Physicians dedicate their lives to acquiring the knowledge and skills to help others and to building a practice and reputation. These efforts often offer substantial personal and financial rewards. However, those who work in the medical field also endure a high risk of personal liability. Asset protection for physicians is an important part of financial and estate planning.
Asset Protection for Physicians Requires Advance Planning
Domestic asset protection (DAP) trusts can be a useful tool in physician asset protection, but these financial vehicles require advance planning. Once an incident has occurred or a medical malpractice claim has been made, transfers of property into any form of trust are likely to be found fraudulent under the law.
Medical Malpractice Threats and Asset Protection for Physicians
Medical malpractice claims present significant threats to a physician’s financial security, reputation, and livelihood. As a physician, being accused of malpractice is a real prospect. One study found that more than half of doctors surveyed had been sued. With average case management costs of $46,000 and average indemnity payments reaching $360,000, it is clear that a preemptive strategy for protecting your personal wealth and property from these claims is important.
What Is a DAP Trust?
A DAP trust, also called a spendthrift trust, is an irrevocable trust that can shield assets from potential creditors. It can be used in wealth management for physicians to protect assets from legal claims, and it also can offer tax benefits and help your heirs avoid probate when settling your estate.
DAP trusts for physicians can be used to secure personal and business accounts and assets, cash and securities, property, and life insurance policies. These trusts can be structured in various ways to achieve your specific goals.
Physician Asset Protection: DAP Trusts in WV, OH, and KY
Seventeen states currently allow DAP trusts under state law, including West Virginia (WV) and Ohio (OH). Each state sets forth the requirements and rules related to these trusts. Non-residents can establish a trust in a state where they do not reside, but it is important to review the resident and non-resident states’ laws to ensure the grantor and beneficiaries receive the full benefit of a non-resident DAP trust.
In WV and OH, DAP trusts must be irrevocable. The trust documents must include a spendthrift provision and language that expressly applies the laws of the state. DAP trusts in these states also must appoint at least one trustee who is qualified under the requirements set forth by state law.
Kentucky (KY) has a partial DAP trust statute that permits asset protection under a self-settled trust, but the state does not condone DAP trusts in full. Because states have different requirements and standards for asset protection and trusts, it is wise to consult with an experienced attorney when you wish to include these vehicles in your financial planning.
Using DAP Trusts in Asset Protection for Physicians
Accusations of medical malpractice or other professional wrongdoing create a great deal of turmoil for physicians and their families. Understanding how DAP trusts can help physicians and implementing these trusts in advance can provide peace of mind during these difficult times.
Anna M. Price is an experienced estate planning attorney with the Huntington, WV firm of Jenkins Fenstermaker, PLLC. If you would like to discuss asset protection for physicians with Anna, you may contact her by phone at (866) 617-4736 or complete the firm’s online contact form.