The dos and don’ts of asset protection for doctors

By Jonathan Ford Hughes | Fact-checked by MDLinx staff
Published October 5, 2022

Key Takeaways

  • The idea of facing a malpractice suit may be daunting, but there are steps you can take to protect your assets.

  • Safe holdings include real estate and retirement funds.

  • Supplemental insurance can also boost your level of protection.

When it comes to asset protection, W. Ben Utley of Physician Family Financial Advisors says that it’s irrelevant what your specialty is, whether you’re a surgeon, whether you’re an employed physician, or own your own practice.

"There are two kinds of doctors. Those who have been sued, and those who will be sued."

W. Ben Utley

If you run the odds on any procedure you perform, drug you prescribe, or diagnosis you make, there will be a statistically predictable amount of bad outcomes and consequently, a malpractice suit. This has nothing to do with the doctor personally and everything to do with the imperfect nature of medicine.

With the high probability of facing a malpractice suit at some point in your career, the time to think about protecting your assets is now, before a patient sues.

“Afterward, the move might be interpreted as a way to delay a creditor,” Utley says. “A reasonable court of law will set those moves aside.”

The good news about asset protection

While the prospect of a lawsuit is terrifying, Utley says the good news is that most physicians already have the asset protection that they need. Malpractice insurance protects them up to a certain amount of damages, and most—if they’ve done their financial homework—will have their money in protected accounts. Examples of safe holdings include qualified retirement accounts like 401(k)s and equity in a primary residence. There are a few other things you can do to build layers of protection.

But first, a brief refresher. A few things need to happen to jeopardize your assets. To begin, a doctor must have a bad outcome. Second, the patient has to be willing to file a lawsuit. Third, the case has to go to court, and the doctor has to lose. Finally, the judge has to issue a verdict that exceeds the limit of their malpractice coverage.

If the patient is in a hurry to collect, it’s going to be difficult and time-consuming for them to come after your protected assets. If they’re willing to stick it out, it’s going to take a lot of legal wrangling and lawyer fees to pull it off. The strength or laxity of each state’s laws may hinder or help them.

The bad news about asset protection

Where most doctors get blindsided is when life outside of medical practice intervenes, Utley says. For example, their teenager injures somebody in a motor vehicle accident, the family dog bites someone in the park, or a worker falls at their home.

These factors require what Utley calls orthogonal asset protection.

“Let’s say a doctor is a Harvard-trained breast radiologist,” Utley says. “She’s the most sought-after physician in her field. She’s tucked away money into asset-protected corners. She’s adequately covered with malpractice insurance. But she’s married to a guy who has spent about a month learning to drive, and he severely maims someone behind the wheel. This is a major exposure. The plaintiff will come after his assets and joint assets through that risk exposure.”

To avoid situations such as this, Utley says doctors should have:

  • A personal umbrella insurance policy: This will protect against life’s non-malpractice-related mishaps. It’s inexpensive, Utley says, and half of the doctors who come to him don’t have one. 

  • Disability insurance: “As a physician, your greatest asset is your ability to earn an income,” Utley says. Out of 4 new clients who approach him, typically 1 has no disability insurance, 2 have adequate insurance, and 1 will think he or she is covered, but their policy is full of holes.

Other must-have coverage for improved asset protection is auto and homeowners insurance.

A word for the wise

If you’re seeking legal counsel to improve your asset protection, Utley suggests looking for a lawyer from a multi-specialty firm. Your best candidates will specialize in business law or estate planning. But beware of anyone who bills themself as an asset-protection attorney.

“Many of the people who call themselves asset protection experts are actually hucksters,” Utley says, and many are trying to push high-priced life insurance.

Some doctors also get too clever for their own good and start to look to offshore asset protection. But that generally isn’t a good idea, Utley says.

"If your creditors absolutely can’t get to the money, then you probably can’t get to the money."

W. Ben Utley

What this means for you

In all likelihood, you will face a lawsuit at some point in your career. The time to prepare for it is now, not after a suit has been filed.

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