Your Booster Shot
Preservation of a Physician’s Financial Well Being
Asset protection recognizes that preservation of a physician’s financial well being during his or her life is at least as important (and in the view of many, more important) than preserving and protecting it after death. Wills and estate planning techniques can accomplish the proper transfer of your assets after death. But, financial uncertainties stemming from high divorce rates, partners leaving the practice, threat of litigation and government enforcement actions jeopardizes these assets during your lifetime.
Some basic asset protection steps involve separating different streams of income (professional, ancillary businesses and investment) into separate legal entities, removing medical equipment and other assets from your medical practice (to create your own equipment leasing company) and reducing the number of non-exempt assets you personally own. As is typically the case, the treating physician and partners are named as defendants in any lawsuit along with the medical practice. Therefore, care must be taken to protect each of them.
A basic legal document that I think all medical practices should use is a Buy-Sell Agreement. Inevitably, medical practices will add a new member or lose a member for a variety of reasons. To promote a smooth transfer of ownership, a Buy-Sell Agreement provides for an orderly transfer by setting forth the manner in which the ownership must be sold, the method for determining the price and the time periods for the transfer to occur.
Timing is crucial when seeking to protect your assets. It should optimally be done when there is no claim or threat of claim for damages. Fraudulent transfers can occur when a physician knows or should have known that he or she was subject to a claim. If the transfer of assets occurs after the physician gained such knowledge, a court could void the transfer, leaving the assets available to your creditors. As with most things, it is better to begin protecting your assets sooner than later.
Steven H. Phelps is an attorney and certified public accountant practicing in the Health Law field. His clients include independent physician associations, large medical practices and solo physicians. Steve is located at 10,000 North Central Expressway, Suite 1460, Dallas, Texas 75231 or by telephone at (214) 373-0880.