May 13, 2009

Asset protection — revisited (continued)

“Just as you encourage patients to take preventive measures to ward off health problems, it is prudent to organize your financial affairs and assets to guard against risks in advance,” says Austin attorney Ken Vanway.

For Fort Worth attorney Marvin Blum, asset protection is one part of the overall financial and estate planning process. “You build a structure to protect assets from being taken by future creditors, especially if disaster strikes and there is a substantial judgment against the physician that exceeds his or her insurance limits,” he says.

Why physicians need asset protection

According to Mr. Blum, medical liability is just one risk physi- cians face. “Physicians can also be sued for other reasons — if a patient is injured in the office or parking lot, slip-and-fall claims,” Mr. Blum says. “Physicians have a reputation as having deep pockets. They are perceived as wealthy. If one party is perceived as having deep pockets, they are more likely to be sued even if it’s an automobile accident.”

Many physicians believe the threat of an excess judgment or jury verdict was mitigated by the medical liability reforms of 2003. According to Mr. Blum and Mr. Vanway, physicians should still be concerned about asset protection for several reasons.

The 2003 reforms placed caps on non-economic damages only. Economic damages — which can include past and future medical expenses and lost wages— were not capped. “If the plaintiff was a high wage earner, the judgment could be substantial,” says Mr. Vanway.

Additionally, the reforms only affected medical liability claims. Other types of liability claims are not subject to the caps on non-economic damages. Mr. Blum also points out that the protection afforded by the caps could be short-lived. “There is no guarantee these reforms will stick. They continue to be controversial, and it is very likely the legislature will be pressured to either raise the cap or repeal the law,” Mr. Blum says. “It’s important for physicians to have asset protection strategies in place before that happens.”

“When deciding on an asset protection plan, we look at a client’s financial statement to first determine what is protected by statute. What cannot be taken away from you,” says Vanway.

These “protected assets” can include:

• The physician’s home, if he or she has lived there longer than 40 months. The Texas Property Code provides that a “homestead” is exempt from the claims of the owner’s creditors, other than valid encumbrances properly fixed on the property. In Texas, this homestead protection was unlimited, with no dollar limit on the value of the property. However, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 placed limits on the unlimited Texas homestead exemption. The unlimited Texas exemption only applies if the homestead has been owned for more than 40 months. If the home has been owned for a shorter period, the homestead exemption is limited to $125,000.


• $30,000 in personal property for a single adult and $60,000 in personal property for a family. The personal property eligible for this exemption includes home furnishings, family heirlooms, vehicles, personal property used in a trade or business, and jewelry (not to exceed 25% of the applicable dollar limitation.)


• Qualified retirement plan benefits and IRAs are generally exempt from creditors. The 2005 Bankruptcy Reform Act limited this exemption to $1 million per individual ($2 million for a husband and wife.) IRAs are only exempt to the extent that the contributions were tax deductible when made.


• Annuities and life insurance — Texas has an unlimited exemption for insurance benefits, employer-provided annuities, and annuity contracts purchased by individuals.

“All other assets — other real estate, brokerage accounts, interest in a practice, bank accounts, notes, are subject to creditors,” says Mr. Vanway.

One particularly vulnerable area for physicians — their accounts receivables, which may represent their largest business asset. “A large accounts receivable balance presents an attractive target to a creditor. It is relatively easy for a creditor to collect a judgment because the court can appoint a receiver to open the mail and take the payments made on the accounts receivable balance until the judgment is satisfied,” says Mr. Blum.

“In a multi-physician practice, if any one physician has a judgment against him or her, all of the practice’s accounts receivables are exposed because they are an asset of the practice,” says Mr. Vanway. This applies even for a judgment against a physician who is no longer with the group.

Accounts receivables are susceptible even if the physician practice operates with an entity that limits liability. “If the doctor is the sole owner of his entity, the creditor can get a judgment againstthe entity too, which gives the creditor access to the accounts receivable,” says Mr. Blum. “Also, if the doctor operates as a sole proprietor and owns the accounts receivable personally, then a creditor who has a judgment against the doctor can take the doctor’s accounts receivable.”

Physicians who are married and hold their assets as community property should be aware that 100 percent of community property is vulnerable in a claim against either spouse. “Many physicians believe that only their half of the community property can be taken. But a creditor can take 100 percent of the property, wiping out both the physician and the spouse,” says Mr. Blum. (Texas is one of 10 states that follow the community property system, meaning that property acquired by spouses during a marriage is viewed as one total “community” of property.)

Fortunately, a number of strategies can be employed to protect a physician’s vulnerable assets. “The process can go from simple to very complex. I usually lay out the continuum to clients, and they pick how far we go by what it takes for them to sleep well at night,” says Mr. Blum.

An example of one simple strategy is partition planning which can be used to protect community property. “With partition planning, the husband and wife agree to partition community property into separate halves. This is a simple document that protects the separate property of the innocent spouse from exposure to claims against the other spouse,” says Mr. Blum.

Physicians can also take advantage of state law exemptions and pay off their home mortgage, if they have owned the home longer than 40 months. Another option is to put money in qualified retirement plans, though the protection is limited to $1 million per individual. Physicians can also purchase life insurance or annuity products, which are exempt from creditors’ claims. Physicians can also set up trusts for children or grandchildren. “By setting up trusts, physicians can gift assets into them and get them off their balance sheet,” says Mr. Vanway.

One strategy along the middle of the complexity spectrum includes creating a Family Limited Partnership. “One way to protect personal assets is to create a Family Limited Partnership [FLP] and transfer title of those assets to that entity. If there is a judgment against the physician, the assets in this entity cannot be touched,” says Mr. Vanway.

Under an FLP, a creditor holding a claim against a physician has limited rights to satisfy that claim with respect to the partnership interest held by that person. “Creditors can end up waiting and waiting for years. This tends to make creditors frustrated and inclined to settle for less than the judgment amount,” says Mr. Blum. “It also makes the personal injury attorney less likely to take the case because it is more difficult for them to recover their fees and expenses.”

To protect accounts receivables, Mr. Blum implements a strategic medical accounts receivable transfer or SMART plan. “For this, you borrow funds from a bank and then use the proceeds to purchase an asset that is exempt from creditor claims, such as an annuity. The receivables are pledged as collateral for the loan and cannot be reached by creditors,” Mr. Blum says.

According to both Mr. Blum and Mr. Vanway, the key to successful asset protection is to do it early. It is very difficult to protect assets against existing claims, but it is relatively easy to protect assets against future claims. “Procrastination closes the door on all these strategies,” says Mr. Vanway. “Once you have knowledge that a lawsuit or judgment is pending, it is considered fraud to transfer the assets after a suit has been filed.”

Additionally, physicians should understand that the process is very individualized and how complex or simple a plan will be depends on the physician’s individual circumstances. However, when asked if physicians could implement only one asset protection strategy, what should it be, both Mr. Blum and Mr. Vanway said creating a Family Limited Partnership.

Physicians may be hesitant to begin an asset protection plan for a number of reasons including a lack of understanding of the process or a lack of time. “I think there is always a mentality that it will never happen to me. But statistics show that over a physician’s career, the odds are very high that he or she will lose sleep over a potential claim,” says Mr. Blum. “When a claim arises and you have this in place, you know it will not wipe you out.”

Asset protection tips

How to find an attorney

Both Mr. Vanway and Mr. Blum recommend that physicians employ an attorney who is Board Certified in Estate Planning and Probate Law and who has extensive experience in this area of law. “Physicians should look for a board certified attorney with good references and 10 or more years of experience in asset protection,” says Mr. Vanway.

Time involved

According to Mr. Blum, the time involved in setting up a plan depends on the complexity of that plan. For the simplest plans, it is a 3-meeting process with the attorney. At the first meeting, which would last about two hours, the physician and attorney discuss the physician’s assets and financial situation. The attorney would then analyze this information and make recommendations. These recommendations would be reviewed at a second meeting, which would take about one hour. The attorney then begins to implement the recommendations, and there is a third meeting to review and sign documents. This meeting may take about two hours. For more complicated plans, it could take several meetings.

To prepare for the initial meeting, the physician needs to bring a list of his or her assets. The physician’s CPA or financial planner can help collect this information.

Cost

How much an asset protection plan will cost also varies with the complexity of the plan. Mr. Blum estimates the cost for partition planning and using state law exemptions to be $2,000. The cost to create trusts could be $3,000. The cost to create an FLP and implement a complex plan could range from $5,000 to $10,000. According to Mr. Vanway, the investment in an asset protection plan is generally a one-time expenditure and will be fully or partially income tax deductible.

“The cost is very individualized and clearly this is a situation where you get what you pay for,” says Mr. Blum.

For more information on asset protection, please visit Ken Vanway's web site.

FOR IMMEDIATE RELEASE

August 18, 2008

Contact:  Laura Brockway
Manager, Communications and Advertising
(512) 425-5936, laura-brockway@tmlt.org

Dana Leidig
Vice President, Communications and Advertising
512-425-5934, dana-leidig@tmlt.org

TMLT awards eight medical school scholarships

Austin, TX  — Texas Medical Liability Trust (TMLT) is proud to announce the winners of the 2008 TMLT Memorial Scholarships.

• Alexander J. Alvarez is a third-year medical student at the University of Texas Southwestern Medical School. Read Mr. Alvarez’s essay.


• Megan Gentry is a third-year medical student at the University of Texas Health Science Center at San Antonio. Read Ms. Gentry’s essay.


• Douglas James Heiner is a third-year medical student at the University of Texas Medical Branch at Galveston. Read Mr. Heiner’s essay.


• Michael Merrick is a fourth-year medical student at the University of Texas Medical School at Houston. Read Mr. Merrick’s essay.


• Ana Nguyen is a fourth-year medical student at the Texas Tech University Health Science Center School of Medicine. Read Ms. Nguyen’s essay.


• Kyle Piwonka is a fourth-year medical student at the University of North Texas Health Science Center’s Texas College of Osteopathic Medicine. Read Mr. Piwonka’s essay.


• Jenny Van Winkle is a fourth-year medical student at the Texas A&M University System Health Science Center College of Medicine. Read Ms. Van Winkle’s essay.


• Ajit Vyas is a fourth-year medical student at Baylor College of Medicine. Read Mr. Vyas’s essay.

For the past 4 years, TMLT has awarded a $5,000 scholarship to one student at each Texas medical school that participated in the competition. Scholarship recipients are chosen based on each student’s financial need and written essay. Winning essays will be published on the TMLT web site (www.tmlt.org) and in TMLT’s newsletter, the Reporter. The TMLT Memorial Scholarships recognize Texas medical students who are interested in finding creative ways to enhance patient safety and who can communicate their ideas in a short essay. Applications for the scholarship are available in early spring at www.tmlt.org. The TMLT Board of Governors evaluates the applications and chooses the recipients.

About TMLT

Texas Medical Liability Trust is a physician-owned, health care liability claim trust offering medical liability insurance products to Texas physicians. Created in 1979 by Texas Medical Association, TMLT currently protects more than 14,000 doctors in all specialties practicing in all areas of the state.

FOR IMMEDIATE RELEASE

February 4, 2008

Contact:  Laura Brockway
Manager, Communications and Advertising
(512) 425-5936, laura-brockway@tmlt.org

TMLT to award $40,000 in medical student scholarships

Austin, TX  — One student at each Texas medical school will receive a $5,000 scholarship thanks to the 2008 TMLT Memorial Scholarship program. Launched in 2005, the program awards $40,000 in scholarships annually to Texas medical students who are interested in finding creative and effective ways to enhance patient safety.

Scholarship recipients will be chosen in a competitive process that weighs each student’s financial need along with their ability to evaluate the patient safety concerns in a closed claim study and communicate their recommendations in an essay. Entries will be judged by the TMLT Board of Governors, which is composed of 9 Texas physicians.

All application materials are available here. Deadline to apply for the scholarship is Monday, June 9, 2008. Winners will be announced in September.

To be eligible for the scholarship, applicants must:

• be entering their third or fourth year of study at a Texas medical school in the fall of 2008;
• be in good academic standing;
• be able to demonstrate financial need;
• be able to communicate a commitment to patient safety and medical risk management through an essay; and
• be a current student member of (or have a student application pending with) the Texas Medical Association.

To apply, students should submit the following:

• a completed application (incomplete applications will not be considered);
• an official medical school transcript; and
• a short essay (no more than 500 words) describing the risk management considerations for a closed claim study provided with the application.

Texas Medical Liability Trust is a physician-owned, health care liability claim trust offering medical liability insurance products to Texas physicians. Created in 1979 by Texas Medical Association, TMLT currently protects more than 14,000 doctors in all specialties practicing in all areas of the state.

FOR IMMEDIATE RELEASE

September 5, 2007

Contact:
Dana Leidig
Vice President, Communications and Advertising
512-425-5934, dana-leidig@tmlt.org

AUSTIN, TEXAS… The Governing Board of Texas Medical Liability Trust (TMLT) has approved an unprecedented third straight rate reduction/dividend for TMLT policyholders. The Board has approved a 6.5% rate reduction for all medical specialties and classes effective January 1, 2008. In addition, all current TMLT policyholders renewing their policies in 2008 will receive a dividend equal to 22% of their expiring premium. The total dividend declared is approximately $35 million. The dividend will be applied at policy renewal.

TMLT has reduced rates five consecutive years since the passage of House Bill 4 and Proposition 12 in 2003: 12% in 2004; 5% in 2005; 5% in 2006; 7.5% in 2007; and 6.5% in 2008. The net effect of these cumulative rate reductions amounts to a 31% reduction from 2003 rates and approximately $200 million of premium savings.

The dividend for 2008 represents the third consecutive year TMLT has declared a policyholder dividend. By the end of 2008, renewing TMLT policyholders will have received dividends amounting to approximately $75 million. Since the passage of Prop 12 and medical liability reform of 2003, TMLT policyholders will have realized cumulative savings of approximately $275 million from rate reductions and dividends.

Effective tort reform has reduced claims intake and associated legal expenses. Improved Trust earnings have strengthened TMLT’s financial position making these rate reductions and dividends possible. There is no guarantee that an ever changing business climate will ensure future rate reductions or dividends; however, TMLT continues to work diligently to protect 2003 tort reforms in an effort to keep premiums as low as possible. Rate changes and dividend considerations are determined annually by the TMLT Governing Board, executive management, and financial consultants to the Trust.

FOR IMMEDIATE RELEASE

August 8, 2007

Contact:
Laura Brockway
Manager, Communications and Advertising
(512) 425-5936 or laura-brockway@tmlt.org

Dana Leidig
Vice President, Communications and Advertising
512-425-5934, dana-leidig@tmlt.org

TMLT awards seven scholarships

Austin, TX — Texas Medical Liability Trust (TMLT) is proud to announce the winners of the 2007 TMLT Memorial Scholarships.

• John Chiara is a fourth-year medical student at Texas Tech University Health Science Center School of Medicine. (Mr. Chiara also won the scholarship from Texas Tech in 2006.) Read Mr. Chiara’s essay.

• Paul Chin is a fourth-year medical student at the University of Texas Southwestern Medical School. Read Mr. Chin’s essay.

• Julie Cummings is a fourth-year medical student at the University of Texas Medical Branch at Galveston. Read Ms. Cummings essay.

• Stanford T. Israelsen is a fourth-year medical student at Baylor College of Medicine. Read Mr. Israelsen’s essay.

• Jason R. Pearce is a fourth-year medical student at University of Texas Medical School at Houston. Read Mr. Pearce’s essay.

• Eric South is a third-year medical student at the University of North Texas Health Science Center’s Texas College of Osteopathic Medicine. Read Mr. South’s essay.

• John Wilkinson is a fourth-year medical student at Texas A&M University System Health Science Center College of Medicine. Read Mr. Wilkinson’s essay.

The $5,000 scholarships were awarded to one student at each Texas medical school that participated in the competition. Scholarship recipients were chosen based on each student’s financial need and written essay. Winning essays will be published on the TMLT web site (www.tmlt.org) and in TMLT’s newsletter, the Reporter.

The TMLT Memorial Scholarships recognize Texas medical students who are interested in finding creative ways to enhance patient safety and who can communicate their ideas in a short essay.

About TMLT
Texas Medical Liability Trust is a physician-owned, health care liability claim trust offering medical liability insurance products to Texas physicians. Created in 1979 by Texas Medical Association, TMLT currently protects more than 14,000 physicians in all specialties practicing in all areas of the state.

FOR IMMEDIATE RELEASE:

August 16, 2007

CONTACT:
Laura Brockway
Texas Medical Liability Trust
(512) 425-5936
laura-brockway@tmlt.org
www.tmlt.org

Texas Medical Liability Trust (TMLT) donates $1130 to the new Dell Children’s Medical Center

Austin, Texas – On August 15, 2007, Texas Medical Liability Trust (TMLT) donated $1130 to Dell Children’s Medical Center of Central Texas. The contribution came from TMLT’s annual employee raffle, which was held in July 2007.

The new Dell Children’s Medical Center of Central Texas opened its doors in June 2007 to replace the Children’s Hospital of Austin.

“A large-scale children’s medical center has long been needed in Central Texas,” said Gail Nichols, vice president of human resources, TMLT. “We are proud to support it.”

“We are so grateful to TMLT for their support,” said Missy Wood, executive director, Dell Children’s Medical Center Foundation of Central Texas. “Their generosity will impact the lives of many Central Texas children.”

About Texas Medical Liability Trust
Texas Medical Liability Trust is a physician-owned, health care liability claim trust headquartered in Austin, Texas. TMLT offers medical liability insurance products and services to Texas physicians. Created in 1979 by the Texas Medical Association, TMLT currently protects more than 14,000 doctors in all specialties practicing in all areas of the state.

About Dell Children’s Medical Center
Dell Children’s Center Medical Center is more than triple the size of the Children’s Hospital of Austin. It will offer pediatric inpatient rehabilitation, a mobility gym, fully wireless technology, play and activity rooms, a healing garden and family-friendly patient rooms.

FOR IMMEDIATE RELEASE

June 26, 2007

Contact:
Dana Leidig, Vice President Communications and Advertising
512-425-5934, dana-leidig@tmlt.org

TMLT NAMES NEW PRESIDENT & CEO

Austin, Texas... The Governing Board of Texas Medical Liability Trust (TMLT) has announced their selection of Bob R. Fields as the new president and chief executive officer of the Trust. Mr. Fields has served as acting president and CEO since August 2006. Prior to that, he was executive vice president of claim operations at TMLT.

"I am honored to serve our policyholders in this capacity," said Fields. "TMLT is a physician-owned organization with a long history of leading the medical liability industry in our state. I plan to continue this legacy of providing innovative products and services, strong defense, and advocacy. With over 30 competing carriers, we have some challenges ahead. I am confident the TMLT Governing Board, management team, and excellent staff can meet those challenges successfully."

Mr. Fields has more than 34 years experience in the insurance industry. After working for The Hartford for nearly 13 years, he came to TMLT as a territorial supervisor in 1986. Mr. Fields was named director of the claim department in 1988 and later promoted to executive vice president in 1994. He has an enviable track record in the area of medical malpractice claim management. He is a past member of the PIAA claim section committee and has served as chairman of the state’s JUA claim review committee.

He is a past member of the TMA/TTLA medical malpractice legislative negotiating team, a current member of the Texas Alliance for Patient Access legislative committee, and was a frequent public speaker concerning the need for medical liability reform prior to the passage of House Bill 4 and Proposition 12.

Mr. Fields received a bachelor's degree in business education from Southeast Missouri State University and an MBA, with honors, in 1980. He also served in the U.S. Naval Reserve for more than 23 years before retiring as Captain.

Texas Medical Liability Trust is a physician-owned, health care liability claim trust offering medical liability insurance products to Texas physicians. Created in 1979 by Texas Medical Association, TMLT currently protects more than 14,200 doctors in all specialties practicing in all areas of the state.