Physicians require quality asset protection to prevent having to forfeit their hard-earned assets to a creditor, which could be devastating for both doctors and their families. Asset-protection strategies include irrevocable trusts, retirement accounts, corporations, and limited liability companies (LLCs).
Estate planning and probate law attorney Charlie Davis and corporate and tax attorney Robin Pipkin, both partners at North Carolina-based Poyner Spruill, LLP, stress the importance of physicians getting ample insurance and thoughtfully structuring asset ownership to safeguard personal assets from potential creditor claims.
According to Davis and Pipkin, quality professional liability, property and casualty, and umbrella insurance coverage is the most crucial element and should be a physician’s initial consideration when attempting to protect assets. Without such protection, important personal assets like financial accounts and real estate run the risk of falling into a creditor’s grasp.
Consult Attorney for Advice on Your State’s Laws
After securing coverage in these areas, physicians may choose to speak with an attorney to discuss possibilities for additional asset protection, like limited liability companies and irrevocable trusts. Davis and Pipkin urge physicians not to pursue these additional asset protection strategies without legal guidance to ensure that doctors act within the confines of their state’s laws. For example, a significant number of states prohibit irrevocable trusts for the benefit of the trust grantor to give creditor protection to the grantor. However, some states permit domestic asset protection trusts to safeguard against potential future creditors.
Davis and Pipkin also stress the key role played by spouses when it comes to protecting assets. For instance, assets jointly-owned as “tenancy by entireties” property provide added safeguarding against creditors. Not to mention, a physician’s loved ones can benefit from assets “given away” to specific irrevocable trusts, when spouses are the primary beneficiary. Conversely, a former spouse could be a potential creditor. As such, Davis and Pipkin suggest that physicians who are engaged to be married consider a prenuptial agreement to safeguard their assets in case of divorce.
Once a physician is embroiled in a creditor problem, it may be too late to engage in strategizing asset-protection. Therefore, Davis and Pipkin urge physicians to have a solid asset protection plan before any problems arise, and they should do so with the assistance of a knowledgeable legal source.
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