Why physicians should begin with the end in mind and secure their estate plan early
It’s understandable why many physicians in their 40’s and 50’s are inordinately focused on their careers and on trying to accumulate assets; they’ve been playing catch up since they left training, and they have a shorter time horizon in which to achieve their most important goals. However, a common mistake most physicians make is to put off planning their estate until they’ve accumulated some wealth, not realizing that there is so much that can happen along the way which can have devastating consequences for their families. While there are a number of reasons why younger physicians tend to avoid facing these critical issues, the minimal time and expense it takes to address them, thus preventing unnecessary hardship and heartache, makes it almost inexcusable not to.
There’s a common misconception that estate planning is only for the wealthy. While it’s true that wealthy families have more at stake in financial terms, all families will face unpleasant consequences if they don’t have some of the essential tools for settling the estate of a deceased breadwinner. The bottom line is, if you don’t have an estate plan, one will be provided for you by the state; and you can bet your estate that the state’s interests are not always going to be aligned with your family’s interests.
No Will? No Problem – We have one for you
Without a will, the state becomes the executor of your estate, deciding not only how and to whom your assets will be distributed, but also who will take care of your children.
Your will is the foundation, and most important guiding document for your estate, so it should reflect your desires and preferences in minute detail. It should include instructions for the distribution of your assets as well as a guardian for your children.
Related: see our full estate planning checklist for physicians
What if you survive the accident?
If you become incapacitated due to an illness or an accident, without a power of attorney and a health care directive, the courts may decide both your financial and medical fate. In some cases, the court will assign a third party to manage your affairs while your family members sit by helplessly.
It may be your property, but the government has first dibs on it
You may have a will which is a core component of your estate plan; however, your assets (excluding your home titled as joint-tenants or community, qualified retirement plan, life insurance and any annuities) may be subject to probate. The cost and delay of probate proceedings can cause a hardship on your family who must wait in the back of the line to receive any assets.
Every family should have a revocable living trust, an easy and inexpensive document to create, to keep all of your assets out of probate. A living trust also provides the means to name a trustee, time the distribution of assets to children and ensure a smooth transition of assets that need to be managed (i.e. real estate, investment portfolios).
As your assets grow, they can eventually become subject to some of the highest taxation in the land. Generally, assets in excess of $5.34 million could be subject to a 40 percent tax rate. Fortunately, there are a number of tools and methods available that are designed to maximize the amount of your estate that is passed on to your heirs. That’s where marital trusts, irrevocable trusts, charitable trusts, and other complex vehicles come into play requiring the expertise of estate planning professionals.
It’s not going to get any easier
While it’s true that estate planning can get to be somewhat complex and expensive when addressing the needs of the ultra-wealthy across multiple generations, for the average family, or the wealthy-in-waiting, it’s a low cost, fairly straightforward way to eliminate uncertainty at the worst possible time for family members. Physicians of all ages can have all of the legal protections they need for their estate and their family for the cost of short vacation.
Estate laws can be somewhat complex, and they’re always subject to change, which is why it’s advisable to consult with an estate planning professional.
Physicians Thrive can assist you with your estate plan through our financial planning process. We can help you ensure you have all the elements in place to feel confident your family is protected and your wealth will be passed on as intended. Call today to consult with an advisor or request a free consultation.