Should You Pay Off Your Home Mortgage To Protect It From Malpractice Claims? By: Marc Singer, MBA, CFP Question: I am a high-risk physician who may consider going bare. I would like to accelerate the payments on my home mortgage since it is a protected asset. Is this a good idea? Answer: In this situation, you should not go with your intuition, which correctly identifies your home as being the safest asset from malpractice claims. It is the only asset protected by Florida's constitution, whereby retirement plans and annuities are protected by Florida statutes. Instead, this decision should be part of the strategic puzzle of protecting your assets through the difficult ordeal of a malpractice lawsuit. Most assets can and should be protected well in advance of a suit, thus avoiding fraudulent conveyance problems. One of the largest assets of many physicians is their future income, which continues to be earned throughout a lawsuit. A doctor's income is a much more difficult asset to protect. For example, a doctor earning $300,000 per year will have total earnings of $1.5 million during the 5-year timeline of a typical malpractice suit. Paying off a mortgage is the best way to protect post-lawsuit income.   Accelerating mortgage payments is not actually a transfer of assets, but rather is considered a payment to a creditor (the mortgage holder). Since it is not a transfer, it is very difficult to claim this is a fraudulent conveyance. In order to use this strategy, it is essential that the physician maintain a mortgage on their home. We recommend a mortgage in the amount of 3-4 years of excess cash flow. In the above example, if the physician earns $300,000 yearly, with annual savings of $80,000, the mortgage should be for at least $320,000. Of course, it is important that all wages pass through a segregated wage account in order to maintain a protected status. The other advantage of having a mortgage is that interest rates are at a 40-year low, and a home mortgage remains one of the best tax deductions.   "Don't go with your intuition...wait until after you are sued to pay down your mortgage.  Save the safest asset for last." In conclusion, physicians should not pay off their mortgage early if not sued, since this is the safest asset trump card to be utilized right up until an actual malpractice trial. This provides a significant safety net for assets earned during the period of an ongoing lawsuit. Reprinted from Florida Medical Business Singer Xenos does not provide legal advice. Please consult with your own legal counsel.