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A Service Trust is a must for doctors and health experts who want to reduce risk and protect their assets.
Medical professionals are looked at with high esteem within society, as we all look for a healthy and long life. However, this brings with it costs at times, and often medical professionals find themselves as targets for litigation.
A person’s health is serious business. If something goes wrong in a medical setting, someone usually must take the blame. As medical professionals usually make a substantial amount of money, the chances of a lawsuit are increased.
It means that for doctors and health experts, protecting your assets is absolutely essential. It can only take one lawsuit to have devastating result to your wealth.
Is Insurance Enough?
Insurance is an essential part of business for all professionals and is more substantial to those in the medical profession than most other professions. At the very least medical professionals should have basic and efficient insurance. This is usually compulsory for medical professionals.
If a medical professional owns property, they should have building and contents insurance. They should also have public liability, cyber attack, business and medical indemnity insurance. But, is just having insurance enough?
Insurance companies have an obligation to generate profits for their shareholders, and unfortunately settling claims does not always serve this purpose. This regrettably means other measures need to be put in place to have sufficient and effective protection over assets. This is where the Service Trust comes into play.
Trust the 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. However, their assets outside of their business should be held under someone else’s name – spouse, child, sibling, etc. This is where you split the risk and the assets – the person with the risk should not hold the assets.
The next step for a medical professional is to establish a Service Trust, lessening future risk and allowing for the efficient system to pay staff members and rent premises. The service fee – typically 30-40% of the Doctors billings – produces profit for the trust. This can then be distributed to family, or other beneficiaries. The ATO have benchmarks for Service Fees. Anything outside of the benchmark will need to be justified to the ATO under an audit.
If a medical professional is looking to acquire a property, it is wise to set up a property trust with a corporate trustee. However, the medical professional should make his/her spouse (or another trusted person) the director of the trustee company, and the sole named beneficiary. This allows for assets to be protected under the medical professional’s benefactor’s name in the case of an unfortunate event.
Only for Steady Relationships
In most cases, assets are owned in 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 it will be capital gains exempt.
Now you can see why it is so important that medical professionals keep their assets in their spouse’s (or other deeply trusted person) name, and not their own.
Nonetheless, although highly recommended, the stability of the relationship will really decide whether this method is effective or not.
It’s vital to seek personalised advice about Service Trusts and asset protection. OnPoint Advisory specialises in accounting, tax and financial advice for medical professionals. Contact us now for a no obligations discussion about your needs.