Physician estate planning guide

Physicians may deal with life and death issues every day, but few may want to think about the eventuality of their own end. And yet, not only do physicians need to think about it, they need to plan their estate to protect their assets, manage their long-term health care, and make matters easier for their next of kin.

Estate planning and elder care attorney Rebecca Goldfarb, J.D., co-owner of Goldfarb & Luu in Tarzana, California, said, “The benefit of an estate plan is to get your wishes honored, to avoid court, and to maintain family harmony.”

Age doesn’t matter

Although there are a few legal issues that are unique to health care, such as the need to protect against malpractice litigation, the stage and age of the physician shouldn’t matter when it comes to getting started on estate planning. Younger physicians may be less inclined to think about estate planning, but there is never a bad time to get those plans underway, according to Jeffrey Asher, J.D., principal at Law Offices of Jeffrey A. Asher, PC, in New York and Connecticut.

“You deserve to control who makes financial decisions and health care decisions in the event you can’t make them yourself, and how your property goes when you pass away or suffer a mental incapacity,” Asher said.

Power of attorney

The most important first step is to designate a power of attorney, according to Mackenzie Sorich, J.D., owner of View Ridge Family Law and Estate Planning in Seattle, Washington. “Power of attorney directs someone to make decisions on your behalf if you’re alive and incapacitated,” Sorich said.

Not having this legal relationship can lead to significant problems, she explained. “You can’t even manage the payments on a mortgage, or the rent, unless you have a power of attorney, or (family) go through a long-drawn-out process of establishing a conservatorship or guardianship,” she said.

Decide on a will or a trust

Once you have your power of attorney covered, you want to decide between the two primary methods of protecting assets –– to draw up a will or create a trust. Although a will is the simplest and cheapest method, Asher noted, it is not the most protective, and a will always requires a court to process.

“A will is a one-sided document. I create it, it names my executor, and tells the world where I want my stuff to go,” Asher said. “But no part of that will is valid until a court sees it, verifies it, and there are no challenges to it. Then my executor is appointed to act on my behalf and carry out its instructions.”

Most states don’t require an executor to be notified in advance of their role, so sometimes this can also take a person by surprise, Asher explained.

Additionally, a will is problematic if the physician has family members they specifically do not want their assets to go to. A disinherited child, or even an ex-spouse, for example, could still sue in court for a right to a share of the estate, and even win, Asher said. Only a trust will allow the physician full control over the direction of their estate after death.

Different kinds of trusts

The most common form of trust is a living trust, created while the person is still alive, said Goldfarb. A trust is kinder to the physician’s beneficiaries, especially if the physician has a private practice, which may have more complex business arrangements as well as the need to arrange for continuation of care of patients. “That’s a burden you’d be putting on your next of kin,” she said.

Trusts can also help if a physician owns assets in more than just the state they live in, Asher added. Deeds to properties can all be entered into one trust, streamlining and consolidating the assets and making it simpler to redirect after death.

Trusts are also a good way for physicians to both protect their assets and qualify for Medicare health insurance. They may need this in order to pay for long-term care without depleting assets for beneficiaries, Asher said.

Then there are irrevocable trusts, which could be especially useful to physicians who exist in an environment that is prone to malpractice claims because, Asher said, “When something goes wrong, and someone is hurt or dies, people are often looking for someone to blame. An irrevocable trust helps to protect assets from creditors seeking to take money.”

The primary reasons that people avoid making trusts and opt for wills, even though wills must go through probate in court, is that trusts cost more and require more paperwork, Asher explained. But a physician should look at their goals and decide accordingly.

Succession and business planning

Estate planning for physicians must also consider succession and retirement planning. This is because physicians need to decide who will make financial and health care decisions, which includes taking over or managing patients if the physician becomes incapacitated or dies.

It’s important to find out the rules in your state regarding business operations and succession planning, according to Yana Feldman, J.D., owner of New York Legacy Lawyers By Yana Feldman & Associates PLLC in Brooklyn, New York. “For example, in New York a medical practice cannot really operate unless the owner — or owners — is a physician,” she said.

If a physician is in solo private practice, it is not a bad idea to appoint another doctor to manage the practice, even if only to get it ready to sell, in case of incapacity or death, Feldman said.“It’s much easier to sell a going concern that’s operating, that has people coming in, than if you have to put a padlock on the front door and say ‘Sorry, Dr. Smith isn’t available, all appointments canceled,’” she explained.

If a physician is in a group practice, it is crucial to put all the plans for future incapacity or death into writing at the business level. Some examples include deciding on whether one or more partners will buy out the deceased physician’s share of the business, often from the surviving spouse or child, and deciding who is in charge of alerting the physician’s patients that their physician has passed on, given strict Health Insurance Portability and Accountability Act rules and other considerations.

Feldman said that having a good disability insurance policy that pays if you are incapacitated is also useful. Additionally, life insurance policies can sometimes pay partners to buy out the physician’s surviving spouse or beneficiary.

Finding a good estate planning attorney

Goldfarb stressed that not all estate planning attorneys are qualified to do all the things a physician might need and want. She said to avoid “generalist” lawyers and pick someone who specializes in estate and business law. Additionally, this lawyer should be able and willing to educate the physician. She recommended some questions to ask:

• How do you figure out all my wishes?
• How long do you spend in the planning meeting?
• Will you teach me, seeing I don’t know anything about estate planning?
• Do you maintain a lifelong relationship with me and reach out to me to update my plan?

Feldman urged physicians not to wait to set up their estate planning, because accidents and unpleasant surprises do happen, which she sees all the time. Not being prepared often leaves next of kin in the lurch, scrambling to figure things out, while money and assets are on the line.

Estate plans can also be updated as needed. “If you create a solid plan, it becomes easier to do small updates over time,” Sorich said. “You’ll have a foundation.”