Asset Protection for Accounts Receivables

In certain types of professions, such as Physicians, Clinics, Lawyers and Accountants, Accounts Receivables may be the largest asset. These professions sometimes have millions of dollars of receivables due. The threat of professional lawsuits threatens these very valuable assets.

The concepts of Accounts Receivable (AR) should be the following:

1. To protect the asset from creditors, and

2. To turn a stagnant asset into one that yields revenue.

The primary users of AR plans are physicians. Physicians are in a particularly high-risk profession and vulnerable to lawsuits. Usually physicians and these other professionals form entities separate from themselves to conduct their business. In many cases, these entities alone are not enough to protect the liability flow through of lawsuits. This means that personal liability can flow from company liability if it is not structured properly straight through to the personal assets, even with malpractice insurance.

A professional must be concerned about the assets already in the company, the assets due to the company and the flow through to personal property in the event that the insurance does not cover the amount of the judgment.
It would seem that a single practitioner is more at risk than a multiple professional practice. A single practitioner is solely responsible, meaning the assets in the practice and the potential liability may not be enough to cover a judgment.

However, in a multiple partnership, any of the partners can be held liable for a judgment against the partnership, practice or business. This also means that all the Account Receivable in the company and their personal assets are at risk from a judgment against the other partners, even if a partner has done nothing wrong.

This puts the Accounts Receivable of every professional in the company at great risk of being seized. To make matters worse, practices can also be sued for the actions of their employees.

There are two common elements for protecting Account Receivables. If there is already a claim or pending suit, it may be too late.

1. A loan collateralized by the AR.
2. A cash value life insurance policy funded by the proceeds of the AR.

AR protection plans are designed to use the tax advantages associated with life insurance to create cash value.