Estate Planning for Medical Professionals

Estate Planning for medical professionals

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The Law Office of Alan C. Stein, P.C. is a full-service law firm providing clients with the highest caliber of legal services. The firm has the breadth of practice and experience to handle the most complex medical practice and estate planning matters.

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Medical school teaches many things, but estate planning isn’t one of them. There’s no course on what should happen to your medical or dental practice if you are incapacitated, are in an accident, or pass away. And there’s definitely nothing taught about the importance of protecting your assets, avoiding probate, and planning for estate taxes.
Although doctors or dentists pick up skills along the way such as how to survive on a handful of hours of sleep, and the quickest dinner options after a long day of seeing patients, financial planning and estate planning are not included. But it’s your financial future we’re talking about here; it’s a bit more important than deciding between takeout burgers or pizza for dinner (even if they are vegan!).
Then there’s the unfortunate reality that the stakes are higher for doctors or dentists than most professionals. High tax rates and the ever-present threat of malpractice claims mean that doctors or dentists face a number of challenges to their financial health and that of their families, both during their lifetime and after their passing.

You became a doctor or dentist to help people, but the long hours and high-stress levels take their toll, and caring for others can come at the cost of caring for yourself and those closest to you. If you have a family and children, estate planning is one of the most important steps you can take to protect them. You can’t afford to be like almost half the American population who “haven’t gotten around to it.” As a doctor or dentist, it’s not something you can put off until you have more time.

ESTATE PLANNING FOR DOCTORS OR DENTISTS

7 Steps to Plan Your Estate

These are some of the steps that your estate planning attorney will walk you through. Everyone’s needs are different so the exact order and specific steps may vary to address your specific situation.

1. Create a Will

A will means that you get to decide who gets your assets when you pass away. It allows you to distribute your property, as well as name an executor and guardians for your children. This is the absolute minimum that you need to have in place, but it isn’t always enough to avoid probate, so keep reading…

2. Create a Net Worth Statement

A net worth statement is a list of your assets and liabilities. It includes your life insurance policies, bank accounts, cash holdings, real estate, loans, debt, and mortgages. This will give you a good idea of your current financial standing and means that you can take the next step.

3. Set up a Revocable Trust

This is a vital step for medical professionals as a revocable trust will prevent your assets from going through the probate process and your family can be taken care of quickly and efficiently. If your estate is over the estate tax exemption threshold, you will need to discuss additional estate planning strategies with your attorney. Also, if you run your own practice, you will need to appoint a Special Trustee that is licensed to manage the practice until it is sold. A revocable trust will not protect your assets from malpractice claims, so make sure to discuss that with your attorney.

4. Formalize a Buy-Sell Agreement

If you are in a partnership with other doctors or dentists, there needs to be an agreement between the partners as to how the value of the practice will be determined. This will prevent other partners from taking over patients without passing on value to your estate.

5. Establish an Asset Protection Trust

Because a straightforward revocable trust doesn’t offer asset protection, you need an instrument that will protect you against malpractice claims. An asset protection trust is often combined with a Family Limited Partnership, an LLC, or a Private Retirement trust.

6. Consider a Division of Business Assets

The 2018 Tax Reform means that doctors or dentists are unable to benefit from most income tax cuts. You may consider a division of your assets between the medical equipment, your office, and the practice of medicine for better asset protection and to meet the income thresholds for a larger tax break. These structures are created in close consultation with an experienced CPA.

7. Make Provisions for Your Spouse

For many families, the doctor is the sole or major breadwinner in the home. This income discrepancy may mean that you need to draw up pre-nuptial or post-nuptial agreements to keep assets separate or purchase life insurance as a replacement income stream for your family after your passing.