Effective estate planning is about seeing the big picture and how each component fits into and impacts the other parts. This is especially true of planning for doctors, dentists and other healthcare professionals.
Doctors, dentists, etc. have all the estate planning issues that any client might have. Among healthcare professionals, you’ll also encounter a high incidence of more advanced needs and other planning considerations. There are a couple of reasons for this.
First, those in the medical field are often the target of lawsuits – surgeons and OB/GYNs are among the highest. (The well known saying among physicians: “There are two kinds of doctors – those who have been sued and those who will be sued.”) For these individuals, liability insurance, and risk management, and advanced asset protection planning techniques such as domestic asset protection trusts and foreign asset protection trusts are critical to their planning.
Second, many in the medical profession are quite entrepreneurial and have established side businesses (ex. imaging labs, diagnostic centers, billing services, records services, etc.). For these clients, it’s important that they work with an estate and business planning attorney who will take into account the totality of their estate and help to create comprehensive estate, business, and asset protection strategies.
For instance, if a dentist plans to establish a dental lab business, it’s important that the business be set up independent of his or her dental practice. To assure the new enterprise is structured properly and to mitigate liability, work closely with a CPA and business planning/tax attorney. Perhaps the client owns the building, in which case establishing a separate business entity for the building to further limit liability may be recommended.
Another very real consideration: Doctors are often earning a lot of income even if they don’t have a high net worth. For these high income earners, it’s important for them to work closely with retirement planning specialists and financial advisors to be sure they’re setting aside enough money for retirement, but also strategically saving in ways that reduce income tax liability. When it comes to legacy transfer of assets, the Uniform Transfer to Minors Account may not be their wisest choice. Often high earners will pour money into such an account and at majority, 18 or 21, the child receives the entire sum. Discuss with your high income-earning client the advantages of setting up irrevocable trusts for their children; trusts that will provide the kids with a framework to grow into their money.
When it comes to effective estate planning for physicians and other professionals, it’s important to have a “big picture” view as well as a keen eye for detail. This is especially true for MDs and other healthcare professionals. As always the goal is a solid, comprehensive estate plan where all the moving parts – retirement planning, business planning, asset protection and tax planning – work together.
What kinds of concerns are your healthcare professional clients expressing, and how do you advise them? Please share your experiences in the comments section.
