Asset protection for physicians isn't optional—it's essential. Malpractice claim and lawsuit rates can vary significantly by specialty, location, and time period. Even meritless claims cost tens of thousands in legal fees. And while malpractice insurance is your first line of defense, policy limits don't always cover catastrophic judgments.
The 2023 Chris Maragos case resulted in a $43.5 million verdict against an orthopedic surgeon—the kind of number that can wipe out a lifetime of wealth if you're not properly protected.
This guide covers the four pillars of asset protection for healthcare professionals: insurance, entity structures, trusts, and asset titling. Implemented correctly and in advance, these strategies create legal barriers between your personal wealth and potential creditors.
The Reality: Why Physicians Are High-Value Targets
Physicians face a unique combination of liability exposure and visible wealth. You work in a field where lawsuits are not just possible—they're statistically likely. Your income is high and often verifiable. And unlike many other professionals, you can't simply incorporate and shield yourself from your own professional negligence.
The threats extend beyond malpractice. If you're in a group practice, you're exposed to the acts of your partners. Employee claims—wrongful termination, harassment—can threaten practice assets. HIPAA violations carry significant penalties. And as your wealth grows, you become a more attractive target for any plaintiff's attorney.
The goal of asset protection isn't to avoid legitimate obligations. It's to create enough legal friction that creditors are motivated to settle within insurance limits rather than pursue personal assets—and to ensure that if the worst happens, your family's financial security survives.
The Four Layers of Physician Asset Protection
Effective asset protection is built in layers. Each layer serves a different function, and together they create a comprehensive shield:
- Insurance — Your immediate defense against claims
- Entity Structures — Separation between business and personal assets
- Trusts — Legal ownership transfer that shields assets from your creditors
- Asset Titling — Strategic ownership arrangements that limit exposure
Layer 1: Insurance — Your First Line of Defense
Insurance is the foundation. Without adequate coverage, the other strategies are just backup plans for an avoidable disaster.
Malpractice Insurance
If you work for a hospital or health system, verify your coverage limits and whether tail coverage is included. Many employed physicians assume they're fully covered, only to discover gaps when it matters.
- Occurrence vs. Claims-Made: Occurrence policies cover incidents that happen during the policy period, regardless of when the claim is filed. Claims-made policies only cover claims filed while the policy is active. If you have claims-made coverage and change jobs, you need tail coverage.
- Tail Coverage: This extends claims-made coverage after you leave a position. It can be expensive—often 150-200% of your annual premium—but without it, you're exposed to claims from past patients.
- Policy Limits: Common limits are $1M per occurrence / $3M aggregate. For high-risk specialties or high-net-worth physicians, consider whether these limits are sufficient.
Umbrella Liability Insurance
An umbrella policy provides additional coverage beyond your malpractice, auto, and homeowners policies. It covers claims outside traditional malpractice—personal injury on your property, auto accidents, defamation. If your net worth is $5 million, a $1 million umbrella policy leaves a significant gap. Match your coverage to your assets.
Layer 2: Entity Structures — Separating Business from Personal
Business entities create legal separation between your practice and your personal assets. They won't protect you from your own malpractice, but they limit other forms of exposure.
Professional LLCs and Corporations (PLLC/PC)
A Professional Limited Liability Company (PLLC) or Professional Corporation (PC) shields you from:
- Liability from another physician's malpractice in a group practice
- Administrative errors and employee claims against the practice
- Business debts and contractual disputes
- Creditors of your partners reaching practice assets
Critical point: These entities require strict compliance—separate bank accounts, proper corporate formalities, annual filings. If you commingle personal and business assets (using the company car for personal errands, for example), a court can "pierce the corporate veil" and eliminate your protection.
Separate LLCs for Practice Assets
Consider holding practice real estate, expensive equipment, and other valuable business assets in separate LLCs that lease back to your practice. If a lawsuit judgment hits the practice, these assets remain protected in their own entities. This technique also offers estate planning benefits—ownership interests in these entities can be gifted to children or trusts to shift income and reduce estate value.
LLCs for Personal "Hot" Assets
Rental properties are "hot" assets—they generate liability (slip-and-fall, tenant disputes). Placing each rental property in its own LLC (or a "Series LLC") provides both internal protection (the rental's liability doesn't reach your personal assets) and external protection (your personal creditors can't easily seize the property). In Florida, a multi-member LLC affords protection from creditors who can only obtain a "charging order" against LLC interests, which limits them to receiving distributions; they can't force a sale or take control.
Layer 3: Trusts — Legal Separation of Ownership
Irrevocable trusts create legal separation between you and your assets. When structured properly, assets in certain trusts are no longer "yours" for creditor purposes; even though you or your family may still benefit from them.
Irrevocable Trusts
An irrevocable trust holds ownership of assets out of your estate. Because you no longer own the assets, your creditors generally cannot reach them. With competent planning and drafting;
- The Trustee maintains control over the assets
- "Decanting", in FL, has been simplified to more easily modify the trust terms
- Eliminate federal gift & estate tax implications on the transfer
Spousal Lifetime Access Trusts (SLATs)
For married physicians, Spousal Lifetime Access Trusts offer one of the most effective asset protection strategies. With careful consideration of the "Reciprocal Trust Doctrine", each spouse creates an irrevocable trust for the benefit of the other. The assets are removed from your estate and protected from your creditors, yet your spouse can access them; providing indirect family benefit.
Reciprocal SLATs:
- Each spouse creates a trust for the other, allowing both to benefit from assets neither technically owns
- Provides creditor protection while maintaining family access to wealth
- May be able to use the federal lifetime gift and estate tax exemption, which is scheduled to change after 2025 under current law; exemption amounts are indexed and subject to legislative change. Confirm current limits with IRS guidance and your tax advisor. (See IRS Publication 559 and IRS “Estate and Gift Taxes” resources at IRS.gov.)
Domestic Asset Protection Trusts (DAPTs)
Wyoming, Nevada, Delaware, South Dakota, and Alaska allow "self-settled" trusts where you can be a beneficiary of your own irrevocable trust while still receiving creditor protection. DAPTs are more flexible than traditional irrevocable trusts, but their protection has limits: bankruptcy courts and some state courts have questioned whether they truly shield assets when the trust creator is also a beneficiary, or resident of a non-DAPT state.
Dynasty Trusts
A multigenerational dynasty trust can protect family wealth from creditors, ex-spouses, and estate taxes across multiple generations; 1000 years in Florida. Assets placed in the trust are shielded not just from your creditors, but from your children's and grandchildren's creditors as well. This is powerful planning for physicians who want to ensure their wealth benefits future generations rather than being depleted by divorce settlements or lawsuits.
What About Revocable Living Trusts?
A revocable living trust is excellent for estate planning—it avoids probate and provides for incapacity—but it offers no creditor protection. Because you retain full control and can revoke the trust at any time, the assets are still considered yours for creditor purposes. Don't confuse estate planning tools with asset protection tools.
Layer 4: Asset Titling — Strategic Ownership Arrangements
How you title assets—whose name is on the deed, account, or registration—can significantly impact creditor exposure. Proper titling is one of the simplest and most effective protection strategies, yet it's frequently overlooked.
Tenancy by the Entirety
For married couples in states that recognize it (including Florida), tenancy by the entirety is powerful protection. When assets are titled this way, they cannot be seized to satisfy a judgment against only one spouse. The creditor would need a judgment against both spouses jointly.
- Works for real estate and, in Florida, personal property like bank accounts and investment accounts
- Protection exists only while the marriage is intact
For physician couples where only one spouse has significant liability exposure, this titling can shield the family's core assets from that spouse's creditors.
Homestead Exemption
Florida offers unlimited homestead protection—your primary residence cannot be seized to satisfy most creditors regardless of its value. Texas has similar protections. This is one of the most powerful asset protection tools available, but it only applies to your primary residence and comes with restrictions on selling or refinancing.
Retirement Accounts
ERISA-qualified retirement plans (401(k)s, pension plans) receive strong federal creditor protection. IRAs receive varying protection depending on state law—Florida offers unlimited protection for traditional and Roth IRAs. Maximizing contributions to protected retirement accounts is both smart tax planning and effective asset protection.
529 Education Accounts
Florida 529 plan contributions are protected from creditors after being held for one year. This can be a useful vehicle for sheltering funds intended for children's education while receiving state tax benefits.
The Critical Importance of Timing
Asset protection planning must be done in advance—before any claims arise. Transferring assets after a claim exists (or is reasonably anticipated) can be voided as a "fraudulent transfer." Courts look back years to unwind transfers made with the intent to defraud creditors.
The Uniform Voidable Transactions Act (adopted in Florida and most states) allows creditors to challenge transfers made within four years—or longer if fraud can be proven. Even legitimate estate planning transactions can be questioned if the timing appears suspicious.
Key principle: The time to implement asset protection is when you don't need it. Once a lawsuit is threatened, most aggressive strategies are off the table. Build your protection during good times.
What Doesn't Work (and What's Dangerous)
Some commonly-suggested asset protection strategies are ineffective or potentially illegal:
- Transferring assets to family members: Gifts to children or parents can be easily unwound as fraudulent transfers. You lose control with no guarantee of protection.
- Hiding assets: Failing to disclose assets during litigation is perjury.
- Offshore accounts without proper reporting: U.S. taxpayers must report foreign accounts. Failure to report carries severe penalties and criminal exposure.
- Overly aggressive domestic trusts: Some promoters market trust arrangements as providing protection in all circumstances, but results can vary and courts may not uphold a structure as intended; investors should consider the legal uncertainty, costs, and potential tax consequences and consult qualified legal and tax professionals. Many of these have been struck down by courts, leaving clients worse off than if they'd done nothing.
- Court-ordered support: Alimony, child support. and other court-ordered indentures can pierce virtually any asset protection device.
Legitimate asset protection uses transparent, legally-recognized structures. If a strategy requires secrecy or seems too good to be true, it probably is.
Building Your Asset Protection Plan
Asset protection isn't a single product or transaction—it's a coordinated strategy. Here's how to approach it:
Assess your exposure:
- What are your liability risks (specialty, practice structure, other assets)?
- What is your current net worth and expected future earnings?
- What assets are already protected (retirement accounts, homestead)?
Review insurance coverage:
- Verify malpractice policy type, limits, and tail coverage
- Size umbrella coverage to your net worth
Structure entities correctly:
- Use PLLCs/PCs for practice operations
- Separate high-value business assets into their own LLCs
- Place rental properties in individual LLCs
Implement trust strategies:
- Consider SLATs for married couples—one of the most effective physician strategies
- Use Crummey powers properly with documented notices for each contribution
- Evaluate DAPTs in favorable jurisdictions for additional protection
- Consider dynasty trusts for multigenerational wealth transfer
Optimize asset titling:
- Use tenancy by the entirety where appropriate
- Maximize homestead protection
- Title retirement accounts and 529s properly
Document and maintain:
- Keep entities compliant with required formalities
- Review and update planning as circumstances change
- Coordinate with estate planning and tax strategies
Working with the Right Team
Effective asset protection requires coordination among multiple professionals:
- Asset protection attorney: Specializes in entity structuring, trust planning, and liability analysis
- Estate planning attorney: Ensures protection strategies align with wealth transfer goals
- CPA: Handles tax implications of entity structures and transfers
- Financial advisor: Coordinates investment strategy, insurance, and overall financial planning
Be wary of any single provider who claims to handle all aspects of asset protection. This is specialized work requiring genuine expertise—not a side offering from a general practitioner.
The Bottom Line
As a physician, you've spent years building expertise and wealth. Asset protection ensures that a single lawsuit, even an unjust one, can't undo that work. The strategies exist. The legal structures are well-established. What's required is planning, implementation, and ongoing maintenance.
The cost of proper asset protection is minimal compared to the cost of being unprotected when a judgment hits. Don't wait until you receive a demand letter to think about protecting your wealth. Build your defenses now, while you have the luxury of time.
Your financial security—and your family's—depends on it.