Malpractice or other litigation: take steps to protect personal, practice assets.(Practice Trends)

MIAMI BEACH -- Effective strategies to protect physician wealth from malpractice or other litigation include diluting the value of your practice, forming corporations and limited partnerships, directing assets to offshore irrevocable trusts, and avoiding false asset transfers in anticipation of a lawsuit.

"We now call it wealth preservation, not asset protection. The analogy is 'undocumented immigrants' versus 'illegal aliens'--wealth preservation has a much better ring to it," Leslie A. Share, J.D., said at a symposium sponsored by the Florida Society of Dermatology and Dermatologic Surgery.

To protect a valuable practice. Mr. Share suggested physicians pledge accounts receivable to a bank or other lender to protect them and produce cash flow as necessary. To minimize potential tax penalties, he suggested placing some of the money withdrawn in a 529 plan. These education funds for children or grandchildren grow tax free over time, and "as long as you use the money for educational purposes, it's tax free and asset protected," said Mr. Share, a lawyer in Miami.

Another practice protection strategy is to employ an "arm's-length lease agreement" between personal and business real estate. "If you own real estate where you practice, don't include it in the same business as your practice." Mr. Share advised. Another tactic is to put liens on office furniture, fixtures, and equipment. "The key is to greatly dilute the value of valuable practice assets as a potential creditor target," he said.

Even how a physician obtains a car can make a difference. Mr. Share said. "Try to lease, not own, assets like a car," he explained. "Avoid obvious targets--like a Ferrari in the driveway or a yacht docked in backyard."

Malpractice insurance is a physician's first line of defense in terms of wealth preservation, Mr. Share said. He suggested that doctors hire their own counsel in the event of a ...