Three Liability Planning Tips for Physicians Anyone Can Use

Whether you are a physician or not, you probably know that the practice of medicine is a profession fraught with liability. It’s not just medical malpractice claims either – employment related issues, careless business partners and employees, contractual obligations, and personal liabilities add to the risk assumed by a physician in private practice. Unfortunately, in our litigious society, these liability risks are not unique to physicians. Business owners, farmers, board members, real estate investors, other professionals, and retirees need to protect themselves from a variety of liabilities too.

Below are three liability planning tips anyone – physicians and non-physicians alike – can use to protect their hard earned money.

Tip #1 – Insurance is the First Line of Defense Against Liability

Liability insurance is the first line of defense against a claim. Liability insurance provides a source of funds to pay legal fees as well as settlements or judgments. Types of insurance you should have in place include (as applicable):

• Homeowner’s insurance
• Property and casualty insurance
• Excess liability insurance (also known as “umbrella” insurance)
• Automobile and other vehicle (motorcycle, boat, airplane) insurance
• General business insurance
• Professional liability insurance
• Directors and officers insurance

Tip #2 – State Exemptions Protect a Variety of Personal Assets From Lawsuits

Minnesota has laws that provide partial or complete exemptions for certain types of assets owned by residents from the claims of creditors. While the specifics of these protections can vary, Minnesota law may allow you to safeguard the following assets from a judgment entered against you:

• Homestead: Minnesota offers robust "homestead" protection, exempting a primary residence up to a certain value from creditor claims.
• Retirement Plans: Qualified retirement accounts, including 401(k)s, profit-sharing plans, money purchase plans, and IRAs, are generally protected.
• Life Insurance: The cash value of life insurance policies may be exempt under certain conditions.
• Annuities: Some annuities are protected from creditor claims.
• Wages: Minnesota law limits the amount of wages that creditors can garnish.
• Prepaid College Plans and Section 529 Plans: Funds in qualified education savings plans may be shielded from creditors.
• Disability Insurance Payments: Payments from disability insurance are typically exempt.
• Social Security Benefits: These are generally protected from creditor claims under federal law.

Understanding these exemptions in detail and how they apply to your situation requires professional guidance, as exemptions can depend on the circumstances of your case and the nature of the debt. It is also important to familiarize yourself with other states in which you have a presence as these laws vary widely from state to state.

Tip #3 – Business Entities Protect Business and Personal Assets From Lawsuits

Business entities include partnerships, limited liability companies, and corporations. Business owners need to mitigate the risks and liabilities associated with owning a business, and real estate investors need to mitigate the risks and liabilities associated with owning real estate, through the use of one or more entities. The right structure for your enterprise should take into consideration asset protection, income taxes, estate planning, retirement funding, and business succession goals.

Business entities can also be an effective tool for protecting your personal assets from lawsuits. In many states, assets held within a limited partnership or a limited liability company are protected from the personal creditors of an owner. In many cases, the personal creditors of an owner cannot step into the owner’s shoes and take over the business. Instead, the creditor is limited to a “charging order” which only gives the creditor the rights of an assignee. In general this limits the creditor to receiving distributions from the entity if and when they are made.

Final Advice for Protecting Your Assets

Liability insurance, exemption planning, and business entities should be used together to create a multi-layered liability protection plan. Our firm is experienced with helping physicians, business owners, farmers, board members, real estate investors, and retirees create and—just as important—maintain a comprehensive liability protection plan. Please call our office if you have any questions about this type of planning.

Keep an eye on our Events page, located at: https://www.wagnerlegalmn.com/events/ for free upcoming seminars for business owners.

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