Grasping the fundamentals of estate planning is paramount, even for young physician families. Without a comprehensive estate plan in place, crucial decisions regarding your assets and healthcare preferences could be left to the discretion of a court, a scenario that is not ideal for anyone.
At a basic level, an estate plan serves as a blueprint for your wishes in the event of your passing or incapacity. These wishes are formalized through a series of legal documents including a Will, Living Will, Trust, and Power of Attorney. In the following sections, we’ll review the core estate planning components that are relevant for young physician families, illuminating their significance and showing how they can shape your future financial and personal goals.
Will
A Will, also known as a Last Will & Testament, is the document used, once you’ve passed away, to tell the court your wishes. For young physician families, it’s a crucial tool for nominating guardians for minor children. This decision holds immense weight, as it determines who will care for your children if both parents are unable to do so. When you begin working on a Will, think about questions like these:
- Where do you want your personal assets to go when you die?
- Who do you want to take care of your kids if you pass away?
Your Will is a guide for answering those questions when you pass. The Will is reported to what is called a probate court and the settlement process is known as probate. In probate, a judge will need to sign off on the handling of your estate settlement to ensure the Executor handled everything. If anything is unclear or contested, the judge will be the one to make the final call. Through creating a Will, you can limit any questions or issues during the estate settlement process.
Living Will
A Living Will is the document used during your life when you become unable to make decisions for yourself. Sometimes this can be referred to as a Health Care Power of Attorney. Depending on the state you reside, these documents can also be combined into an Advance Health Care Directive.
As a physician, you understand the importance of decision-making when it comes to your health care needs. The Living Will is the document that shares the details of how you wish to be cared for and specifying who should take care of you if you become incapacitated or unable to make decisions for yourself. The Living Will outlines your desires for life-sustaining treatment, end-of-life care, organ donation, and specific medical conditions.
In your living will, you appoint a person to relay your healthcare wishes or make decisions for you. This appointed person can be a spouse, a family member, or a friend. You can also list more than one person as an alternative in the case your first choice is unable to fill the role for you.
Living Trust
A Living Trust can sometimes be referred to as a Revocable Trust. While a Living Trust can help with a number of estate planning issues, the most common issue to be solved for is probate. The formation of a Living Trust is generally created so individuals and families can avoid the probate process.
The probate process can take years to complete, but it can also cost thousands of dollars, especially if you don’t have an estate plan or only have a Will. Instead, a Trust will serve as the centralized mechanism for your assets when you become incapacitated or pass away. However, the importance of “funding your Trust” while you’re living is a crucial step to effectively maintain a Living Trust.
A Living Trust also offer privacy with your financial affairs when you pass away. Compared to the probate process, which records your estate in public records. Check out these popular probate cases from deceased celebrities!
Power of Attorney
There are various forms of Power of Attorney documents and the most common is a Durable Power of Attorney (DPOA). In general, this document assigns specific powers to the person you designate as your “authorized agent”. The Power of Attorney can allow someone to handle your medical and financial related decisions while you’re living.
For example, if you own a medical practice or have an LLC for real estate properties, you may desire to appoint a specific agent to specifically handle the business affairs. If you are a single parent, you may wish to appoint a different person for handling your healthcare decisions and your financial decisions. The person appointed as a financial power of attorney will be able to help you pay your bills, manage investments, or other financial transactions.
Without a Durable Power of Attorney, the probate court gets involved (which again is expensive & a time-consuming process) and a judge will appoint a conservator. This is not ideal.
Preparing an Estate Plan
If you’re interested in setting up an estate plan for yourself or your family, you can start by thinking about who you’d want to designate for these life altering scenarios. Once you have decided on who you’d like to appoint, you’ll need to decide how to prepare these estate plan documents.
Will it be using an online platform? Or do you want to meet with a local estate planning attorney? Meeting with an estate planning attorney can ensure your thinking through the “what-ifs” which can lead to a more comprehensive plan. Using an online platform allows you to prepare documents from home (minus the notary part) but will likely require more of your time and can feel less customized.
Estate plans should not be one-size-fits-all, and in fact, estate plans are handled differently in each state. But as a physician, it’s important to consider your future and how others in your life would be impacted without these estate planning documents.
Incorporating these estate planning components, physician families can achieve peace of mind knowing that their wishes are documented. Moreover, a well-crafted estate plan can serve as a roadmap for achieving long-term financial goals, safeguarding assets, and preserving your legacy for future generations.
Panoramic Financial helps young physician families understand the importance of an estate plan by focusing on protecting their family in the event of incapacity or death. Please click “Work with Us” at the top of the page to learn more.