Kevin Shea, JD
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The dental profession is not exempt from unexpected death or disability. What makes these unfortunate events even more tragic is when a doctor is not prepared. This column does not address the proper practice transition under death or disability, but focuses on how a complete estate plan will assure wealth preservation for you and your loved ones.
For most dentists a good estate plan will frequently consist of a will, power of attorney, health care directive, and possibly a revocable trust (this list is certainly not comprehensive). Nevertheless, you should consult with your own estate planning attorney to be sure that your particular situation is addressed and state law is considered.
A will allows you to designate where your assets will go, and who will take care of any minor children, administer your estate, establish testamentary trusts, and engage in complicated estate tax planning. Without a will, state law determines who gets your assets, takes care of your children, and administers your estate. Moreover, if you allow the state rules to apply without estate tax planning, it may cost you millions of dollars in estate taxes.
A revocable trust is a will substitute that allows you to do the same things you can do in a will, as well as avoid probate proceedings, protect your privacy, and allow for speedier distributions. Revocable trusts are especially appropriate for people who have real estate in multiple states, and for those who are approaching retirement.
Power of attorney
A power of attorney allows you to designate an individual to make financial decisions on your behalf. Without a power of attorney, if you become incapacitated, your family may have to go to court to have a conservator appointed to make financial decisions on your behalf, which is cumbersome and very expensive.
Health care directive
A health care directive allows you to designate someone to make health care decisions on your behalf in the event you are unable to make them for yourself. It also allows you to give directions regarding burial vs. cremation and organ donations. Without a health care directive, your family may have to go to court to have a guardian appointed to make decisions regarding health care.
Asset protection planning
Asset protection planning is often done in conjunction with estate planning. It involves retitling of assets, establishing asset protection trusts, examining insurance policies (property casualty, malpractice, and life), and ensuring that different pools of assets are held in different entities. All of these can provide a great deal of protection from creditors' claims. Without even basic asset protection planning, creditors can reach the assets that you have worked very hard to earn.
In addition to the above items, typically during the estate planning process you will change the beneficiary designations on IRAs, 401(k)s, retirement plans, and life insurance policies to dovetail with your estate planning documents. This is an essential part of the process and very important to follow through.
Those who do not have an estate plan are leaving much to chance. They are allowing state law to govern the disposition of their assets to other people, and those may not be the people they want to receive their assets. Furthermore, careful estate tax planning can save millions of dollars in state and federal estate taxes on death, which can be avoided with estate planning.
Like dentistry, proper estate planning is good "preventive medicine" for the unexpected. Naturally, we all have the expectation that these unfortunate things will never happen to us. Yet we know of friends, colleagues, and family members who have been stricken by death or disability. No one wishes to leave themselves or their family in a difficult financial situation, thus a proper estate plan is one of the best ways to avoid this difficulty. Estate planning won't solve all the problems, but it will help preserve your wealth.
Kevin Shea, JD, is with Shea Practice Transitions, PA. He extends a special thank you to Matt Shea, JD, of Gray Plant Mooty for his estate planning expertise. A longtime ADS member, reach Shea at email@example.com or (888) 419-5590, ext 952.