This article in our “Asset Protection Success Stories” series focuses on a common business operated by our client base: a medical practice.
Owning a Medical Practice
Harry and Wilma Johnson (names changed for confidentiality) have been our clients for many years. Wilma operates an ob-gyn practice and Harry is a professional in an unrelated field. Concerned about Wilma’s liability and how it would affect their combined financial future, the Johnsons established an offshore trust and funded it with their savings and investments. The few assets remaining in the U.S. were owned by the couple as “tenants by the entireties,” meaning that they were only available to satisfy claims against the Johnsons if they were both liable. To prevent such claims from arising, Harry deliberately had no ownership or role in his wife’s medical practice, and Wilma chose to operate without medical insurance, which she was legally and ethically permitted to do under her state’s medical regulations.
Operating Without Insurance
While only a few states permit doctors to operate without medical malpractice insurance, when possible, doctors should consider reducing or cancelling the insurance. Insurance payouts are another asset. Even with asset protection planning, the existence of an insurance policy can attract frivolous litigation.
The Johnsons’ decision to operate without insurance was tactical, as they explained:
“The nature of the ob-gyn practice means that people always sue, even when there is no fault by the medical professional. No insurance means no asset to recover.”
Wilma is not the only ob-gyn who chooses to practice without insurance. Since the early 2000s, the medical profession has seen a liability insurance premium crisis in certain high-risk fields—and obstetrics and gynecology are two such fields. The mid 2000s saw pregnant women in some states scrambling to find obstetricians who would accept new patients, as the number of professionals leaving the field skyrocketed. In order to get coverage, ob-gyns were paying insurance premiums in excess of $200,000 per doctor, per year, which bankrupted many practices. Many doctors have since turned to offshore asset protection planning as a significantly lower-cost alternative to protect their financial futures.
The Lawsuits and Claims
Over the past decade, Wilma has been sued “at least six times,” and according to her, “That doesn’t take into account all the times that an attorney requested medical records and began probing our financial condition and assets.”
So what happened to these suits?
“No case was pursued successfully. There’s no way to determine why they ultimately decided not to proceed. We made it clear that we would not settle and it would be an expensive case for them. When they checked and saw that we had no attachable assets, everything was offshore or TBE, and there was no insurance policy, the cases were all dropped. The plaintiffs’ lawyers seemed to have decided it wasn’t worth the work. One of the reasons, and probably the primary reason, was the lack of available [unprotected] assets to attach.”
We asked Harry what value he received from the asset protection planning:
“Whatever the expense to put the money in a safe locale has been more than worth it. Not just because of the financial safety, but also because of the psychological benefits. The terror faced by a doctor in an ongoing lawsuit is immense. The alleviation of anxiety and stress alone was worth the money.”
Harry’s analysis is spot on. We often find that effective asset protection planning pays for itself before the first day in court. When faced with the impossibility of collection, and especially in medical malpractice cases where the plaintiff’s lawyers are often represented by attorneys working on contingency fees, the creditors will often walk away. With respect to the Johnsons, the planning not only protected their assets, but reduced the amount they spent defending frivolous claims.