Everyone is prone to making mistakes. Of course, no one is perfect. However, there are some mistakes that shouldn’t be allowed and they are done made while planning your estate.
As a physician it is a must that you plan your estate the right way if you want your will to be valid or your wishes fulfilled after your passing. To make this happen, you are advised to look at for some estate planning pitfalls that can ruin your estate plan.
Below, we have highlighted some of these pitfalls.
- Failure to create other documents aside from a will: Many people believe that a will is enough to plan their estate since it outlines how they want their assets to be shared among beneficiaries. But, the truth is that, regardless of how comprehensive your will is, your estate will still undergo probate without the right estate planning documents put in place.
- Failure to set up a trust: A trust is a legal vehicle that helps transfer assets from one party to another with the help of a third party. If you are a physician and you wish that your loved ones receive your assets without undergoing the difficult probate process, it is important you set up a trust as failure to do so would be considered as a big mistake.
- Failure to fund the trust: With the widespread talk about trust creation and provisions, it is essential to state the number one mistake with this legal document. Establishing a trust is one thing, while funding it is another. For a trust to be active, it needs to be funded and this is where some people get it wrong.
- Failure to include estate tax planning: Any assets left in an individual’s estate after their passing are subject to an estate tax which ranges from 18% and 40%. Currently, an estate tax exemption allows $11.8 million (double for married couples) to be left out from the tax. However, there is a huge probability that the future exemptions would be lower. To reduce estate taxes, you will have to discuss estate planning techniques, like moving assets to a revocable trust, with an estate planning attorney and a competent financial advisor.
- Failure to create a health care proxy and power of attorney: If the situation arise where an individual cannot communicate while requiring medical treatment, if the individual failed to establish a health care proxy, their family has no right to make choices on their behalf. Also, in case an individual is incapacitated, there may be decisions aside from medical ones that needs to be made. A power of attorney is a legal document that allows an individual to make financial decisions on another individual.
- Not incorporating income tax planning for beneficiaries: inherited assets can also lead to more income taxes for beneficiaries, as adult beneficiaries must take yearly RMDs from inherited IRAs and 402(k) s. For those with substantial net worth, including physicians, tax techniques, such as second to-die life insurance policies or both IRA conversions may be effective in reducing the income tax weight on beneficiaries.
- Not having a buy/sell agreement: Physicians always have jointly-owned businesses. Since they trust their partners, they always have informal agreements set up regarding selling a transferring shares and providing for surviving spouse. These insignificant agreements aren’t recognized by the court. It is best to establish a formal agreement that covers these issues, always done under a business-designated transfer on death.
- Failure to combine assets protection and estate planning: Physicians are very likely to be involves in lawsuits than those In other industry. When creating an estate plan, it is essential to talk with a competent financial advisor who can recommended techniques like a domestic asset protection trust, a Nevada asset protection trust, or a family limited partnership (FLP), all of which are made with assets protection in mind. These asset protection elements can be incorporated into estate planning as part of a holistic financial strategy.
Need an estate planning attorney?
If you need the help of an estate planning attorney to plan your estate, don’t hesitate to contact our office. Our estate planning attorneys are experienced and can help you with issues regarding estate planning, be it the setting up of estate planning documents, or providing you with valuable advice.
