When the newly minted physician completes their residency and begins practicing, the last thing on their minds is getting their estate plan in order. Instead, according to a recent article titled “Physicians, get your estate in order, or the court will do it instead” from Medical Economics, they should make it a priority. Physicians accumulate wealth to a greater degree and faster than most people. They are also in a profession with a higher likelihood of being sued than most. They need an estate plan.
Estate planning does more than distribute assets after death. It is also asset protection. An estate planning attorney helps physicians, dentists, and other medical professionals protect their assets and legacies.
Primary estate planning documents include a last will and testament, financial power of attorney, and medical power of attorney. However, the physician’s estate is complex and requires an attorney with experience in asset protection and business succession.
When creating an estate plan, the physician will need to determine who they would want to serve as a guardian if there are minor children and what they would like to occur if all of their beneficiaries predecease them. Physicians should draft a list with all assets, debts, including medical school loans, life insurance documents, and retirement or pension accounts, including the names of beneficiaries.
The will is the center of the estate plan. It will require naming a person, typically a spouse, to be the executor: the person in charge of administering the estate. If the physician is not married, a trusted relative or friend can be named. You should also name a second person if the first cannot serve.
If the physician owns their practice, they should augment the estate plan with a business succession plan. The will’s executor may need to oversee decisions regarding the sale of the practice. A trusted friend with no business understanding or knowledge of how a medical practice works may not be the best executor. These are all critical considerations. Special considerations apply when the “business” is a professional practice, so do not make any moves without expert estate planning assistance.
They will only control assets in the individual’s name. Assets owned jointly, or those with a beneficiary designation, are not governed by the will.
Without a will, the entire estate may need to go through probate, which is lengthy and expensive. For one family, their father’s lack of a will and secrecy surrounding his affairs took 18 months and cost $30,000 in legal fees to settle the estate.
Trusts are an option for protecting assets. By placing assets in a trust, they are protected from creditors and provide control in complex family situations. The goal is to create a trust and fund it before legal actions occur. Transferring assets after a lawsuit has begun or after a creditor has attached an asset could lead to a physician being charged with fraudulent conveyance—where assets are transferred to avoid paying creditors.
Estate planning is never a one-and-done event. If a doctor starts a family-limited partnership to transfer wealth to the next generation but neglects to maintain the partnership properly, some or all of the funds may be vulnerable.
An estate plan needs to be reviewed every few years, and every time a significant life event occurs, including marriage, divorce, birth, death, relocation, or a substantial change in wealth.
When consulting with an experienced estate planning attorney, a doctor should ask about the potential benefits of revocable living trust planning to avoid probate, maintain privacy and streamline the administration of the estate upon incapacity or at death.
Reference: Medical Economics (Feb. 22, 2022) “Physicians, get your estate in order, or the court will do it instead.”