Litigation Education: Protecting Your Assets in a Litigious World

Foreword by Kristi Wright 
The need to protect your assets in a litigious society is essential but often overlooked. If you’re a physician or a professional in a high-liability field, this is a topic you can’t afford to ignore. And frankly, even if you’re not in a high-stakes profession, building wealth can put you at risk. Frances Cronlund, S.V.P., Senior Wealth Advisor for Curi RMB Capital, explains why.

When someone knows or thinks you’re wealthy, their motivation to seize your assets can be strong. This is especially true in professions like medicine, where medical malpractice lawsuits can arise. But even without a medical professional connection, anyone with significant assets can be targeted by creditors or plaintiffs. 

So, how can you potentially safeguard your hard-earned wealth? The answer is to start early. Ideally, asset protection should begin as soon as you start accumulating wealth. For many, that’s right after completion of education or training. Here are key strategies to consider for protecting your assets:

1. Your first line of defense is to ensure adequate liability insurance coverage. Professional and personal liability insurance will defend you and pay any claims up to their policy limits. You probably already have auto and home insurance. But do you also have an umbrella insurance policy? An umbrella policy sits over your existing auto and homeowner’s insurance, extending your liability coverage. Most physicians opt for umbrella limits between $5–$10 million, depending on their exposure. Remember that your personal auto, home, boat, or umbrella policy does not provide you with coverage for professional liability, such as medical malpractice claims. For that, you need a medical professional liability policy.
   
   
2. But what if the plaintiff’s claim is larger than your policy limit? Not all of your assets are protected. Unprotected assets might include cash and taxable investment accounts, rental properties, or even your future earnings. 
   
   
3. On the other hand, assets like 401(k)s, life insurance, and primary residences may have legal protections depending on how they’re titled and your state’s laws. So, it is important to maximize protected asset types.
    
   1. • Consider maxing out contributions to retirement accounts like 401(k)s, 403(b) Cash Balance Plans, and IRAs governed by ERISA laws are often shielded from creditors.
      • State homestead exemptions can protect the equity in your primary residence. Just keep in mind, the level of protection varies by state. Consider adding a spouse to your home title, which may make a big difference.
      • Some states also offer Tenants by Entirety for your homes as well as your bank or investment accounts.
        
        
4. Think about proper asset titling. Options like creating business entities, such as LLCs for rental properties, can help limit liability. Keep business and personal assets separate. Mixing the two can be a recipe for vulnerability.
   
   
5. Consider funding irrevocable trusts. These can protect assets while also assisting with estate planning. Transferring assets to family or charity can reduce your estate’s exposure.

Asset protection isn’t a one-size-fits-all approach. What works for your colleague or neighbor may not be right for you. A tailored strategy is crucial. And yes, there can be trade-offs. For example, setting up a multi-member LLC or an irrevocable trust may require you to relinquish full control of your assets. Additionally, there are costs involved, like hiring attorneys or tax professionals to maintain compliance.

Timing is everything. If you try to move assets after a lawsuit is filed, you could run into the ‘fraudulent transfer doctrine.’ In most states, this allows plaintiffs to reclaim assets transferred after an adverse event or legal claim arises. So, the best time to start protecting your assets is before a problem arises.

Let’s shift gears for a moment. Recently, my teenage daughter hit a major milestone—she passed her driving test! While we’re proud and excited, we also took this as an opportunity to review our personal liability coverage.

As a parent, I trust my daughter’s driving skills, but we’ve all heard the phrase, ‘It’s the other drivers you need to worry about.’ And they are one of the main reasons drivers need the proper amount of auto insurance coverage. Excess liability claims in your personal life—whether from a car accident, property damage, or even volunteering—can be financially devastating. And as a physician or high-net-worth individual, you’re seen as a prime target for claims.

At the end of the day, protecting your assets isn’t just about insurance or how to protect your wealth—it’s about strategy. A good financial advisor can help you prioritize your goals, calculate your risk, and create a plan that minimizes your liability exposure.

For more insights into the litigation process, listen to Dr. Gita Pensa’s podcast: Doctors and Litigation: The L-Word, and watch Curi’s litigation education video fifteen, Asset Protection Strategies.

The opinions and analyses expressed in this blog post are based on Curi RMB Capital, LLC’s (“Curi RMB”) research and professional experience are expressed as of the date of our blog publishing. Certain information expressed represents an assessment at a specific point in time and is not intended to be a forecast or guarantee of future results, nor is it intended to speak to any future time periods. Curi RMB makes no warranty or representation, express or implied, nor does Curi RMB accept any liability, with respect to the information and data set forth herein, and Curi RMB specifically disclaims any duty to update any of the information and data contained in this blog. The information and data in this blog do not constitute legal, tax, accounting, investment, or other professional advice. Returns are presented net of fees. An investment cannot be made directly in an index. The index data assumes reinvestment of all income and does not bear fees, taxes, or transaction costs. The investment strategy and types of securities held by the comparison index may be substantially different from the investment strategy and types of securities held by your account. RMB Asset Management is a division of Curi RMB Capital.   

The content contained herein was generated by Curi RMB Capital with the assistance of an AI-based system to augment the effort. 

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