Wary of having a large taxable account (asset protection)

[Papaya]

I don't have very much tax-advantaged retirement account space. My spouse and I have one TSP, two Roth IRAs, and one HSA. Our dual-income trajectory makes it clear that our taxable account will be the lion's share of our nestegg.

My question: How iron-clad is tenants by the entirety titling for asset protection against a malpractice judgment against one of us? Our state protects TBE assets, but I am left with a vague anxiety about the entire nestegg being exposed over some legal loophole or something.

Some background: My group pays for $250K/$750K malpractice, and I've been advised that upping those limits will make me a more attractive litigant. I have plenty of umbrella insurance for other liability. I am comfortable with my divorce risk.

Should I stop worrying?

Thanks for reading.

[Zaphod]

Papaya wrote:

I don’t have very much tax-advantaged retirement account space. My spouse and I have one TSP, two Roth IRAs, and one HSA. Our dual-income trajectory makes it clear that our taxable account will be the lion’s share of our nestegg.

My question: How iron-clad is tenants by the entirety titling for asset protection against a malpractice judgment against one of us? Our state protects TBE assets, but I am left with a vague anxiety about the entire nestegg being exposed over some legal loophole or something.

Some background: My group pays for $250K/$750K malpractice, and I’ve been advised that upping those limits will make me a more attractive litigant. I have plenty of umbrella insurance for other liability. I am comfortable with my divorce risk.

Should I stop worrying?

Thanks for reading.

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I dont know the reasoning about your limits as that doesnt make any sense. The only time they would know that is after something has been initiated. What you need to be aware of is your states limits, laws etc....Being in a capped state is very nice in this regard. I would probably have 1/3mil to protect myself rather than take the crowd wisdom, no one is going to not pursue you because you have "only" 250/750k, they will simply get what they can and the rest elsewhere if your state doesnt have limits. I dont know what the cost differential is, but its probably worth it, at least to add 4x protection to your nest egg.

[DarrVao777]

What about placing the money under a spouse's name if he/she isn't in medicine?

I understand the risk of divorce is probably significantly higher than the risk of a malpractice settlement that exceeds insurance limits

[Zaphod]

DarrVao777 wrote:

What about placing the money under a spouse’s name if he/she isn’t in medicine?

I understand the risk of divorce is probably significantly higher than the risk of a malpractice settlement that exceeds insurance limits

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So, so much worse. Almost all doctors will eventually face litigation in their careers. However, the great majority will not be found at fault. Even those found against it is ever so rare to come close to exceeding limits. Choose your state of practice wisely. Vote with your feet and these laws will change, its bad for everyone (except the malpractice firms of course).

[VagabondMD]

I do not know what your specialty is, what your exposure is, and what your community standard for coverage is, but $250k/$750k is well below what is the standard in our community ($1M/$3M--some I know even do $2M/$4M), and I do not think I would be comfortable with that level of coverage. Remember, too, that a med mal case costs upwards of $80-100k for the plaintiff side to put together on spec, so the cases against you, if any, are going to be aiming for far greater than $250k. And they might be able to garnish future wages to pay for a claim.

I have a good friend who is a very successful med mal plaintiff attorney, and he has informed me that it is extremely rare for physicians to be tapped beyond their coverage. In his own experience, he only once pushed it beyond coverage limits, when the defendant, in this case a dentist, was more than negligent, but frankly mean-spirited to his client throughout their relationship that culminated in a successful malpractice case against the dentist. In this case, the dentist was under insured, maybe intentionally so, and the true damages from missing a growing mouth cancer on multiple occasions were significant.

I think you are worrying about the wrong issue here.

[Docbeans]

Addressing the amount of malpractice coverage, it is possible OP is in FL- which allows a lower than national avg for minimum malpractice limits. The national avg is $1M/3M. The lowest limit is in TX: $200k/$600k. FL is next. The minimum as well as commonest coverage amount in FL is 250/750.

[amphora]

The key here is the umbrella insurance. If you have $5 million of umbrella insurance you should be able to sleep sound.

[Zaphod]

amphora wrote:

The key here is the umbrella insurance. If you have $5 million of umbrella insurance you should be able to sleep sound.

Click to expand...

How will umbrella insurance help?

[childay]

Zaphod wrote:

amphora wrote:

The key here is the umbrella insurance. If you have $5 million of umbrella insurance you should be able to sleep sound.

Click to expand…

How will umbrella insurance help?

Click to expand...

Clearly it wouldn't help for a malpractice suit

[VagabondMD]

The only thing worse than having a large taxable account is having a small taxable account. Max out your tax deferred opportunities and then still save as much as you comfortably can. People who have a large taxable account are less likely to have financial difficulties. Don't overthink it.

[afan]

The level of protection provided by TBE is state specific, so you need to check with a lawyer familiar with the laws of your state. If your state does provide strong protection then you are in good shape using it.

 

 

[AlexxT]

Don’t put assets in your spouse’s name. Divorce is more common than a malpractice claim higher than malpractice insurance coverage.

Get more malpractice insurance.

Umbrella insurance is important to have but won’t cover malpractice.

[MPMD]

Not to pick on the OP in any way, but my general sense is that America is full of docs who have an 8% savings rate, $150k of student loans 9 years into practice, and 2 car payments for Beemers who spend a decent amount of time worrying about losing personal assets in a med mal case.

 

[PhysicianOnFIRE]

Vagabond MD beat me to it. I'd rather have assets at a very small risk than no assets to risk.

We have titled our 7-figure taxable account as joint tenants by the entirety.

[VagabondMD]

Old thread, which I did not remember, but I read the title, and my gut reaction was: "The only thing worse than having a large taxable account is having a small taxable account." I guess my feelings have not changed.