New Physician Couple in Texas Need Advice

[manny61986]

Hi,

My wife and I will start practicing family medicine (myself in private group practice and she will be with a larger organization) in Texas starting this August.  Does anyone have any advice in terms of how to set up asset protection for a physician couple or can point me to someone in Texas familiar with all the laws.  I know there is a homestead act but with both of us having high incomes we want to make sure our assets are protected.  We will be purchasing umbrella insurance and disability along with malpractice at 200k/600k limits which I have been told is the norm for a Texas GP.

Thanks

[The White Coat Investor]

The first thing I'd do is get higher malpractice limits. $200K seems like a very, very small limit to me. I carry $1M/$3M, the norm for my specialty and state. Buy a few million in Umbrella insurance, max out your retirement accounts and maybe pay off your mortgage sooner than you would if you lived in a state like mine that doesn't have much homestead protection. And be sure to get a gun and some chickens. They're all protected by Texas law.

I don't know these guys but they know a lot more about Texas asset protection law than you and I combined:

http://www.lonestarlandlaw.com/Asset-Protect.html

His site advocates for a lot of more complicated and expensive measures that require an attorney's services that you probably won't ever need, but if you're really paranoid about asset protection, there are lots of folks who will take your money to design something for you.

This is my favorite Texas asset protection law:

Protection of Personal Property

It is not just realty that is protected. Chapter 42 of the Property Code states that personal property valued at $60,000 for a family or $30,000 for a single adult (exclusive of liens) is exempt from garnishment, attachment, execution or other seizure so long as it is on the following list:

§ 42.002. Personal Property

(1) home furnishings, including family heirlooms;

(2) provisions for consumption;

(3) farming or ranching vehicles and implements;

(4) tools, equipment, books, and apparatus, including boats and motor vehicles used in a trade or profession;

(5) wearing apparel;

(6) jewelry not to exceed 25 percent of the aggregate limitations prescribed by section 42.001(a);

(7) two firearms;

(8) athletic and sporting equipment, including bicycles;

(9) a two-wheeled, three-wheeled, or four-wheeled, motor vehicle for each member of a family or single adult who holds a driver’s license or who does not hold a driver’s license but who relies on another person to operate the vehicle for the benefit of the nonlicensed person;

(10) the following animals and forage on hand for their consumption:

(A) Two horses, mules, or donkeys and a saddle, blanket, and bridle for each;
(B) 12 head of cattle;
(C) 60 head of other types of livestock; and
(D) 120 fowl; and

(11) household pets.

[Dicast]

I practice EM in Texas.  Our group standard is 1m/3m occurrence based and my hospital's minimum is 200k/600k.  As much as it makes sense to buy a big house because it is protected under the law, just remember that there are no state income taxes (yay!) but Texas makes up the difference in property tax.  At 2.5% of assessed value for my locale a 500k home will run you 12.5k a year in taxes...which is more than I pay in malpractice insurance.  So if you buy a 1 million dollar house and pay 25k a year in taxes, over a decade you're losing over 100k to "protect" your money.

We use TMLT because they have a long track record of protecting our physicians' interest first.

[manny61986]

Great, thank you for the information it definitely helps!

[BigLaw1636]

Key things to know in Texas are (i) strong homestead protection (noted above), (ii) IRAs also are protected from creditors even in the case of bankruptcy (unlike in some other states) and (iii) physician-friendly medical tort-reform makes the environment less litigious ($250k cap on non-economic "pain and suffering" damages, etc.).  Note that, unless you have some unusual marital agreement, all of the assets that you each earn during your marriage while being residents of Texas will be community property.  Essentially you each have a 50% interest in all community property, but all community property (the entire 100% interest) is subject to claims for torts (including malpractice) committed by either spouse during the marriage.

[Docbeans]

The White Coat Investor wrote:

The first thing I’d do is get higher malpractice limits. $200K seems like a very, very small limit to me. I carry $1M/$3M, the norm for my specialty and state. Buy a few million in Umbrella insurance, max out your retirement accounts and maybe pay off your mortgage sooner than you would if you lived in a state like mine that doesn’t have much homestead protection. And be sure to get a gun and some chickens. They’re all protected by Texas law.

I don’t know these guys but they know a lot more about Texas asset protection law than you and I combined:

http://www.lonestarlandlaw.com/Asset-Protect.html

His site advocates for a lot of more complicated and expensive measures that require an attorney’s services that you probably won’t ever need, but if you’re really paranoid about asset protection, there are lots of folks who will take your money to design something for you.

This is my favorite Texas asset protection law:

Protection of Personal Property

It is not just realty that is protected. Chapter 42 of the Property Code states that personal property valued at $60,000 for a family or $30,000 for a single adult (exclusive of liens) is exempt from garnishment, attachment, execution or other seizure so long as it is on the following list:

§ 42.002. Personal Property

(1) home furnishings, including family heirlooms;

(2) provisions for consumption;

(3) farming or ranching vehicles and implements;

(4) tools, equipment, books, and apparatus, including boats and motor vehicles used in a trade or profession;

(5) wearing apparel;

(6) jewelry not to exceed 25 percent of the aggregate limitations prescribed by section 42.001(a);

(7) two firearms;

(8) athletic and sporting equipment, including bicycles;

(9) a two-wheeled, three-wheeled, or four-wheeled, motor vehicle for each member of a family or single adult who holds a driver’s license or who does not hold a driver’s license but who relies on another person to operate the vehicle for the benefit of the nonlicensed person;

(10) the following animals and forage on hand for their consumption:

(A) Two horses, mules, or donkeys and a saddle, blanket, and bridle for each;
(B) 12 head of cattle;
(C) 60 head of other types of livestock; and
(D) 120 fowl; and

(11) household pets.

Click to expand...

WCI, those low liability coverage limits of $200/600 are likely the norm in TX. TX has the lowest required limits in the country. FL is a close second with minimum required (and most common[except for those going bare]... though I don't know %) limits of $250/750. Throughout the rest of the nation, $1/3M are the most common coverage carried by doctors, though hospital systems and health insurance plans may hv different requirements.

[The White Coat Investor]

I don't use the lowest limits legally allowed on my auto insurance liability. I don't know why I'd do it for malpractice. $200K in economic damages seems VERY easy to hit to me.

[Docbeans]

I agree. Those just happen to be the most commonly carried numbers in those places. Everyone needs to assess their MP risk and their tolerance for it- whatever lets you sleep at night.

[Crazyroadtodublin]

I agree with the above, but it is important to remember that Texas underwent tort reform several years ago.  The result was that many attorneys (ambulance chasers) had to change fields.  Caps on pain and suffering, Medical experts who testify must be practicing physicians in Texas and several other changes have dramatically decreased the number of lawsuits.  I have heard some areas (south Texas-the valley and east Texas) tend to have more cases filed.  As always WCI offers sage advice- get a horse and a gun-They can't take that away from you. 

[benign_user]

My employer has me at 500k/1million. I asked about increasing it to 1mill/3mill and the employer said I'd become a bigger target for lawyers if I have the higher malpractice coverage. Is there validity to his reasoning?  Our specialty doesn't get sued often.

[AlexxT]

California also has a 250k cap for pain and suffering, but that doesn't stop multi-million dollar awards based on lost income, etc.

[Zaphod]

AlexxT wrote:

California also has a 250k cap for pain and suffering, but that doesn’t stop multi-million dollar awards based on lost income, etc.

Click to expand...

I think sometimes people forget about medical/economic damages not being limited. Sadly I am more leery of wealthier patients because of this, what a perverse way of looking at things this system causes.