Physician Bankruptcy Filings On The Rise

Doctors are being pushed into bankruptcy with increasing frequency as reported in this CNN article. Surprisingly, bankruptcy attorneys have noted that malpractice judgments are not a direct cause of the increase in physician bankruptcy filings. The ever escalating price of malpractice premiums does, however, seem to be a factor.

Asset Protection Planning Can Actually Reduce the Cost of Operating a Medical Practice

As unlikely as it may seem, doctors can actually reduce the cost of operating their practices by simply spending the one-time cost of developing an asset protection plan. While that cost is significant (often north of $20,000), the plan serves twin purposes that will save physicians money in the long run. First, an asset protection plan will serve to protect your wealth and keep you at the investment helm. In comparison to tools like whole life insurance, asset protection is superior because the fees are straightforward, and there is never any sort of penalty or need to jump through hoops if you ever want to remove your cash from the plan (though few of my clients ever want or need to pull money out their plans).

Second, when doctors have asset protection, there is less of a need for malpractice insurance.

The Need for Malpractice Insurance is Inversely Proportional To The Existence of Asset Protection

Think about the reasons for carrying malpractice insurance. For one, it covers the cost of legal defense in the event that you’re ever sued. Malpractice insurance also provides plaintiffs with a pot of readily available money from which to draw in the event that they succeed in their malpractice claim. That’s a huge incentive . . . FOR SOMEONE TO SUE YOU!

I spoke with a seasoned malpractice defense attorney two weeks ago. He said something along the lines of this: “In 20 years of practice as a malpractice defense attorney, I’ve never seen a doctor without malpractice insurance get sued.” The inverse must be true as well: Only physicians with malpractice insurance are likely to get sued.

You can effectively protect your personal wealth through the use of an offshore asset protection trust coupled with a family limited liability company. You don’t need malpractice insurance for protection. What you might neet it for is to pay the cost of a legal defense. I always recommend at least a minimal amount of malpractice insurance, if only to cover the cost of legal fees in the even that you are ever the victim of a lawsuit.

Asset Protection Can Increase Your Profitability

Do the math. Reduced malpractice premiums over the course of your career can really add up to a huge savings, and with reductions in insurance reimbursements, patient cash outlays, and the ever increasing cost of doing business as a physician, asset protection may be just the cost savings that helps you achieve banner profits.