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Step-by-step estate planning: What dental professionals need to know

March 30, 2023
Dental professionals tend to be planners, but one crucial task some fail to consider is estate planning. Here's what you need to know to protect your assets and plan for your family.

Dental professionals tend to be meticulous planners. Whether diagnosing a complicated case or planning a complex rehabilitation treatment, we go to great lengths to plan each step to achieve a favorable outcome. Estate planning, however, is often on the back burner. It requires each of us to face the inevitability of mortality, so we tend to delay or avoid it for both emotional and practical reasons.

What is estate planning?

Estate planning is one of the most important plans we can make for our families and practices. So, what is an estate plan and what does it consist of? A simple definition of estate planning is the process of an effective transfer of wealth considering legal, tax, and personal objectives. The common goals and objectives of an effective estate plan include transferring property or assets consistent with the transferor’s wishes while minimizing taxes and transaction costs.

Who should be included on the estate-planning team? The team commonly consists of an attorney, a certified public accountant, a financial planner, and perhaps an insurance consultant. Each member of the team brings a unique perspective, and together they will likely produce the best results in formulating an estate plan for your situation. Before meeting with your estate planning team, you must spend some time establishing your goals for your estate. Here's a review the parts of an estate plan.

You might also enjoy: Your most important estate planning document is not what you think it is

The will

The will is the centerpiece of any estate plan. It is the legal document that gives the will maker, known as the testator, the opportunity to control the distribution of their property at death. The advantages of a will are numerous, but primarily it lets you choose how your assets will be distributed and to whom. As part of the will, you may choose a personal representative to administrate your estate.

This personal representative is known as the executor. You may choose a guardian and trustee for your minor or dependent children. You may choose a charity in which to transfer some of your assets. You may input specific provisions in your will to minimize your estate taxes. You can even direct that certain people receive none of your assets. It is always good to name contingent representatives and beneficiaries just in case they are needed. The will can be simple or complex depending on your individual situation.

Letters of instruction

Separate documents from the will are personal letters of instruction which can detail your wishes regarding disposition of specific tangible possessions. These must be incorporated in the will with specific language. Items such as household goods, jewelry, and art may be included in this letter; funeral and burial wishes can be included in a separate document. Another good idea is to have a separate document that contains information regarding the location of important personal documents, safe deposit boxes, and financial information to help administer the estate. This letter, while not legally binding, is given to the executor to help in the disposition of the estate.

Power of attorney

A power of attorney is a legal document that authorizes a trusted person to act on another’s behalf. Individuals need a trusted person to make important financial decisions for them when they are unable to make them for themselves. The power of attorney also appoints the agent to execute documents to support those decisions. Essentially the general power of attorney gives this agent the power to do anything that the principal could do. This power of attorney is automatically revoked at the principal’s death.

Living will or advanced medical directive

The living will is not part of the will at all. It is a legal document expressing an individual’s last wishes regarding the sustainment of life under specific circumstances, and a limited power of attorney to enforce those wishes. It specifies situations in which the individual no longer desires life-sustaining treatment in the event he or she is incapable of making those decisions themselves. The living will can also name a trusted person as an agent to make those life-sustaining decisions.

Health-care proxy or durable power of attorney for health care

This is a legal document that appoints an agent to make health-care decisions on behalf of an individual who is unable to make them for themselves to restore or maintain their health. Unlike a living will, which states a person’s wishes regarding sustainment of life, this durable medical power of attorney puts health-care decision-making in the hands of a third party. It can give direction in terminal and nonterminal situations. It eliminates the necessity of petitioning a local court to appoint a guardian to make those decisions.

These are the basic documents you will need to protect your estate and plan for your family. What happens to our families and practices after we are gone has a lot to do with what we do when we are alive. No two estate plans are the same. Each one is complex and unique, and each plan must be geared to your individual goals. There are numerous techniques, too many to list here, to achieve those goals including trusts, gifting, wealth transfer, and insurance. This article is not meant to be a template for your estate plan but merely an overview and a catalyst to help you think about planning for the inevitable.

Editor's note: This article appeared in the March 2023 print edition of Dental Economics magazine. Dentists in North America are eligible for a complimentary print subscription. Sign up here.

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