Professional Liability: How Do You Protect Yourselves?
Is Professional Liability Insurance Enough?
Professional liability insurance is not enough to protect your assets from liabilities which arise in your work environment. In today's professional liability insurance market, it is more important than ever to explore additional options to protect your assets. I recommend that health care professionals approach asset protection as if they do not have any professional liability coverage.
Asset protection strategies are designed to either protect an asset from a creditor or make the asset less attractive to a creditor. Asset protection planning should begin with consideration of the following three strategies:
| 1. |
Retitle assets into your spouses name. This is a very simple and effective strategy for families in which only one spouse has professional liability and all assets are marital property. If both spouses are professionals, we look at which spouse has less professional risk (i.e. pediatrician vs. neurosurgoen). |
| 2. |
Maximize your investment in assets which creditors cannot reach. These assets include life insurance, IRA's, annuities and qualified retirement plans. The main problem with this strategy is that you lose control of the assets. |
| 3. |
Contribute assets into a limited liability company. Transferring assets into a limited liability company (LLC) or limited partnership does not protect the assets from creditors. However, it does make the asset less attractive to a creditor because the interest in the company is not transferable and does not provide the creditor with control of the company. Holding assets in an LLC will make it more likely that the creditor will not go after the assets held by the company or will settle for less than full value on the claim. |
These strategies will work to protect the asset or make the asset less attractive to creditors as long as the asset is transferred before a liability arises. Asset protection strategies should be implemented before you are served with a malpractice lawsuit. The transfer of an asset after a liability arises will likely be considered to be a fraudulent transfer.
SMR&S is experienced in developing asset protection strategies and estate planning for professionals in a cost-effective way. For more information, contact Orly Rumberg at (513)579-1414.
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