Arizona doctors face a variety of legal and financial threats that must be managed proactively for the most predictable and cost-effective results. Here are some personal asset protection basics that every Arizona doctor should consider. We addressed asset protection for your practice itself in a companion piece in the print version of Arizona Physician magazine
The Elephant in The Room – Malpractice Risk
Statistically, most American physicians will face two medical malpractice claims in during their practice life and Arizona is a “top-ten high risk state” for medical malpractice claims. Traditionally, doctors consider the ever-present specter of a malpractice lawsuit to be the biggest threat to their wealth.
Doctors are also told the following, both of which are true:
- Most med-mal claims don't go to trial
- Most claims settle within policy limits
The problem is, ‘most' is not ‘all', and in some years there are over $100 million in settlements and excess claims paid nationally. So the real question is, what if it's you, and how bad could it be?
In 2022, two of the top ten biggest lawsuit awards of the year in Arizona were medical malpractice claims at $2.8 and $2.1 million, respectively coming in last, at 9th and 10th place.
The number one biggest verdict of the 2022, a $21 million judgement, also involved doctors but it was not a med-mal claim, it was a business dispute between former practice and business partners.
In 2023, however, things were much tougher for physicians. Rather than being the two lowest of the top ten Arizona verdicts, medical malpractice verdicts were the four highest Arizona lawsuit awards of the year, including the largest med-mal verdict in Arizona history at $31.5 million coming in at number one, and verdicts for $10 million, $5.9 Million and $5.2 million making up the second, third and fourth highest awards.
Which Medical Specialties Get Sued the Most?
While all physicians face risk, these are the ten riskiest medical specialties, according to a wide-ranging medical malpractice report that surveyed a national sample of 4,300 physicians across 29 specialties. Factor this into your self-exam of your asset protection risk factors.
1. General surgery
2. Urology
3. Otolaryngology
4. OB-GYN & Women's Health (source of this year's $31.5MM award)
5. Surgery, specialized
6. Radiology
7. Emergency medicine
8. Cardiology
9. Gastroenterology
10. Anesthesiology
Know ALL Your Risk Factors – Think Beyond Malpractice Risk
While the risks above can be significant, they are certainly not your only risks and I continually advise physicians to manage all their risks, including those that extend beyond their office walls. You are also business owners, homeowners, employers, parents, real estate investors, the list is endless, but here are some common, potentially serious non-medical risk factors I consider:
- Do you and or any family members drive a vehicle?
- Do you own a home?
- Do you have employees?
- Do you own liability producing assets, like rental real estate?
- Do you have a legal responsibility to protect medical and financial data?
- Do you have children?
- Do you own a business?
- Are you a board member, officer, or director of a corporation?
- Do you have partners whose actions create joint and several liabilities for you?
- Do you have tail liability for professional services performed in the past?
- Have you made specific legal or financial representations that others have relied upon in a business context?
- Are you exiting a business (including a medical practice) and replacing a large recurring income with a single lump sum? (Especially important if you are selling your practice to a private equity group, which are often litigious).
Factor In Your “Target Value”
Are you worth suing beyond the limits of your med-mal policy, or for any other risk? Is it worth it to spend time and money protecting what you have? I have practiced in this area of law for two decades, but my time before that as a litigator taught me some key lessons about lawsuits:
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Lawsuits are often driven as much by collectability as they are liability. If there are multiple potential defendants in a pool, the most collectible will often be the most aggressively pursued.
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Lawyers (and personal injury lawyers in particular) don't want to waste time pursuing defendants beyond policy limits if they don't have any assets or if their assets are difficult, expensive and time consuming to reach.
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Most people don't know what they have to lose and don't take steps to protect their current hard-earned level of success, whatever that is, until that wealth is threatened. I continually hear, “We didn't think we had enough to worry about” from people who are, bluntly, worried about something bad that happened, when it is too late to implement any effective legal planning.
Personal Residences in Pricey Neighborhoods
Given current soaring real estate values, for many Arizona doctors, home equity is an asset that represents a significant portion of their net worth. Creditor protection for the equity in your primary residence is generally referred to as the “homestead” exemption and is currently limited to $400,000.
Given that we have whole neighborhoods, if not whole zip codes, of multi-million-dollar homes in the Phoenix metro area, that number is obviously inadequate, and you must act to protect your equity using the appropriate legal tools. This includes those with properties titled in the name of a “revocable living trust” or family trust, which does not protect your assets, from your liability, during your life. Finally, please remember that this protection applies to a single primary residence only, so if you have multiple personal residences or vacation homes, those aren't protected in any way, and you must also act to protect them.
As an example, a physician I just spoke with in Scottsdale has a $4.2 million home with only $500K left on the mortgage and the Arizona homestead exemption is $400K. This means he has $3.3 million in exposed equity in his home, or about a third of his family's current net worth. That's an amount worth collecting against for almost any creditor, and the idea that judgment creditors can't or won't take your home is a common anecdotal myth that makes collections attorneys laugh. To determine your home's exposed equity, simply take the current market value and subtract any mortgage or other debt and the $400,000 Arizona homestead exemption.
Investment Real Estate
Any investment real estate you hold personally or in any revocable estate planning entity is exposed to all your personal and professional liability, as is any income stream it produces. Conversely, you are also personally exposed to the significant internal liability of the property if you hold it in your own name. The use of an LLC is most often a simple, well proven and cost-effective solution for holding investment real estate. If it is properly owned by an LLC and you are personally member of that LLC, any income stream it distributes to you is generally also exposed. Pay attention to who (or better what) the member of your LLC is. There are holding company structures that are usually a better choice than you personally.
Taxable Liquid Assets (non-exempt)
Your personal hard-dollar exposure here is the total of the following personal property assets that are titled in your own name, the name of your medical practice, or in the name of any revocable estate planning trust, etc.
- Cash, stocks, bonds, CDs, money market accounts, precious metals, and other taxable liquid cash equivalents.
- Investment grade personal property like jewelry, coins, art, antiques, sports memorabilia, high value firearm collections, etc.
- Income from other sources, including current or expected inheritance distributions, royalties, payments on any notes you hold.
- Intellectual property and any associated income.
- Other business income.
- Your garnishable, personally-earned income; and
- High value “toys” like boats, aircraft, exotic cars, etc.
Exempt Assets (Or are they?)
Arizona law protects very little of consequence by law. There is a long list of exempt personal property in the bankruptcy code, but most doctors don't care about getting to keep one chicken, a cheap car and a sewing machine. Here is the short list of the few big assets that are protected by law. You must act to protect nearly everything else:
- Qualified retirement plan assets, like IRAs, are generally well protected in Arizona, and are wholly exempt (including from bankruptcy) after only 120 days from that date of the last deposit.
- $400,000 of the equity in single primary residence
- The cash value of life insurance and annuities, to an “unlimited” dollar amount.
Pay close attention to details when making these calculations. Many assets are only, “Exempt if…”, meaning specific conditions need to be met. Examples of such assets include Arizona residency requirement for both homestead and the cash value of life insurance, which is protected if personally owned, after 24 months, (or in a life insurance trust), and that may be exposed if the medical practice itself is the policy owner.
What Should Every Arizona Doctor Do Today?
Asset protection takes many individual forms and ranges from simple to complex, but there are some universal basics. Address these core defensive issues now will help protect your assets while you still have the greatest number of predictable, cost-effective options, and a legal right to do so.
Get An Estate Plan
The tool I most often recommend is a Revocable Living Trust to better control the passing of your estate at the end of your life. This tool avoids the expenses and delay of public probate, allows you to make specific decisions about your heirs, name trustees, appoint guardians for minor children, create wills, living wills and medical and financial powers of attorney and other vital functions that could otherwise be left up to the state. Using just a simple will merely pushes the work off down the road on others and creates avoidable expense and delay during a stressful time for your family.
If you have a net worth near or over $10 million, you have a time sensitive estate tax problem that needs to be addressed now. In 2026, every dollar in your estate over $10 million is subject 40% estate tax, which is due within nine months of your passing. There are transfers that ca be made now to take advantage of current high exemptions, but when they're gone, they're gone.
Be Highly Insured For Personal Risks
The single most cost-effective asset protection measure every doctor must implement is a high limits personal liability “umbrella” insurance policy of at least $2 million dollars (ideally more). This is true whether you own or lease your home and cars.
Personal insurance should be implemented with the help of an experienced agent who can explain the features of various polices and available “policy riders” that can be added for an additional cost to extend coverage where needed. Not all polices are created equal and different carriers offer different pricing, options, and, most importantly, different exclusions.
Examine Disability Insurance (Three Kinds)
Most doctors' greatest asset is their ability to earn. As with the other insurance referenced above, the specifics of your disability matter and your coverage should be both sufficiently limited to your ability to practice your “own occupation” as you do now and adequate to cover your fixed personal overhead. Coverage beyond your personal disability insurance may be warranted to cover the loss of a high-producing partner or employee (key-person disability) as well as the fixed business overhead costs that may be jeopardized by loss of income after the disability of yourself or another (disability overhead expense).
Use Defensive Legal Structures
Determining which specific legal structures apply to your unique fact pattern requires individual diagnosis, but there are three general rules that should always be observed.
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Act now; the only time you can legally and effectively move assets into these structures is before you have an exposure. Doing so after the fact will fail and is typically regarded as fraud.
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Segregate your personal and professional assets so that they are distinct from you and from each other. We use business tools for business assets and personal tools for personal assets.
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Properly structure entities with an operating agreement as opposed to just "recording" an LLC, formally fund them with title transfers, have legitimate business purpose, and maintain proper legal formalities, including tax ID numbers and separate bank accounts.
These comments are meant to apply to the widest possible physicianaudience and can't substitute for personalized professional guidance. Please get fact specific help from a qualified professional while you have the right to do so.
