Can I Lose My House if I Get Sued?

Mark Crane

Disclosures

May 18, 2016

In This Article

Recovering a Physician's Assets Is Difficult

Each state has its own rules about which assets can be attached, but many physician assets are exempt from collection efforts.

"Remember when O.J. Simpson moved to Florida in 1999 after a civil jury found him liable in the deaths of Nicole Brown Simpson and Ronald Goldman?" said Michael Sacopulos. "One reason may be because the law in Florida says a defendant's residence cannot be attached. You could own a waterfront mansion worth millions of dollars, but a plaintiff won't be able to touch it."

Laws around the country also provide substantial protection for primary residences. "In Colorado, the law is that the first $105,000 of equity in a house for people aged 60 and older is exempt from execution," said Nancy Miller. "It's $75,000 for younger defendants.

"If the defendant is married, the house may be held jointly, making it more difficult to collect on," she said. "There's also usually a mortgage to be satisfied. Even in the rare case where the plaintiff can attach the home, he or she would have to market and sell it. It's a lengthy and costly process."

Joint accounts are considered marital property and are difficult to collect on. If your practice is a limited liability company, a building the practice owns can also be exempt. Retirement accounts, such as 401(k)s and IRAs, are often protected, as are cash-value life insurance policies, she said.

Transferring assets to a spouse provides less protection than many physicians think. "Any such transfer should be part of an overall integrated estate plan," said Nancy Miller. "If the transfer is made after the doctor had reason to know that he could face a legal judgment, and especially after a suit has been filed, courts have deemed those transfers to be fraudulent. So any protection would be lost."

In addition, lawyers say it's especially important to be confident in the strength of your marriage. If your spouse divorces you or dies before you do, any protection will be lost. If the spouse is holding assets that the defendant actually controls, a creditor might be able to collect. Transferred assets must truly become the spouse's property.

"Some doctors spend a lot of money on asset protection schemes," said Sacopulos. "They can be expensive. It's probably smarter to purchase more malpractice insurance." Nancy Miller believes the best asset protection is contributing to a retirement account.

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