Estate Planning For Physicians (Complete Guide)
December 28, 2022
Many things are taught in medical school, but estate planning is not one of them.
Nothing is taught about the significance of safeguarding your assets, avoiding probate, arranging for estate taxes, and having a plan in place as to what should happen to your medical practice if you become disabled, are in an accident, or die.
If you're a doctor and have a family and children, one of the best things you can do to protect them is to arrange your estate. You cannot afford to put it off until you have more time.
High tax rates and the ever-present fear of malpractice lawsuits mean that physicians confront many financial obstacles during their lifetime and after death. The unpleasant reality is that doctors face higher estate planning stakes than other people in other occupations.
Nevertheless, a solid estate plan can help your family after your death by safeguarding assets, providing privacy for the grieving, and ensuring the your desires are carried out.
After reading this article, you will learn the following:
Why estate planning is important for doctors
What happens when a doctor dies without a will
Potential estate planning challenges for doctors
The advantages of estate planning for doctors
Whether or not doctors can write their own estate plans; and
How doctors should choose an estate planning attorney
Why Is Estate Planning Important for Physicians?
Death comes to all of us, and no one understands this more than a doctor.
Despite recognizing that death is an unavoidable component of the natural order of things, facing the reality of mortality is tough.
Death is more than just a physical process; it is also emotional, and most individuals are unaware that there is also a significant financial component to dying.
So, on that gloomy note, here are a few things doctors should be aware of when it comes to estate planning.
Doctors Need a Thorough Legal Strategy
Estate planning for doctors is particularly difficult due to the substantial student debt balances that most physicians maintain throughout medical school and beyond.
In the long term, a thorough legal strategy to preserve your earnings, company, assets, and career will allow you to sleep easier at night.
When done correctly, estate planning for doctors will also work in unison with your financial strategy to gradually pay off your school loan debt.
Having a Good Estate Plan Can Give You Peace of Mind
Even better, an estate plan can guarantee that your hard-earned assets (which, despite your student loan debt) are preserved throughout your life and career.
In addition to the ever-present possibility of malpractice claims, doctors have complicated business obligations if they manage a private practice, and those commercial needs add another degree of complexity to estate planning.
Ensuring that your money and personal desires are in place before death can guarantee that your company partners, patients, and loved ones are not in a financial bind if the unexpected occurs.
What Happens If a Doctor Dies Without a Will?
To plan an estate is a fancy way of expressing that you took legal procedures to decide how your assets and obligations would be distributed when you die. You'll need a collection of legal paperwork to ensure everything is handled the way you want.
It's not enough to leave property to someone or inform a friend or loved one that they may take your house or the money in your bank account when you die. Verbal interactions are generally not binding or enforceable; what is written down is what matters.
Assume you are a partner in a medical firm, and your business partner dies without a will or an estate plan.
Your business partner's stake will not instantly transfer to you. The state in which the firm is owned will go through a long procedure to locate legitimate successors, who are usually living relatives. Those relatives may or may not want to be located and may or may not like to be involved in your company. They may sell you their stake, or they may attempt to operate the company without any expertise.
You'll be at the mercy of probate court and a lot of legal red tape in either of these cases. This will take time and money and may even lose you the company.
The estate planning you do NOW will guarantee that the company you fought so hard to build will continue to prosper when you are gone in the way you specify.
If You Die, Something will Happen to Your Belongings
Either you pick which of your heirs gets what, or the state decides. Your efforts to curate your personal and professional lives may be at the mercy of governmental legal officials.
The legal word for dying without a will is “intestate.” If you die intestate, your assets (and debts) are divided equally among your heirs.
You may believe that your heirs are apparent or that you have no heirs, but identifying your heirs is part of the state's obligation to take over your estate.
In the absence of any more apparent relatives, the state may determine that your heirs are relatives you've never heard of.
The state normally searches for blood or marriage relatives and works their way down the line until they locate someone, ignoring anybody who may have been close to you in a personal connection but not legally, such as foster children or stepchildren.
If no heirs are located, the whole estate is auctioned off by the state as they see proper.
The Advantages of Estate Planning for Physicians
Despite the time and money required to compile your estate planning documents and hire an attorney, there are significant advantages to estate planning for doctors.
Ensures the Safety of Your Assets
You may have a good idea about who you want in charge of your house, company, or retirement assets after you die, but without a documented, formal, authorized estate plan, your best intentions are useless.
Trustworthy helps you keep your important estate planning documents in one place. With Trustworthy, you can invite family members and lawyers to easily access and update your estate and insurance documents.
An Estate Plan Guards Against the Unexpected.
A properly crafted estate plan guarantees that your assets do not become "intestate," which implies that the state where you live chooses who gets what among your assets.
The state may decide that your heir is your closest living blood relative, such as a cousin you haven't seen in twenty years, rather than your life partner who lives with you in your house.
Can Doctors Create their Own Estate Plans?
As a doctor, you have power over your estate and have the full legal ability to establish your own estate plan.
The issue is that your do-it-yourself estate plan may not stand up in court, particularly if someone opposes it.
A Lawyer, on the Other Hand, will Guarantee that Your Wishes are Followed.
A lawyer specializing in estate planning for doctors may help you create your estate planning documents (which change annually) or connect you with other specialists.
An attorney will also understand how big life events affect your estate and will be able to update your strategy appropriately.
If You Own Your Medical Practice, You May Have Estate Planning Concerns
Many physicians run their own practices, whether they buy into one or create their own.
Either way, running a company comes with its own legal complications.
The practice must be run and owned via the proper corporate structure, such as an S corporation, C Corporation, or partnership.
Doctors Can Create “Professional” Entities
A doctor may create a "professional" entity, such as a Professional Association (PA), professional corporation (PC), or Professional LLC (PLLC).
A professional organization sets up barriers between doctors to protect one from the medical negligence of the other. You also don't have to submit an annual report to the Secretary of State's Office or pay the yearly fee.
To incorporate a professional body, approval from the medical board is required.
People incorporate corporations and LLCs primarily to escape personal responsibility for the debts of the businesses they control. By incorporating a separate and distinct entity, only the entity, not the owners, is accountable for the business's debts and obligations.
Doctors Who Own their Own Practices Must Prepare for Incapacity
Consider also how to pay out your firm when you retire or otherwise leave it and how your family will be compensated for your business stake after your passing.
How Should Doctors Choose an Estate Planning Attorney?
Anyone choosing an estate planning attorney should first choose someone they would like to work with.
Because you will be conducting crucial work with the attorney you hire, you must like and trust them.
Another thing to look for when choosing the correct estate planning attorney is one who has extensive experience dealing with other physicians. You should choose an attorney who has already represented other doctors and understands their unique needs.
Finally, doctors who operate their own offices should choose an estate planning lawyer who is also knowledgeable about business law.
By hiring an estate planning attorney that fits all of these criteria, you can construct a solid estate plan supported by legal advice.
Get Started with Trustworthy
Ensure your family and lawyer can access your estate planning documents in one secure, cloud-based platform.
When you have all of your estate planning documents in one place, you can help your family fulfill your last wishes in the event of death or incapacity.
A clearly-stated, accessible estate plan lets your family avoid a lengthy and expensive probate process. Start sharing your estate plan with your family by starting your free 14-day trial with Trustworthy today.