A Service Trust is a must for doctors, surgeons and health experts who want to reduce risk and protect their assets, writes Adelaide accountant Kym Nitschke.

For humanity, health and long life has always been the top priority. And will continue to be so, if the ongoing emergence of medical innovations and investment trends are anything to go by.

This health focus has landed medical professionals at the highest peaks of importance within most current societies. However, this responsibility brings with it consequences at times, and often medical professionals find themselves as targets in courtroom battlefields.

A person’s health is serious business. If something goes wrong in a medical setting, whether it be an accident or even the fault of the patient, somebody must take the blame. Medical professionals usually make a substantial sum of money, so when you get a health problem that can be connected to someone of means, the chances of a lawsuit are increased.

It means that for doctors, surgeons and health experts, protecting assets is essential, otherwise just one lawsuit could produce devastating results.

Is Basic Coverage Enough?

Insurance is essential for all professionals, and is more significant to those in the medical field than most people out there. At the very least medical professionals should, without a doubt, have basic and efficient insurance coverage. This is usually mandatory for practicing doctors.

If a medical professional owns property, they should have building and contents insurance. Furthermore, they should have public liability coverage, and business and medical indemnity insurance. But, is this enough?

Today, insurance companies have themselves become professionals at avoiding and fighting claims; they have entire divisions dedicated to securing the latter. A great example of this is a denied claim based on unkempt CPE (Continuing Professional Education) hours, or the lack of completed training hours every year. It is always wise for medical professionals to seek counsel from their insurance broker, so that they can be aided with the best policy for their unique situation.

Insurance companies have an obligation to generate high profits for their shareholders, and unfortunately settling claims and protecting their clients doesn’t always serve this purpose. This unfortunate reality, for medical professionals especially, means higher measures need to be sought after to obtain sufficient protection over assets. This is where the Service Trust comes into action.

Trust the Service Trust

When a medical professional owns their medical practice, their name is usually tied to their Medicare number; thus, their business is under their name. Even when the latter is avoidable, a very seldom scenario, it is still wise for any medical professional to open their business under their name. However, their assets outside of their business should remain under someone else’s name; spouse, child, sibling, etc.

The next step for a medical professional is to set up a Service Trust, alleviating great future risk and acting efficiently to pay staff members. The service fee – typically 30% + staff wages – also produces profit that can be distributed to the medical professional’s family, or other benefactors.

If a medical professional is purchasing property, it is smart to set up a property trust with a corporate trustee. However, the medical professional should make his/her spouse (or other trusted person) the director of the trustee company, and the sole beneficiary; the latter allows for outside assets to be protected under the medical professional’s benefactor’s name in the case of an unfortunate event.

The Assets from Protecting Assets

A Service Trust does not just benefit a medical professional’s payroll and family, there are various situations where this Trust will protect outside assets.

– If a medical professional forgets to pay the PAYG (Pay as You Go) Tax, or other employment related bills, then they can liquidate the service trust, and avoid paying the bills altogether.

– In the event of an unfair dismissal claim, the medical professional can liquidate the service trust, enabling him/her to avoid paying large sums in many situations.

– If a medical professional gets sued, his/her assets are protected because the assets would be in the spouse’s name. Also, a corporate trustee can be liquidated by a registered liquidator, and all money in that entity will become invalid.

Only for Stable Relationships

In many cases, outside assets are owned under the names of both parties in a marriage. However, for medical professionals, it is highly recommended to keep assets, especially real estate, in the spouse’s name. If the medical professional and his/her spouse both can attest that their property is their primary residence, then the former can be accomplished stamp duty exempt and capital gains exempt. Now you can see why it is so highly stressed that medical professionals keep their outside assets in their spouse’s (or other deeply trusted person) name, and not their own.

Nonetheless, although highly recommended, the stability of a relationship will truly decide whether this method is efficient or not. If a medical professional’s relationship is looking bleak, then it may not be wise to have the matrimonial home under the spouse’s name. For medical professionals, ignoring the latter will indefinitely open a whole new realm of nightmares.

It’s crucial to seek personalised advice about Service Trusts and asset protection. Nitschke Nancarrow specialises in accounting, tax and financial advice for medical professionals. Contact us now for a no obligations discussion about your needs.

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