A Physician’s Guide to Estate Planning

Jan 22, 2018

Doctors are just like anyone else – you have a family and friends you care about, and you have assets that you have worked hard to earn and grow throughout your career. Estate planning is essential for anyone who wants to provide for their loved ones and who have assets to protect. However, estate planning is particularly necessary for physicians. As a physician, your personal assets may be at a higher risk for liabilities than the average person. To protect your assets and preserve your estate for future generations, you will need to familiarize yourself with your estate planning options and work with an attorney to continually adapt your estate plan to reflect your financial and familial circumstances.


Why do I need an estate plan?

The most critical functions of an estate plan are:

1. To choose who will care for your minor children should you become incapacitated,


2. To minimize assets that pass through probate.


If you have minor children, this is the most critical function of an estate plan. You will need to select a trusted and willing individual who can care for your children until they reach the age of 18. Because minors are not able to inherit assets, you may also want to set up a trust that allows you to provide for your children’s’ care, education, and other expenses.

Probate is the state-specific court process through which a judge determines how an estate is distributed. If you write a will, this is where the will is evaluated and approved as legitimate. The probate process can be expensive, time-consuming, and difficult for family members who are grieving the loss of their loved one. It is also public, meaning that all proceedings will become part of the public record. This includes the will and the pieces of the estate that pass through probate. As a way of avoiding the time, expense, and publicity of the probate process, you can use your estate plan to transfer as many assets as possible outside of probate.


Avoid Making the Big Mistakes

Too many people make big mistakes with their estates. By far the biggest mistake is failing to plan. The purpose of an estate plan is to have a record in place of what you want should the unexpected happen. Because the unexpected can happen at any time, it is essential to prepare your estate plan as soon as possible. If you pass without the necessary documents in place, your estate will move through probate and will be subject to the default laws in your jurisdiction. Very likely, this will not create the result you want.

The second big mistake is to fail to update documents. All too many people draft an estate plan early in their careers and then never revisit it. As your career progresses and your family structure changes, it is likely that your assets and your priorities will change. In order to adapt to new circumstances, estate planning should be an ongoing process throughout your lifetime. After any significant life events, your estate plan should be revisited with a trusted attorney and tweaked to match your current situation.

This will also be essential for those non-probate assets. Bank accounts, insurance policies, and other financial assets may have beneficiary designation forms. If you haven’t revisited those forms in a while, or if you aren’t sure you ever filled them out, it is essential to review and update them to ensure that your assets pass to the right person. Regardless of what you may write in your will, beneficiary designation forms control. An old beneficiary designation form will win out over conflicting information written in a will.

Store your estate planning documents in a safe place and make sure that your loved ones know where these documents are kept. Make copies and distribute them to the essential people listed in your estate plan, such as named guardians for minor children, the executor of your estate, and trustees for any trusts.


Staying Out of Probate by Creating a Trust

Creating a trust account for the benefit of your heirs is one of the most common ways to keep assets out of probate. A trust allows you to set the rules by which assets are distributed to beneficiaries. There are two major kinds of trusts: revocable and irrevocable.

A revocable trust allows you to retain control of the assets funding the trust until you pass. Before you die, you can add and remove assets from the trust and change the beneficiaries and rules for distribution.

An irrevocable trust is permanent. Once you have set up the trust, you will no longer have access to the assets, and funds will be distributed to your heirs in accordance with the guidelines of the trust.

A trust can not only be set up to provide for your loved ones, but it can also provide for your own care should you become incapacitated.


Protecting Your Assets from Liability

The most significant difference between estate planning for physicians and other individuals is the potential for liability. You are going to want to choose an attorney who can provide comprehensive estate planning as well as asset protection planning to help separate your business and personal assets and reduce exposure of your personal assets to liability.

If liability is a concern for you as a doctor, you may wish to consider an irrevocable trust. While it is a more rigid way of transferring assets to your beneficiaries, the assets in an irrevocable trust are shielded from creditors. The assets in a revocable trust, by contrast, are still vulnerable to creditors because the trust can be changed at any time.

Another way to protect your personal assets from liability is to purchase liability insurance. However, it is important to remember that this protection will be limited to the face value of the policy. If a judgment is taken that is larger than the value of your policy, your personal assets may still be vulnerable.

There are some assets that are not exposed to liability from litigation. These include retirement plans such as 401(k)s and IRA. Liability protection, however, only extends as long as the assets are held in the account. Once distributions are made from a retirement account, the funds are exposed to creditors.

If it is important to you to protect your assets from the possibility of future liability, it will be essential to speak honestly with your attorney. While your attorney will work with you to make the best choices for your estate, he or she will also be able to advise you so that you avoid any fraudulent conveyance. It is not permissible to transfer assets into an irrevocable trust to avoid collection by creditors. However, if the assets have been transferred prior to any liability arising, there is no fraudulent conveyance.


Health Care Directives

As a physician, you are no doubt familiar with the concept of a living will and health care power of attorney. It is likely that you have been involved in carrying out an individual’s wishes outlined in these documents. However, it is far too common that physicians do not take the time to create these documents for themselves. As a physician, you may choose to name someone other than your closest family members to make difficult health care decisions. Often, family members can be too emotional to think about what you want in the situation. If you do choose someone other than your spouse, children, or close family members, be sure to discuss your decision and reasons with those family members now. Transparency with your wishes and your decision-making process can avoid conflict and pain in the future. Of course, it will also be essential that you discuss your health care wishes with your appointed health care surrogate to be sure that they are willing and able to step in to make health care decisions if you are unable to do so and that they fully understand your health care priorities and wishes.


Choosing an Attorney

When you are selecting an attorney to help create your estate plan, make sure you choose someone who has experience working with physicians. This should be someone you won’t mind returning to again and again (estate planning is a process over a lifetime, not just one afternoon in a lawyer’s office) and someone who has the specialization and the experience to do the job. Think of it as a referral to a specialist physician. You want to choose the right person to do the job, so it is done right the first time.

Stan Faulkner has over 15 years of experience and has focused his practice on serving physicians in the Atlanta area.  If you are ready to create or update your estate or if you have any questions, call Perigon Legal Services at  (770) 685-9501.