Guidance for Medical Professionals From San Jose Attorneys
As a doctor, you may have spent many years working toward your career, and you may have built up a sizeable estate over the course of your career. Your assets may include a residence, a second home, cars, retirement funds, and savings. However, doctors are often subject to malpractice litigation. You may also face a range of other risks, including litigation by former business partners, premises liability lawsuits, liability as a guarantor for others’ debts, and liability arising out of misconduct. You may be able to protect certain assets from creditors’ claims. If you want to understand asset protection for California doctors, you should call the San Jose asset protection lawyers at Sowards Law Firm. We can help you devise a strategy to insulate your assets.
Asset Protection for California Doctors
Asset protection can be complicated for doctors. In California, doctors are not required to purchase insurance, and you may have decided not to buy it so that you can avoid paying a premium. However, choosing to go without malpractice and other coverage will expose your personal assets. If you have unguarded personal assets, you may become a target for unscrupulous claimants.
Doctors can set up their practices as professional corporations under California law. This allows doctors to shield their personal assets from business debts, commercial lease obligations, and vendor contracts. Additionally, unlike a partnership, a professional corporation can allow shareholders to avoid personal liability for another employee’s negligence if the shareholder was not negligent.
Trusts
One method of asset protection is trust creation. A trust is a legal arrangement whereby a settlor moves assets so that they are managed by a trustee for a beneficiary’s benefit. California does not allow for domestic asset protection trusts. However, you can go out of state to set up a trust. Or you can set up an offshore trust in a country with laws that protect foreign investors. It is legal to move your money to an offshore trust as long as you pay the proper taxes.
Additionally, our attorneys can help you create a trust for the benefit of third parties, such as your children, and this also protects your assets. Living trusts that are revocable will not shield your assets because you can voluntarily place money into the trust and take it out.
Transmuting Assets
Some doctors are married to people who have a low risk of being sued. You may be able to overcome the presumption that assets bought with your earnings during the marriage are community property through a prenuptial agreement or by transmuting property. Although creditors with claims against you can pursue your community property, they cannot go after a spouse’s separate property. It is not enough, however, to simply retitle your property. A prenuptial agreement can delineate which property will be held as community property or separate property. Alternatively, under Family Code 952, you can change the legal character of your property through transmutation. Transmutation occurs if there is a writing that explicitly sets out a change in the property’s character, and the writing is either made or accepted by the spouse who is adversely affected.
You cannot transfer your property if you have reason to anticipate that you will be sued. If you try to transfer your property to your spouse to evade a creditor’s claims, you could face harsh consequences for a fraudulent conveyance.
Retirement Plans
Various kinds of retirement accounts, appropriately structured, may provide protection for your assets. Protection is available for plans established under the Employee Retirement Income Security Act of 1974 (ERISA). In California, you can protect your assets in a private retirement plan that is exempt from judgments or bankruptcy. Any assets in the plan that are meant for retirement are guarded against lawsuits and judgments. The protection will also apply to distributions from the private retirement plan.
The Homestead Exemption and Personal Residence Trusts
You may be able to protect a certain amount of equity in your home through the homestead exemption. The exemption may not protect all the equity in your home, although the amount of the exemption will increase in January 2021. You may be able to also set up a personal residence trust that protects against claims and Proposition 13 reassessment.
Hire a San Jose Attorney to Protect Your Assets
As a doctor, you may be particularly vulnerable to litigation and creditors. Asset protection for California doctors can be complex. You should discuss your situation with the San Jose lawyers at Sowards Law Firm. We also represent clients in Campbell, Mountain View, Palo Alto, Santa Clara, Berkeley, Oakland, Concord, Walnut Creek, San Rafael, Salinas, San Mateo, Santa Cruz, and San Francisco. Call us at (408) 371-6000 or complete our online form.
