Asset Protection for Your Urgent Care Business
In the urgent care industry, many urgent care centers and owner/operators are focused only on their liabilities. They take out all different sorts of insurance policies, but insurance only covers liability. Asset protection covers assets, regardless of the type of liability. If you’re facing litigation from a medical malpractice or an employee lawsuit, it doesn’t matter, because your assets themselves are protected. You don’t need to worry about what the liability is, because no one can tell you what the liability is going to be. That’s not to say that you should just completely forget about insurance in favor of asset protection, though. Having a combination of must-have insurances and asset protection will keep you, your practice and your assets well protected if litigation ever occurs.
“Asset protection is best described as the number of layers of legal insurance and financial strategies that will manage risk, control exposure and make future income and assets much more predictable,” Ike Devji, asset protection attorney at Pro Asset Protection, says. “And it’s an absolute necessity in today’s litigious and onerous business environment.”
Some physician and urgent care center owners may confuse estate planning with asset protection, but Devji says they’re not the same thing.
“Estate planning is death planning – what happens when I die, who gets what, etc.” Devji says. “Asset protection is life planning – how do people keep, protect and use their assets during life?”
Urgent care owners are often unaware of the necessary planning they must do in order to protect themselves, and their practice. They often think that various types of insurance provides adequate coverage, but Douglass Lodmell, asset protection attorney at Lodmell & Lodmell, says that insurance alone is not enough.
“If anything goes wrong that’s not covered by insurance, then everything can go wrong, and I’ve seen people lose everything from litigation,” Lodmell says. “Asset protection allows physicians and owners to keep their assets, use them and enjoy them, but keeps them inaccessible to the average lawsuit.”
Assets can include your primary residence, office building, any real estate and investment properties that you own, your savings accounts, accounts receivable, stocks, bonds, liquid assets, all of your investments of any sort and your urgent care business itself. Lodmell recommends using an asset protection trust in order to better protect your assets.
Asset protection trusts started in 1984 in the Cook Islands. The Cook Islands passed a statute saying that an individual can give money to a trust and remain a beneficial owner to that trust, and money cannot be paid out to satisfy a lawsuit judgment. In 1998, Alaska also passed an asset protection law that had the same elements. There are three kinds of asset protection trusts: foreign, domestic and bridge. A domestic trust includes any trust established under the laws of the United States (such as an Alaskan trust), and foreign trusts include any trusts established outside of the United States (such as a Cook Islands trust). A bridge trust offers the best of both worlds.
“The Alaskan domestic trust and other domestic protection trusts do not give the same level of protection as the off-shore islands,” Blake Harris, asset protection attorney at Mile High Estate Planning, says. “I recommend a bridge trust, which is initially a domestic trust, but could become a Cook Islands trust.”
“A bridge trust is a hybrid of both foreign and domestic trusts,” Lodmell says. “Bridge trusts don’t have the limitations of constitutional restrictions, but have the ease of a domestic trust.”
For additional protection, Harris also advises that each individual business should be owned by a corporation or a limited liability company (LLC). Then, he says that each of those individual LLCs should be backed by one, or both, of the following: a family limited partnership, or some other entity that gives charging order protection.
You can also have multiple LLCs, which is a good idea. Devji says it’s important to divide and segregate your assets.
“If you own a medical practice, the corporate structure that owns the medical practice should not own the building as well; that should be a separate company,” Devji says. “If the medical practice gets sued, then the building can’t be taken away from it as an asset. Why make the physical building liable for claims?”
Taking things one step further, Devji says that if a large medical practice has a substantial value in medical equipment, it can set up a medical equipment leasing company so that the medical equipment is not owned by the same company.
“So if a patient sues a practice, the practice itself only owns the cash in the bank accounts, and the accounts receivable,” Devji says. “By keeping everything separate, you minimize the risk of losing the building, medical equipment or any of your other assets.”
To ensure adequate protection, Lodmell, Devji and Harris all strongly recommend having a consultation with an experienced asset protection attorney.
“The best thing to do is to choose a lawyer that exclusively practices in the area of asset protection,” Lodmell says. “This is a time where experience really does matter.”
“An attorney that specializes in asset protection will be able to understand risk management, litigation and estate planning,” Devji says. “They will also be able to better understand the specific medical risks that medical practice owners face.”
“When an asset protection plan is challenged, you need your structures to stand up and guard your wealth,” Harris says. “You need to select an asset protection attorney that understands the legal tools and that can communicate clearly with you.”
In addition to having a thorough asset protection plan, Devji also recommends having certain types of insurance coverage. These include: general liability insurance, medical malpractice insurance, data breach insurance, directors and officers (D&O) insurance, employment practices liability (EPLI) insurance and regulatory audit collections (RAC) insurance.
“All of these different insurance policies work together to provide a layer of protection for you and your urgent care business,” Devji says. “But it’s only a street-line level of defense; insurance alone can never be enough.”
Devji says that good behavior policies, a coordinated insurance program and legal tools are the three layers of asset protection. Good behavior policies and a thorough, up-to-date employee manual that is professionally drafted, and enforced, can help prevent litigation from occurring in the first place. A coordinated insurance program and legal tools for asset protection can protect you when litigation does occur.
A lot of urgent care owner/operators are unaware that they should have an asset protection plan, according to Harris.
“People think those that need asset protection are much wealthier than they are, but in reality, it’s the small business owner that needs to guard their wealth the most,” Harris says. “Urgent care owners are popular targets for lawsuits because they are perceived to have deep pockets, and because of their involvement in the healthcare industry.”
“Traditionally, owners have been focused on insurance, but as they see their colleagues face down claims and go through legal trouble, I think that their thoughts are changing,” Lodmell says.
Devji says that it’s not just medical malpractice claims that urgent care business owners should be worried about.
“I call it a ‘risk myopia’ when owners only think about medical malpractice,” Devji says. “The average American business owner is five times more likely to be sued by an employee than by anyone else.”
“Employee risk and partner risk is greater than patient risk,” Lodmell says. “And the more partners and employees you have, the more risk you’re taking on.”
Having the right combination of insurance policies and an asset protection plan is a step that urgent care owner/operators can take to minimize their risks if litigation occurs. However, it is extremely important to note that asset protection is proactive, not reactive.
“A lot of owners will say that they will get around to setting up an asset protection plan later, but you can’t buy fire insurance once the house has burned down,” Lodmell says. “You cannot protect your assets after you have the liability. It’s much better to protect your assets when you have no patients, no liability and no employee that’s walked out on you in a huff. Have your asset protection done before any of that happens.”
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