Estate Planning Essentials for Doctors and Dentists
In a previous post, we discussed how a carefully drafted practice agreement can protect your practice from being dissolved and/or seriously disrupted due to the unexpected death or disability of a practice partner. In this post, we will discuss some of the ways that a carefully drafted estate plan can similarly help you and your family prepare for the unexpected.
While it can be disconcerting and sobering to contemplate your own mortality, it is important to recognize that you need to have a plan in place that will protect your assets and loved ones in the event of your death or disability. Tragic accidents and debilitating diseases can strike indiscriminately regardless of age. Although death, like taxes, is inevitable, a proper estate plan can minimize the impact of both on your family. Estate planning is particularly essential for doctors and dentists, since, as a group, doctors and dentists typically have more assets than the general population. Therefore, the decisions you make in your estate plan can have many more implications for your surviving friends and family. Moreover, a well drafted estate plan can also protect your assets from being depleted by taxes, malpractice claims and other creditors.
Potential Consequences of Not Having an Estate Plan
Your Assets Will be Distributed According to the Law of Intestacy
If you should die without having an estate plan in place, your assets will be subjected to the laws of intestacy, which is the legal term for someone who dies without a will.1 Under Arizona’s laws of intestacy, your assets will be distributed to your spouse, if you are married, and/or to your blood relatives in accordance with default statutory rules. If any of your assets remain after the default rules have been applied, those assets will escheat, or pass to the State of Arizona.2
The law of intestacy can be problematic for several reasons, but the most obvious is that it does not take your personal wishes into account, but rather simply mechanically applies a list of rules predetermined by the state legislature. Significantly, your assets will not be distributed to persons who are not related to you by blood or marriage.3 This means that persons and/or entities that may be very important to you, such as your significant other (if you are not legally married), the spouses of deceased children, stepchildren and/or charitable organizations, will not receive any of your assets under the laws of intestacy. Additionally, intestacy does not take into account gifts you may have made to your heirs during your lifetime, which may result in unequal total distribution of your assets.
You May Be Subject To Unnecessary Probate Proceedings
A poorly prepared estate plan can be as bad as, if not worse than, having no estate plan. Although do-it-yourself wills are available on the internet, wills require that certain prerequisites be followed before they become valid, something that will not be tested until after you die. Further, even if you are able to validly execute a will, that is just one component of an estate plan. If you have a will in place, but have not created a trust or transferred your property into the trust, your heirs will have to submit the will to probate, a court proceeding in which the validity of the will is determined, the estate’s creditors are paid, and the property transferred under court supervision. This is a time-consuming, costly and public process that can create additional and potentially unnecessary liability to your estate.
Your Family May Be Subjected to Invasive Guardianship and Conservatorship Proceedings
Death is not the only contingency for which estate planning is important. For example, if you become unable to manage your own affairs due to disease or injury without having a proper estate plan in place, your family will likely have to petition a court to appoint a conservator to manage your assets and a guardian to make your health care decisions.4 Guardianship and conservatorship proceedings can be extremely expensive and often give rise to conflict and tension between family members. Additionally, such proceedings are open to the public and can be very intrusive.
Guardianship proceedings are typically required when both parents of minor children have died without there being an estate plan in place. If this happens, your family will be subjected to the same expensive and invasive proceedings.5
Benefits of Having an Estate Plan
Some of the most significant benefits are as follows:
- A well drafted estate plan allows you to determine who will control your assets and make your health care decisions for you if you become disabled.
- A well drafted estate plan will ensure that your assets are distributed to whomever you want, the way you want, and when you want. For example, if you are concerned that a child might squander his or her inheritance, you could set up a trust that provides for staggered distribution so that he or she does not receive it all at once.
- A well drafted estate plan allows you to appoint guardians to care for your minor children in the event of your death.
- A well drafted estate plan can help protect your assets from creditors, including malpractice claims. For example, you could create an irrevocable trust for the benefit of another person (such as a child) and include a spendthrift provision that generally protects the assets of the trust from the creditors of both the parent and the child.6
- A well drafted estate plan will help you avoid costly death taxes, court costs, and professional fees, ensuring that your assets are distributed to your loved ones.
When preparing your estate plan, it is important to work with an attorney who can help guide you through the process, explain the consequences of your estate planning decisions and craft a well-drafted estate plan to guide your loved ones after you are gone. For more information about estate planning or to speak with our estate planning lawyers, please contact our office at 480-998-7800.
[1] See, e.g., A.R.S. § 14-2101.
[2] See, e.g., A.R.S. § 14-2105.
[3] See A.R.S. §§ 14-2101, 14-2102.
[4] See A.R.S. §§ 14-5401, 14-5303.
[5] See A.R.S. §§ 14-5204, 14-5401.
[6] See A.R.S. §§ 14-10501.B., 14-10505.2.