family physicians, don’t focus on until they have been threatened with a malpractice lawsuit. I know, because I have had more than my share of telephone calls from frightened physician clients wanting to know if it is too late to do the planning I recommended when we met at my office to discuss their estate plans.

Unfortunately, the answer is, “It’s almost always too late.” You must plan to protect your assets from being taken before a claim against you is pending, expected, or threatened.

With that warning in mind, here is a number that may keep you awake at night: There are more than 100,000 lawyers in Texas. And while you may believe that recent changes in Texas law make you immune from lawsuits, you are wrong, because plenty of those attorneys are more than ready to take advantage of the legal loopholes available to their plaintiff clients. For example, recovery of damages, especially for loss of future earning capacity and other economic damages are not capped and can easily top millions of dollars. Adding to your potential risk is the fact that if you don’t believe you are at high risk for lawsuits, you may be poorly insured. Many Texas doctors are.

You should also be aware that in my experience doctors are even more in danger of getting sued by their own partners over practice-related issues than they are for being sued by their patients, their patients’ families, and so on, and malpractice insurance does not cover claims arising out of such lawsuits. And finally, you, like anyone else, are always at risk for being sued over such things as car wrecks, homes accidents, and even dog bites.

While there is literally nothing you can do to prevent a lawsuit, there are any number of relatively simple things you can do ahead of time, and some more complicated things too, that will go a long way toward sheltering your assets from seizure if a lawsuit results in a judgment against you. In other words, preventive medicine is an important concept in the law too.

First, purchase an umbrella liability policy. This kind of policy is sold in units of $1 million, and every physician should have one. The policy should protect your assets from most things outside your business and practice worlds, such as car wrecks and accidents in your home.

Second, increase your malpractice coverage and make sure you are with a solid carrier. I realize that malpractice insurance is not cheap, but it does two things: It pays for a very good lawyer to defend you if you are sued, and it can pay money to compensate someone you hurt.

Third, consider investing in assets that are already protected from seizure under the law. These include your homestead, retirement accounts, life insurance, and annuities.

Fourth, consider creating a Family Limited Partnership or Limited Liability Company to own your other, more valuable assets, like your stock portfolio, rental property, and farm, ranch, or lake house. For the most part, assets in either of these two entities cannot be seized to collect on a claim that is the result of malpractice. The same holds true if the claim is the result of an auto accident.

For those of you who want even more robust asset protection, a Nevada or Delaware “On-Shore” trust is an increasingly popular way to achieve a very high level of immunity from lawsuits. Assets in these trusts are generally safe from all claims, even those related to alimony and child support. And finally, going off-shore remains a viable option for those of you with very sizable estates and substantially larger risks.

Of course, it goes without saying that you should only work with a lawyer who is board certified in estate planning. This is a very complex area of the law with many unforeseen pitfalls. Doing your own asset protection planning or working with an attorney who “dabbles” in it can be disastrous.

Asset protection, just like certain medical procedures and medications, can seem expensive sometimes. But like so many things in life, it should be viewed as an investment, not an expense. Furthermore, the knowledge that you have comprehensive protection in place may be the best sleeping pill you can buy. Like they say, “an ounce of prevention is worth a pound of cure.”

Brad Wiewel is a board certified Texas estate planning attorney with The Wiewel Law Firm. Based in Austin, the firm assists clients with estate planning, asset protection planning, probate and trust administration, and business succession planning, among other things. Brad is the author of the Texas Asset Protection Handbook.

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