Protect Your Assets
Having a plan has become a necessity.
BY JEFFREY D. WEINSTOCK, ESQ., AND CHRISTOPHER D. VASALLO, ESQ.

Because physicians can accumulate substantial wealth throughout their years in practice, they have become targets for lawsuits on a personal, as well as a professional level. In today's litigious society, these physicians -- as well as their spouses -- are susceptible to creditor and liability claims. As such, basic asset protection has become an absolute necessity, not merely a second thought. In this column, we'll explain some asset protection strategies that will allow you to sleep easier.

Potential liabilities include malpractice, negligent hiring and vicarious liability (responsibility for the acts of others, including any persons you employ).

Depending on where you reside, you and your spouse could be responsible for anyone who operates your car negligently and harms another. You might also be responsible for any injury that occurs on your property, also known as premises liability. Potential claimant and creditor causes of action are too numerous to note, but should be contemplated when consulting with your attorney.

With liability and creditor concerns on everyone's mind these days, here are a few basic asset protection strategies that you can implement today, depending on your state:

Homestead exemptions. Some states, like Florida, provide excellent homestead exemptions, which generally provide that all or some of the equity within the homestead (as defined by your state law) isn't subject to creditor claims, though there are generally certain exemptions, such as tax and contractor liens.

Sometimes, there are caps on the exemption amounts and limitations on the extent of protection. If your state has this type of law, equity in your house may be safe from the reach of creditors. Therefore, paying your mortgage down or investing substantial sums in a house often provides protection.

Incorporate your practice. If you're practicing through a general partnership arrangement, you can be personally responsible for debts or claims for which you or your partners are charged. Using a corporation, absent some exceptions such as fraudulent conveyance, will limit your liability to the assets held by the corporation.

Buy insurance. General liability and umbrella policies are often the most cost-efficient way to protect your assets, depending on your potential liability exposure. Life insurance held by a trust or otherwise is often exempt from creditor claims.

Start a college savings plan. Many college savings plans are exempt from creditor claims.

Invest in a retirement plan. Many retirement plans are exempt from creditor claims.

Use disclaimers and indemnification agreements. Such agreements between you and your partners, and any business ventures that you might enter into, will limit your potential liability.

Don't lend cars or other potentially dangerous possessions that you own. If your vehicle title is in both your and your spouse's names, you should ensure that title is held by only the party who actually uses the car. Again, any parties who could be considered beneficial owners could be responsible for another's negligent acts.

Consult Your Attorney

The basic asset protection strategies outlined above differ somewhat from state to state but most of these plans are effective, and probably have low transactional costs to implement. Your attorney can more fully explain individual asset protection and limitations.

Christopher D. Vasallo, JD, LLM Taxation, is a tax attorney and partner at the law firm of Trescott Drucker Vasallo, PL, in Coral Gables, Fla. He can be reached by phone at (305) 446-3117, or by e-mail at vasalloc@yahoo.com. Jeffrey D. Weinstock, Esq., is a corporate/transactional attorney with the Boca Raton, Fla., law office of Buckingham, Doolittle & Burroughs, LLP. He can be reached at (561) 241-0414 or via e-mail at jweinstock@bdblaw.com. This article provides a general summary of legal issues and should not be construed as personal legal advice. Application of these principles varies according to individual situations.