Asset protection strategies for primary care physicians: Safeguarding your future

As a primary care physician, you spend your days protecting other people's health. Your financial health, however, might not be getting the same level of care.

According to a 2024 report from Medscape, around 60% of physicians said they've been named in at least one malpractice lawsuit. For cases that were settled or went to jury trial, the majority led to an award between $100,000 and $500,000.

As a physician, the possibility of a lawsuit or other liability damaging your practice and finances is very real. Yes, you can reduce this possibility by doing things like improving communication with patients. But taking other steps to protect your personal and business assets isn't just optional—it's essential.

Here are some crucial ways for you to safeguard your assets as a primary care physician.

1. Carry adequate insurance

Medical malpractice insurance rates have risen sharply since the COVID-19 pandemic. Most doctors now pay at least $10,000 in malpractice premiums each year, although PCPs pay slightly less than specialists.

Yes, it's expensive to be properly insured. But it's even more expensive to find yourself without good coverage when you need it.

What insurance coverage do you need as a primary care physician? If you work for a hospital or health system, you might already have proper insurance coverage, although tail coverage (for claims that arise after you leave the practice) may not be included unless you've had it added to your contract.

If you're an independent contractor, own your practice or work for another physician or a smaller practice, you'll need to shop for your own insurance to cover you at each location where you work. Adequate insurance coverage generally includes:

• Professional malpractice insurance (ideally an occurrence policy with unlimited tail coverage)
• Property and casualty insurance
• Umbrella coverage

2. Make sure your business and personal assets exempt

To reduce your legal liability, invest your cash into assets that are exempt, meaning they cannot be included in lawsuits.

Many physicians who own their own practices incorrectly assume that their personal finances are more vulnerable than business assets. In reality, the opposite is true.

Instead of simply reinvesting profits into your business, as most physicians do, one of the key ways you can protect your business assets (and reduce your taxes) is by investing in 401(k)s and other qualified retirement plans and employee benefits.

When it comes to your personal assets, your state laws determine what's exempt. In many states, this includes:

• Your primary residence
• Specific retirement plans and accounts
• Annuities
• Cash in life insurance policies

3. Transfer ownership of property

For assets that are not exempt from lawsuits, you can take additional measures to increase your protection.

When it comes to the non-exempt property you own, one of the biggest financial vulnerabilities that you can have as a physician is to keep the property in your own name. Even if you're just the joint owner, the asset could be at risk.

Instead of leaving your property and other assets exposed, transfer ownership into your spouse or another loved one's name.

4. Set up an estate plan

For many physicians, the purpose of working hard is to make life better for their heirs. But if you want to ensure your property and other investments actually go to them, instead of being lost in a lawsuit, you need to go beyond transferring ownership and do some full-blown estate planning.

Estate planning is the process of ensuring that your assets are transferred to the people who you want to own them after you pass away. As part of your estate plan, you can set up a trust, which allows someone else to hold assets on your behalf.

Trusts are essential tools, since they can not only protect your physical property, but also your stocks, bonds and business interests. Trusts also help your family avoid the headache of dealing with probate once you pass.

There are several types of trusts you can use as part of a smart estate plan, but to safeguard your assets, irrevocable trusts are often better than revocable trusts. Although they can't be changed after they're created, the assets in an irrevocable trust are protected in the event of a lawsuit since you are not the trust owner. Plus, setting up an irrevocable trust can help you reduce estate taxes.

5. Change your business structure

Another way to protect your practice is to convert your business structure to a limited liability company (LLC). Converting to an LLC can help safeguard your assets in a number of ways, including:

• Protects you from personal liability if another physician in your practice commits malpractice.
• Limits your financial liability with creditors.
• Reduces risk of annual taxes and reduces taxes due if/when you sell the practice.

You can file the paperwork to form an LLC on your own, but you're better off hiring a business formation lawyer and potentially an accountant to advise you through the process. The filing fees will depend on which state you're in, but they're usually $200 or less.

6. Find well-qualified advisors

For several of the above steps, a lawyer or trusted accountant can help you navigate the process and ensure a better outcome.

For example, as you go through the steps of setting up a trust, a lawyer or estate-planning professional can help with things like drafting documents.

One of the best and easiest ways to find knowledgeable professionals is by asking for referrals from other physicians. But if you come up empty-handed, you may have to search on your own.

Regardless of how you find leads, prioritize hiring professionals who have experience serving physicians and who also have current credentials or licensing.

For certified public accountants (CPAs), you can check their credentials through the IRS directory of credentialed tax preparers. For attorneys, check with your state bar association to confirm that they're licensed.

Sarah Brady is a freelance writer and credit expert who's been helping individuals and entrepreneurs improve their financial wellness since 2013. Sarah has written about personal and business finance for Forbes Advisor, Yahoo Finance, ValuePenguin and more. Before becoming a writer, Sarah worked as an NFCC-Certified Credit Counselor, a HUD-Certified Housing Counselor and she taught financial education workshops for the San Francisco Mayor's Office of Housing. You can reach her at LinkedIn.