As a doctor, your life is marked by dedication to your patients and the pursuit of medical excellence. However, amidst the demands of your profession, it is crucial to take a step back and consider your personal affairs, particularly your estate planning. Estate planning is not only about distributing your assets after your death; it is about safeguarding your loved ones, ensuring your healthcare wishes are honored, and putting the right people in charge should you lose capacity. This comprehensive guide will delve into the unique estate planning needs of doctors, focusing on the importance of carefully selecting an agent under power of attorney and the specific considerations for healthcare directives.
Understanding Estate Planning: A Brief Overview
Before diving into the specifics for doctors, let’s briefly outline what estate planning encompasses:
- Wills: A legal document that specifies how your assets should be distributed after your death.
- Trusts: Arrangements that allow a third party (trustee) to hold assets on behalf of beneficiaries. Every plan includes a trust (and a trust is always needed if you have minor children, real estate, or wish to leave assets privately without court oversight).
- Powers of Attorney: Legal documents that grant someone the authority to make decisions on your behalf if you become incapacitated.
- Healthcare Directives: Instructions on the medical care you wish to receive if you cannot communicate your decisions.
- Beneficiary Designations: Naming beneficiaries for retirement accounts, insurance policies, and other assets.
Estate Planning for Doctors: 8 Key Considerations
1. Protecting Your Private Practice
For doctors in private practice, the practice itself is often one of the most valuable assets. Unlike other professions, a medical practice cannot simply be left to any beneficiary or handled by any attorney-in-fact, successor trustee, or executor. Only another medical professional can contact your patients and review their files.
2. Choosing the Right Agent Under Power of Attorney
A power of attorney (POA) is crucial for managing your affairs if you become incapacitated. For doctors, selecting an agent is a decision that requires careful thought. The person you choose will have the authority to make decisions about your practice, financial matters, and personal life. Here are key points to consider when naming an agent to manage, close down, or sell your practice:
- Professional Knowledge: Your agent should have a comprehensive understanding of the medical field and the specific requirements of your practice. This might mean choosing a colleague or another medical professional who understands the nuances of running a medical practice.
- Trustworthiness: Your agent must be someone you trust implicitly. This person will have access to sensitive information and significant control over your assets and decisions.
- Availability: The agent should be readily available to step in when needed. Time is often of the essence in medical practice, and delays can be detrimental.
- Competence: Ensure your chosen agent is capable of handling complex financial and business matters. They should be organized, decisive, and able to handle the stress and responsibility that comes with the role.
There are two ways to approach a power of attorney. For some clients, we draft two documents – one for the doctor’s life and one for the doctor’s practice. The version for the practice must name someone qualified to step into the doctor’s shoes to manage the practice in a period of incapacity or at death and either close down or sell the practice. For other clients, we draft one power of attorney, which allows a trusted spouse, partner, or family member to appoint an ancillary agent who is qualified to address issues related to the practice when the time comes.
3. Choosing the Right Successor Trustee for Your Practice
If you have a trust that includes your medical practice, appointing a successor trustee is a critical decision. This person will manage the trust if you become unable to do so. Similar to selecting an agent under POA, the successor trustee should possess the knowledge and skills to manage a medical practice. As mentioned above, you have options – would you like to choose the successor now or allow a trusted loved one to choose the right person if and when the time comes? Consider the following:
- Experience: Ideally, the successor trustee should have experience in managing or overseeing a medical practice.
- Licensing: Depending on state laws, the trustee may need to be a licensed medical professional to make certain decisions or handle specific aspects of the practice.
- Fiduciary Responsibility: The trustee must act in the best interests of the beneficiaries and adhere to ethical and legal standards.
4. Healthcare Directives: Specific Considerations for Doctors
Doctors, more than most, have a clear understanding of medical procedures and end-of-life care. You may even have helped a family, spouse, or partner with difficult end-of-life decision-making. As such, your healthcare directives are likely to be detailed and specific. Here’s what you should consider:
- Advanced Medical Interventions: Specify which advanced medical interventions you do or do not want, such as mechanical ventilation, dialysis, or extracorporeal membrane oxygenation.
- Pain Management: Detail your preferences for pain management and palliative care.
- Organ Donation: Clearly state your wishes regarding organ and tissue donation.
This document designates someone to make healthcare decisions on your behalf if you are incapacitated. Given your medical knowledge, you may have specific preferences for this role:
- Medical Knowledge: Choose someone with a medical background or someone who fully understands your medical preferences and the implications of various treatments.
- Alignment with Your Value: Ensure the person you choose respects and aligns with your values and wishes regarding medical care.
- Communication Skills: The person you choose should be able to communicate effectively with healthcare providers and advocate for your wishes under pressure. Maintaining family harmony is at the heart of De Fonte Law PC’s work with our clients. Your healthcare directive must be more than technical, and the person you choose must be more than a great medical professional.
5. HIPAA Compliance
Ensure that your estate plan includes provisions for maintaining HIPAA compliance in the event of your incapacity or death:
- Authorized Personnel: Designate individuals authorized to access and manage medical records.
- Secure Storage: Provide instructions for the secure storage and transfer of medical records.
- Patient Notifications: Outline procedures for notifying patients about changes in the management of their medical records.
6. Protecting Your Family and Assets
Beyond your practice and healthcare wishes, your estate plan should protect your family and personal assets. Here are some important considerations:
- Life Insurance: Life insurance is a crucial component of estate planning for doctors, especially those with young families or significant debt from medical school loans. It provides financial security for your loved ones in the event of your death.
- Coverage Amount: Determine an appropriate coverage amount that will cover your debts, provide for your family’s future needs, and cover any estate taxes. Keep those student loans in mind; they do not generally disappear if you pass away.
- Disability Insurance: As a doctor, your ability to work is one of your most valuable assets. Disability insurance protects your income if you are unable to work due to illness or injury.
- Own-Occupation Coverage: Ensure your policy includes own-occupation coverage, meaning it pays benefits if you are unable to work in your specific medical specialty.
- Adequate Coverage: Review your policy to ensure it provides adequate coverage for your financial needs.
7. Legal and Financial Planning
Given the complexity of your estate planning needs, it is essential to work with professionals who understand the unique challenges faced by doctors.
- Estate Planning Attorney: Lawyers are bound by many of the same laws related to patient/client confidentiality. A great estate planning attorney should also be able to help you build a team of terrific advisors to support you as you grow your practice.
- Financial Advisor: A financial advisor can help you develop a strategy to manage your assets, investments, and retirement planning. They can provide guidance on tax-efficient strategies and help you achieve your long-term financial goals.
- Accountant: An accountant with experience in medical practice management can provide valuable insights into the financial aspects of your practice. They can assist with tax planning, business valuation, and financial reporting.
- Insurance Brokers: The right insurance for your home, auto, and umbrella is a key component of any risk mitigation and asset protection plan.
- Entity Formation: You likely know that you cannot simply use an online platform to create the entity for your law practice. Work with the right lawyer, who can also introduce you to CPAs and insurance brokers who understand your business.
8. Business Continuity Planning for Private Practices
Ensuring the smooth operation of your private practice during your incapacity or after your death is crucial. Here are some strategies to consider:
- Emergency Plan: Develop an emergency plan outlining steps for your staff to follow in case of your sudden absence. This should include:
- Contact Information: Provide contact details for key personnel who can make decisions and temporarily manage operations.
- Patient Care: Ensure protocols are in place for handling ongoing patient care, rescheduling appointments, and managing medical records.
- Communication: Outline how to communicate with patients, staff, and business partners about the situation.
- Succession Planning: Succession planning involves preparing for the transfer of your practice to another physician or entity. Consider the following:
- Identify Successors: Identify potential successors within your practice or external candidates who can take over.
- Training and Mentorship: Provide training and mentorship to your chosen successors to ensure they are prepared to manage the practice.
- Valuation of Practice: Have your practice professionally valued to facilitate a fair sale or transfer.