What every spouse should know
Planning is crucial in preparing for life after a spouse’s death.
Planning is crucial in preparing for life after a spouse’s death.
If you think it is hard to talk about your death with your spouse while you are alive, how do you suppose you will do it if you suddenly become totally disabled or die? Can you imagine what life will be like for your spouse? “It’s unimaginable,” my friend Katie told me. One day her husband, who worked for a state agency, died suddenly while at work. A box of personal effects was all that came home from his office. The emotional challenges that unfold after a death must be dealt with at that time. There is no way to do this ahead of time. However, it is not necessary to make an already difficult and painful time even worse by failing to have current legal arrangements and clear financial plans in place for your family and dental practice.
It takes considerable time and thought to adequately get your life organized ahead of death. This is even more so when it involves a dental practice. With the busy lives we lead, we resist doing the preparation and taking the time to meet with the CPA, the estate planner, the lawyer, and the practice-management consultant. We feel like it is OK to leave these items for tomorrow. Then one tomorrow turns into something like the stunning events of 9-11. This tragedy ultimately motivated many people to prepare wills and discuss details with loved ones. The recent media attention on Terry Shiavo has inspired people to document their own health-care wishes. Unfortunately, there are those who are still planning on taking care of business tomorrow.
This article is not intended to give legal advice. It is meant for people to take an active role in planning and preparing for their death, so that the surviving family members are dealing with the heartaches, not the headaches.
Preparing a will
Let’s start with the basics. If you and your spouse have not yet made wills, now is the time. You each need one. Wills are legal documents that specify the people, places, and things to which assets are to be distributed. It also directs the amounts. Wills name guardians for your children. Wills can make arrangements for cherished pets. Maybe you want to give money to a university, a church, or a favorite local charity. If you don’t spell it out, how is anyone to know? Your relatives may not remember or even agree where you “said” some of your funds should go. Wills are designed to carry out the final wishes of the deceased.
After I was married (for almost a year, I must admit), my husband and I made new wills. We also remembered to destroy copies of our previous wills. Our particular considerations were the long-term financial security of our two young children, as well as our newborn son. Several years later, the will needed revisions in order to reflect changes in our assets and tax considerations as well as the ages of the children. We recently went through the process again with a specialized estate planning attorney. Two of the children are older than 21 and, for the most part, on their own. The youngest is 12. We were stimulated by numerous questions our attorney posed. For example, if we both die suddenly, how much do we want to leave the children? When and how much should be distributed? Who else would we want to endow? Do we want to change the executors? Who would care for our minor child? I certainly want my husband and me to direct these things, not the courts. It took us days of thoughtful consideration to come to an agreement.
Advance health-care directive
During this same process, we also wrote our advance health-care directives. These detail what sort of care is wanted in the event one or either of us becomes incapacitated. The questions that must be answered are harsh. Do I want my life prolonged with machines? Do I want hydration? It is an intensely personal issue with dramatic effects on your family. This document also allows you to name whom you want to make your other health-care decisions, if you are unable to do so. Families have been torn apart by opposing views of “the quality of life.” By taking the time to make your own decision and making clear wishes, you can save untold anguish for those who dearly love you.
Durable power of attorney
With a a durable power of attorney, spouses sign a document giving each other the power to make decisions for the other when mental or physical abilities have been compromised. In this way, accounts can be accessed, day-to-day business transacted, Social Security or other benefits collected, and legal claims handled. Hopefully, your wills and corresponding papers are already written and up-to-date. Now, let’s look at the practice. We will look at the scenario in which the dental spouse dies. How well can you and your spouse answer the questions in the following quiz?
✔Are there any buy-sell agreements with partners?
✔Who are the CPA and attorney for the practice?
✔Are there other advisors, like a practice-management consultant?
✔Who will sell the practice?
✔Is it saleable?
✔Who understands the practice’s finances?
✔Who owns the building that houses the practice? What are the lease terms?
✔Can the surviving spouse sign business checks?
✔Where are all the books/records for the practice?
✔Is there any life insurance and where are the papers?
✔Where is the key to the safe deposit box?
✔Where are all the documents kept?
It is important that both the dentist and the nondental spouse be able to answer these questions.
Besides these topics, there are other issues to consider.
The value of the practice
Some spouses, and perhaps dentists also, are living under the illusion that - in the event of sudden disaster - the practice can be sold for a lucrative amount. This may or may not be true. The forced sale of a practice is, at best, challenging. It is wise to establish the value of your business with a practicing dentist. This does not need to be a full-blown appraisal, but rather an estimate from a reliable broker who can help you put your practice on a reality map. The value of the practice comes in part from the tangible assets, like equipment and accounts receivable. These are offset by unpaid expenses and other debts. Part of the value is established by intangibles, for example, the location. Is it a solo practice in a rural area, population 8,000, or is it in midtown Manhattan? Would it be easy to find the right dentist or dental specialist for your particular practice? Or are the chances slim of finding someone wanting your practice? The equipment that is essential to the practice will have value if a dentist is moving into the space or you have a buyer. It would be shocking for a spouse to discover that your once thriving practice is suddenly worth a fraction of yesterday’s value. Not only does the spouse lose the value of the practice, but the years of future earnings are gone also. What contingencies have been put in place for this? A dentist at the end of his or her career is looking at a different picture than a new dentist, who may still be paying college debt as well as initial business start-up costs. Young children in the picture make your choices even more critical.
What is a practice worth if the dentist is now deceased? There are surprising legal complications for the surviving spouse. In many states, a dental practice can be owned only by a licensed dentist. The reason for this is to prevent other businesses, such as insurance companies, from dictating to dental professionals what can or must be done for patients. On the surface, this appears to be a sensible situation, given that the decision-making in a dental setting is best left to the trained professional. However, in the case of the death of the dentist, it may pose a problem for the surviving spouse if he or she is not a dentist. According to the office of State Government Affairs at the American Dental Association, most states don’t have provisions for spouse ownership, or sale of the practice after the death of a dentist. Seventeen states permit the estate or spouse of a deceased or incapacitated dentist to own or operate a dental practice, or to employ a dentist. But the length of time varies considerably. The time frame in Ohio is only 90 days. New Mexico allows a year while other states have nonspecified times. Practices in good financial shape that are looking for a buyer and are kept running by locum tenens may be allowed to stay in business in some states. But it is unclear how long such a situation can legally last. Obviously, this can pose a significant challenge to a surviving spouse who has many other issues with which to deal.
Specific legislation is required to give the surviving spouse adequate time to sell, or to make allowances for the spouse to continue to operate the practice. It is advisable to check with your state board or dental society to understand how the laws or statutes in your state can affect you.
Now is the time to consider disability or life insurance, and to examine other options for providing some security for the surviving family members. Financial planners might offer helpful suggestions regarding college funds, retirement plans, or other investments. Tax advisors can explain ramifications of jointly owned property, including the practice.
My husband belongs to a practice preservation group, consisting of other pediatric dentists in our region. When a member becomes disabled, group members take turns going to that practice to help keep things running. In the event of a death, the same thing happens - for a set period of time - to keep the practice functioning. This continues the business so that it can be sold. It also keeps the cash flow going for the practice, and supports the surviving family and staff. The specifics of these events are outlined in a detailed contract. You can be sure it is a comfort to me knowing that if Greg (my husband) was severely disabled (even temporarily) or were to die, his dental practice would not come to a screeching halt. I would have to deal with the situation in a timely way, but the immediate pressure to act would be eased.
Part of being prepared for a personal disaster is asking the questions raised in this article. They are difficult and require soul searching. By including your spouse in the thinking and planning process, you can make decisions together. Writing and updating wills, reviewing disability and life insurance policies, establishing a value for the practice, having a working knowledge of the practice’s scope, and knowing who to contact and where to look for paperwork are all items you can do in advance. Even if both of you live to ripe old ages, there is value in taking stock in your estate and what you want to be doing with it. The peace of mind that comes with taking care of your family and dental practice is surprisingly great. You have the power to plan ahead for the care of your spouse, family, and practice. The many people, including your employees, who depend on you will also be positively affected. Do yourself a favor. Take action. It is truly a blessing to all those you love (and who love you).
Mary Ellen Psaltis continues to gather firsthand experience at being a dental spouse with husband, Greg, who maintains a private pediatric dental practice in Olympia, Wash. She educates and entertains audiences across the country with presentations on communications and well-being. Ideas for her regular newspaper column, which features food and lifestyles, come from her traveling adventures. She can be contacted at the couple’s Web site at www.psaltis.info, by e-mail at TheRecipeWriter@hotmail.com, or by phone at (360) 413-5760.