Physician Protection

Physician Asset Protection: Shield Your Wealth from Lawsuits

Protect What You Have Worked Hard to Build

Physicians face high litigation risk. Learn layered asset protection strategies using retirement accounts, insurance, state-specific laws, and Section 7702.

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75%+

Physicians Facing Malpractice Claim by Retirement

Unlimited

ERISA 401(k) Creditor Protection

Varies

State-Specific Asset Protection Laws

$5M+

Recommended Umbrella Coverage

Quick Answer

Most physicians will face at least one malpractice claim by retirement - asset protection is essential
ERISA retirement accounts (401(k), 403(b)) receive virtually unlimited federal creditor protection
Insurance is the first line of defense: adequate malpractice limits plus umbrella coverage for non-medical liability
Asset protection must be implemented BEFORE any claim arises - transferring assets after is fraudulent conveyance
State laws vary dramatically: FL and TX offer unlimited homestead; know your state-specific protections

The Opportunity

Why This Matters for Physicians

Malpractice Reality for Physicians

Physicians face among the highest litigation risk of any profession. By retirement, most physicians will have faced at least one malpractice claim. High-risk specialties (OB/GYN, neurosurgery, orthopedics) face even greater exposure. Asset protection is not optional - it is essential.

State-Specific Asset Protection

Asset protection varies dramatically by state. Some states offer unlimited homestead exemptions (FL, TX), strong retirement account protection (most states), and favorable trust laws (NV, SD, DE). Understanding your state laws is foundational to any protection strategy.

Retirement Account Protection

ERISA-qualified plans (401(k), 403(b)) receive virtually unlimited federal creditor protection. Traditional and Roth IRAs have state-specific protection, often $1M+. Maximizing retirement accounts is both tax-efficient AND provides asset protection.

Section 7702 Creditor Protection

Life insurance and annuities receive varying degrees of creditor protection depending on state law. Many states protect cash value from creditors entirely. Section 7702 policies can provide tax-advantaged growth with potential asset protection benefits.

Implementation

Proven Strategies

Layered Asset Protection Strategy

Build protection in layers: adequate malpractice and umbrella insurance first, then maximize protected assets (retirement accounts, home equity in protected states, Section 7702), minimize exposed assets. Each layer adds protection; no single strategy is sufficient alone.

Best for: All physicians - layered protection is foundational regardless of specialty risk.

Example:

$3M malpractice + $5M umbrella + $2M in protected 401(k) + $500K home equity (FL homestead) + $1M Section 7702 cash value. Total protected: $11.5M+. Exposed taxable accounts: minimize.

State-Optimized Residency Planning

If you have flexibility, establish residency in asset protection-friendly states. Florida and Texas offer unlimited homestead exemption. Nevada, South Dakota, and Delaware offer favorable trust laws. Even without moving, domestic asset protection trusts in these states can provide benefits.

Best for: Physicians with residency flexibility or those considering practice relocation.

Example:

Physician relocates from NY (weak protection) to FL: unlimited homestead, strong IRA protection, favorable life insurance creditor protection. Same assets, dramatically better protected.

Business Entity Structuring

Properly structured business entities can provide liability shields. Medical practices as PLLCs or PCs may limit personal liability. Real estate in separate LLCs isolates risk. Never commingle personal and business assets. Maintain corporate formalities religiously.

Best for: Physicians with business interests, real estate investments, or practice ownership.

Example:

Practice as PLLC + rental property in separate LLC + personal assets protected by retirement accounts and homestead. Lawsuit against practice cannot reach personal assets or rental properties.

Avoid These Pitfalls

Common Mistakes

Waiting Until Lawsuit Threatened

Asset protection must be implemented BEFORE any claim arises. Transferring assets after a lawsuit is filed (or even threatened) can be deemed fraudulent conveyance. Courts can reverse transfers made with intent to defraud creditors. Plan proactively, not reactively.

Insufficient Insurance Coverage

Insurance is the first line of defense. Inadequate malpractice limits or no umbrella policy leaves personal assets exposed. $1M/$3M malpractice may be insufficient for high-risk specialties. Add umbrella coverage for non-medical liability.

Assuming All Assets Are Protected

Many physicians believe their assets are protected when they are not. Brokerage accounts, savings accounts, and real estate equity (in most states) are fully exposed to creditors. Know what IS and IS NOT protected in your state.

Questions

Common Questions

Here are the most common questions we receive about this topic.

Ask Your Question

ERISA-qualified plans (employer 401(k), 403(b)) receive virtually unlimited federal creditor protection. IRAs receive state-specific protection, typically $1M+ but varies by state. SEP-IRAs and SIMPLE IRAs often receive the same protection as traditional IRAs under state law.

Depends on specialty and state. High-risk specialties (OB/GYN, neurosurgery) may need $2M-$3M per occurrence with $5M+ aggregate. Lower-risk specialties may be adequately covered at $1M/$3M. Also consider umbrella coverage for non-medical liability.

Limited protection. Joint accounts offer no protection. Tenancy by entirety (available in some states) protects jointly-held property from individual creditors. Transfers to spouse after liability arises can be reversed. This is not a comprehensive strategy.

Possibly. States like Nevada, South Dakota, and Delaware allow self-settled trusts with creditor protection. However, their protection in other states courts is uncertain. They add complexity and cost. Best used as one layer in comprehensive planning, not a standalone solution.

Many states protect life insurance cash value from creditors, some completely. The protection level varies by state. Even in states with limited protection, Section 7702 provides tax-advantaged growth. Consult your state law for specific protections.

Ready to Protect Your Assets?

Every physician's risk profile is unique. Let us help you build comprehensive protection that shields your wealth from potential claims.

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