Covering Your Ass(ets): Wealth Protection for Clinicians

As if declining reimbursement rates and the prolonged recession aren’t damaging enough, many physicians and other healthcare professionals unwittingly leave their personal assets at risk, says Michael Gaeta, LAc, a practicing acupuncturist, herbalist & nutritionist, who also teaches business strategy to health professionals.

He says that many have no clue how vulnerable their assets may be. But a few simple, inexpensive steps can make a world of difference in terms of asset protection.

Mr. Gaeta, who will be a featured speaker at Holistic Primary Care’s upcoming Heal Thy Practice conference, says one of the biggest mistakes he sees is failure to segregate and encapsulate individual assets.

“A lot of people think that if they put everything in their spouse’s name, they’ve solved the problem of protecting assets from liability lawsuits. But what if your wife (or husband) gets in a car accident? Or runs into a liability situation in their own professions? Your house, your investment property, your stocks could all become targets for a plaintiff’s attorney taking action against your spouse,” he explained in an interview.

LLC’s: A Clinician’s Best Friend

Rather than putting things in a spouse’s name, it is far better to create separate, independent LLC’s (limited liability companies), and transfer ownership of property or investment portfolios into these. LLCs are inexpensive, require little maintenance, and create a durable firewall between you and your asset(s) that will be difficult for attorneys to penetrate.

GaetaCrop“Encapsulating assets makes you as a doctor a less appetizing target for a plaintiff’s attorney. I’m married to a former litigator, so I know how they think,” Mr. Gaeta says.

“The first thing that happens when a plaintiff’s attorney is considering a lawsuit is, they look at your assets and how you’re holding them. They assess how many assets are up for grabs and how they’re held. If you’re a plaintiff’s attorney and you see a house, an investment property, nice cars, art, etc, you start to get hungry. If those are owned by separate LLC’s, it’s a much less appetizing target.”

There’s very little downside to creating LLCs for investment protection. The set-up cost is about $500. While an LLC cannot generally buy a house or property—banks prefer to see residential property sales to individuals, not incorporated entities—it is fairly simple to transfer title on a home you’ve purchased.

“You can still pay the mortgage personally, but the title is held by the LLC. The bank doesn’t care, so long as they get paid every month.”

LLC’s can sell properties. All that is required is for the managing member(s) of the LLC to sign on behalf of the LLC.

“Its just paperwork,” says Gaeta.

Take Cover!

The other cornerstone of asset protection is liability insurance. Make sure you understand clearly what is—and is not—covered under your malpractice insurance, general business insurance, and any other insurance you carry.

“The goal is to make sure you have liability or general insurance that covers most situations, and have your assets held by LLCs or other corporate entities that protect you in case you do end up in a losing case, or running into a situation where you exceed the limits of your insurance, or get hit for something that’s excluded from your policy.”

Gaeta says that most malpractice insurers take the established statutes for scope of practice within your state as the basic boundary for what is and is not covered. That means you need to know your scope. MDs have the widest scope of any healthcare professional, but even so, many things may be explicitly or tacitly excluded. Modalities under the rubric of holistic/functional medicine may be excluded, and there is considerable state-by-state variation.

Beyond what’s included and excluded by your state, be aware that insurers have the right to create their own exclusions.

Teleconsultations, which are booming in all health care silos, are a major liability gray area. “Ideally, you want an insurance policy that explicitly states coverage for telehealth. You might assume that email consults and the like are within standard scope and therefore covered by your insurance, but that’s a big assumption. It’s reassuring to see it in writing.”

Time with an experienced malpractice attorney is a worthwhile investment, especially for young practitioners just starting out. “Sit down with the lawyer and go line by line, and read your insurance policy. Get a report about what it actually says. Get super-clear about your legal scope and what your insurance really covers.”

At Heal Thy Practice, Mr. Gaeta will present highlights from his popular Love, Serve & Succeed seminar series, and share many other tips for wealth creation and asset protection—think of it as preventive medicine for your financial life.


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