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Using Risk Management and Asset Protection To Reduce Malpractice Exposure

Friday, June 16, 2017   (0 Comments)
Posted by: Aly Boeckh
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All physicians and medspa owners, at one time or another, have worried about malpractice liability.  Physicians would be wise to acknowledge the potential liability they face and take proper steps to protect against it. This short article will lay out a few of the strategies for doing so.

1. Risk Management
The first and most obvious strategy to protect against malpractice liability is to reduce risk and practice the best medicine possible.  This begins with a dedication to being the best physician you can be and maintaining your ongoing knowledge through education and CME.

Beyond this medicine-centered approach, physicians would be well-served to incorporate non-specialty specific risk management techniques in their practice.  These include learning how best to communicate with patients, especially when dealing with difficult patients or bad outcomes.  This also includes how to handle protected health information (PHI) and even managing risks of communication technology, from blogs and websites, to texting and email.  Many of these techniques are covered in the latest seventh edition of our CME monograph, Risk Management for the Practicing Physician, nationally certified for up to 5.0 hours of Category I CME credit. (You can get a free hardcopy or ebook in the special offer following this article.)

2. Asset Protection
Regardless of how carefully one practices, mistakes will occur.  Moreover, sometimes bad outcomes will occur even when all best practices were followed – and occasionally bad outcomes can lead to potential liability even if the physician believe he or she “did nothing wrong.” Given this, many dermatologists have chosen to buttress their practice risk management with asset protection planning.

Asset protection planning has a simple goal: to position a client’s assets in such a way that makes it difficult, and in certain cases nearly impossible, for a potential future lawsuit plaintiff to have access to them.

If the goal for a physician is to feel more secure and sleep better at night knowing that they will not lose what they have worked hard to build – then asset protection planning is an important part of the solution.

Practice Asset Protection
While the priority of most physicians is to protect their personal assets, practice protection should not be overlooked.  What are the most important practice assets?  Certainly, your cash flow and income are most important.

The good news is that the tools that protect your cash flow also typically help you save on income taxes and build retirement wealth.  These include qualified retirement plans, such as defined benefit plans, 401(k)s and combination plans, non-qualified plans, captive insurance arrangements and more.

Other important practice assets include the practice real estate, if any, and valuable equipment.  If your practice has valuable real estate or equipment, you may want to separate these assets from the main practice, using limited liability companies (LLCs) to lease them back to the main practice entity. 

Personal Asset Protection
Personal asset protection encompasses shielding a physician’s home, retirement accounts, other investment accounts, second home or rental real estate and valuable personal property.

We typically recommend leveraging your state’s exempt assets as a priority, because (1) they enjoy the highest level of protection and (2) they involve no legal fees, state fees, accounting fees or gifting programs.   In other words, you can own the exempt asset outright in your name, have access to any values and still have it 100 percent protected from lawsuits against you.

Each state law has assets that are absolutely exempt from creditor claims. Many states provide exemptions for qualified retirement plans and IRAs, cash within life insurance policies, annuities, and primary homes. Make sure you seek an expert on this to find out the exemptions in your state.

Beyond exempt assets, basic asset protection tools like family limited partnerships (FLPs) limited liability companies (LLCs), and certain types of trusts should be used.

FLPs and LLCs will provide good asset protection against future lawsuits, allow for maintenance of control by you (the client), and can provide estate and income tax benefits in certain situations.  For these reasons, we often call FLPs and LLCs the “building blocks” of a basic asset protection plan.  Trusts can also play an important role in asset protection planning – if they are irrevocable.

Obviously, for all these legal tools, their asset protection benefits are reliant on proper drafting of the documentation, proper maintenance, respect for formalities and proper ownership arrangements.  If all these are in place, the physician can enjoy solid asset protection for a relatively low cost.

Conclusion
The practice of medicine in any specialty has inherent lawsuit risks, primarily from medical malpractice.  Risk management and asset protection planning go hand in hand to help physicians reduce their risk of liability and protect them in case liability does occur.

SPECIAL OFFERS:  To receive a free hardcopy of Wealth Protection Planning for Dermatologists or For Doctors Only: A Guide to Working Less and Building More, please call 877-656-4362. Visit www.ojmbookstore.com and enter promotional code AMSPA for a free ebook download of these books for your Kindle or iPad.

David B. Mandell, JD, MBA is an attorney and principal of the wealth management firm OJM Group www.ojmgroup.com. He has authored more than a dozen books for physicians, including Wealth Protection Planning for Dermatologists and For Doctors Only: A Guide to Working Less and Building More and can be reached at 877.656.4362 or mandell@ojmgroup.com.

Disclosure:
OJM Group, LLC. (“OJM”) is an SEC registered investment adviser with its principal place of business in the State of Ohio.  OJM and its representatives are in compliance with the current notice filing and registration requirements imposed upon registered investment advisers by those states in which OJM maintains clients.  OJM may only transact business in those states in which it is registered, or qualifies for an exemption or exclusion from registration requirements.  For information pertaining to the registration status of OJM, please contact OJM or refer to the Investment Adviser Public Disclosure web site www.adviserinfo.sec.gov.

For additional information about OJM, including fees and services, send for our disclosure brochure as set forth on Form ADV using the contact information herein.  Please read the disclosure statement carefully before you invest or send money.

This article contains general information that is not suitable for everyone.  The information contained herein should not be construed as personalized legal or tax advice.   There is no guarantee that the views and opinions expressed in this article will be appropriate for your particular circumstances.  Tax law changes frequently, accordingly information presented herein is subject to change without notice.  You should seek professional tax and legal advice before implementing any strategy discussed herein.



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