Medical Malpractice and Protecting Your Medical Practice

Medical Malpractice and Protecting Your Medical Practice

When it comes to medical malpractice, there is no one asset protection strategy or technique that will protect all of your assets.

As most physicians are aware,malpractice insurance costs are staggering, and they alone will not cover most physician liability claims.

Therefore, the starting point for any medical malpractice protection strategy is to first look at the physician’s personal financial statement to review the physician’s assets and how each asset is owned and titled.

First, let’s take a look at a few commonly used asset protection strategies, which may create more exposure than protection from medical malpractice liability.

Medical malpractice protection techniques

One of the most common medical malpractice protection techniques used by physicians is to transfer some or all of their personal assets to their spouse or other family members. Unfortunately, transfers to a spouse or family members may not protect the assets being transferred. First, there is no guarantee that a spouse or other family member who receives the physician-transferred property will always be without creditor claims. There will always be a risk that the spouse or other family member may be involved in an auto accident or be sued for personal and property injuries.

Physicians who transfer all of their property to their spouse or to other family members are simply shifting the risk of creditor claims and putting all of their eggs into someone else’s basket in the hope that the transferee basket is safer than their own. I tell my clients that no one knows what the world will look like tomorrow, in a month, or in a year. So transferring all of your assets to a spouse or to a family member is not good asset protection planning in the case of medical malpractice lawsuits.

Protection from medical malpractice

Many people are familiar with and use joint tenancy for ownership of their bank and brokerage accounts and for real estate. Under most state laws, the distinguishing feature of a joint tenancy is the right of survivorship. Upon the death of a co-owner, the remaining surviving co-owner(s) share the ownership of the property. The survivorship feature of joint tenancy can be a real benefit. But, using joint ownership as part of your medical malpractice protection plan may not be a good idea.

Here’s why: Jointly owned bank or brokerage accounts entitle the co-owners with the power and authority to liquidate and remove all of the assets from the joint owned bank account. This is true even if such a co-owner didn’t contribute any money or property toward the creation or the continuation of the joint account. Because a co-owner has the power and authority to liquidate the entire joint account, the creditors of such joint owner will inherit the joint owner’s ability to liquidate the account.

Therefore, while transferring property to a spouse or family member and making use of joint ownership is easy to do, such medical malpractice protection techniques are often not the best asset protection strategies. Ultimately, physicians seeking to reduce their exposure to medical malpractice claims would be best served by

  1. being proactive
  2. seeking the advice and counsel of a qualified asset protection attorney

Therefore, rather than transferring all of your assets to your spouse or family members or holding assets jointly with others, consider other options. We’ll discuss a variety of them over the next few weeks.

More on medical malpractice and asset protection

Next> Medical Malpractice Claims: Choosing the right type of business entity can be a crucial first step when designing your medical malpractice protection strategy

More> DAPTs: Learn more about forming a Domestic Asset Protection Trust

More> FAPTs: The ins and outs of Foreign Asset Protection Trusts

More> Understanding voluntary disclosure and offshore bank accounts as you protect your foreign assets

Back> Medical Malpractice Insurance: A simple primer to answer the question of whether to insure or not insure

About the Author: Steven Nofar is licensed in Michigan as an Attorney and Certified Public Accountant. Mr. Nofar practices primarily in the areas of estate and tax planning, business succession planning, asset protection, charitable gift planning, and tax controversies with federal, state and local taxing authorities. Mr. Nofar’s clients range from small to large business owners and span across the U.S., Europe, Asia, and the Middle East. If you need additional information or clarification related to this article, please contact Mr. Nofar at 248-335-5000 or at


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