by Kevin Keegan
With the seemingly ever changing tide of the health care industry, continual pressures to reduce health care costs while at the same time increasing services, the threat of lawsuits and the burden of the current tax structure, it is not surprising that increasing numbers of health care professionals are not fully satisfied with their financial situation. In fact, of all doctors surveyed in a recent study by CEG Worldwide, all expressed some level of dissatisfaction and more than half said they were highly dissatisfied with their current financial situation.
For most people a properly structured wealth management plan will help preserve the wealth you have accumulated and help you keep more of the income you will earn in the future. A properly structured plan will also allow you to transfer your wealth and assets without fear of unnecessary taxation. Some key points to consider in a wealth management plan for medical professionals would include the following:
WEALTH PROTECTION
You should work with a financial professional who will help you develop strategies tailored to your specific needs of income growth and protection. A financial professional’s goal is to make sure you have the finances to do what you want to do now and through your retirement years. Keep in mind that in some cases retirement could last 10, 20, 30 years or longer. It is also important to plan so your wealth is not unjustly taken by creditors, litigants, ex-spouses or poor planning.
RETIREMENT INCOME PLAN
Medical professionals like other people can usually retire when they have saved “enough” money and they can stay retired as long as they do not run out of money. Unfortunately, many people in America today are not facing a secure financial retirement or at least not one that they had dreamed of 10 or more years ago. Retirement Income Planning is imperative to Wealth Protection. A financial professional can help medical professionals build a specific plan that identifies how much money they will need to retire along with an income withdrawal plan to meet essential and discretionary expenses both now and in the future.
FORMS OF OWNERSHIP
Real and personal property can be held in various ownership structures that can place assets out of reach of creditors. One example is property owned by married couples in tenancy by the entirety. Tenancy by the entirety is a type of joint ownership for married couples. This means that a creditor would need a judgment against both husband and wife to attach all the assets held jointly by the married couple.
BUSINESS ENTITIES
Establishing a medical practice as a limited liability partnership or corporation can help to avoid personal liability.
STATE LAW EXEMPTIONS
Some state laws contain exemptions that will enable medical professionals to protect their wealth from creditors’ claims. These exemptions might include the cash value of life insurance, an annuity contract, a retirement plan or disability insurance. Do not overlook these important exemptions.
GIFTING
Gifting assets or cash to a spouse, children or grandchildren can help to protect assets, especially if gifts are made when there are no issues with creditors. In addition, advanced gifting strategies such as charitable trusts and installment sales can protect wealth while also reducing or eliminating gift taxes.
WEALTH TRANSFER
An equally important aspect of your wealth management plan is transferring your estate upon your death. There are many different strategies available. We have found several in particular to be very successful depending on the specific circumstances. Several of the more important wealth transfer strategies for medical professionals are listed below.
LIFE INSURANCE PLANNING
Not usually thought of as a vehicle for wealth transfer, life insurance can provide liquidity for estates with assets that are “tied-up” in real estate or art, for example, (non liquid assets). For estate planning purposes, insurance policies are often owned in trusts, such as an irrevocable life insurance trust, since assets held in these trusts are not included in the taxable estate.
REVOCABLE TRUSTS
To ensure maximum protection against creditors, financial professionals often recommend a revocable trust, keeping your assets in those trusts for as long as possible. The trusts also often authorize an “absolute discretion” standard for distributions to gain maximum creditor protection.
QUALIFIED PERSONAL RESIDENCE TRUSTS
A financial professional would recommend these trusts to pass a residence or vacation home to heirs tax efficiently by removing the personal residence or vacation home from your estate.
As a medical professional your wealth management plan should include a discussion of these important issues as well as other sophisticated estate planning techniques depending upon your specific circumstances and goals.
If your wealth management plan does not include some of these important wealth management and estate planning techniques you may need to consult a financial professional. Remember most people don’t plan to fail, they fail to plan. With tax laws certain to change over the next several years it is important to insure that your financial plan is up to date and meets your needs.
Author Kevin E. Keegan, Esq. is at Trilogy Financial Services 400 Trade Center, Suite 4850 Woburn, MA 01801
Tel: 781-933-6533 x2608 Fax: 781-933-6833
