Establish an Estate Plan Aligned with Your Objectives

When I wrote this, proposed tax legislation was making its way through Congress. Part of the legislative package included doubling the estate tax exemption from just more than $5 million per person to just more than $10 million per person. It’s easy to imagine some of the complexities that come with estate taxation and generational wealth transfer involving ultra-high-net-worth individuals.

It’s also easy for those under this threshold to think estate planning isn’t for them. But the transfer of assets upon death is complicated at any level of wealth. Indeed, probate can drain any person’s net worth, beneficiary omissions can affect every account, and the unfortunate reality is that all of us will face end-of-life issues at some point.

In this article, I will address the estate planning process as well as the documents that the estimated 99.8 percent of Americans who do not exceed the estate tax exemption need to consider and why. I will also identify some key concerns and solutions for practice-owning dentists to consider. The most vital estate plan documents and decisions are: wills and trusts, durable and health care powers of attorney, and beneficiary designations.

Wills and Trusts

Your will is your overarching estate document. It guides the distribution of your property, and it should align with other estate documents and comply with state law. When updating your estate documents, you want to ensure any and all changes to account beneficiary designations (which we’ll discuss later) are incorporated. Often associated with your will are any trusts used for estate purposes. Trusts are purpose-built entities that can take a variety of forms. Delineating all the uses of trusts would be beyond the scope of this article, but a few common functions related to the estate planning process are to provide managed accounts for minor beneficiaries, to provide for the care of a beneficiary with a lifelong disability, to protect assets from certain liabilities, and, for a select few, to mitigate estate tax.

Powers of Attorney

You should have at least two powers of attorney (POA): a durable POA and a health care POA. A POA is simply a legal document that allows another individual to look after your affairs should you become unable to do so. The person appointed in the POA becomes the agent and you, the person appointing them, are the principal.

The durable POA allows the agent to act on the principal’s behalf if the principal can’t due to physical or mental incapacitation. The agent has the ability to make financial and legal decisions.

For a health care POA, the principal appoints an agent to make health care decisions on their behalf in the event of incapacity. This is a sensitive role, because making end-of-life decisions for someone can be a difficult position. The principal should inform the agent of their health care and end-of-life wishes; the agent should feel they are speaking on the principal’s behalf.

Beneficiary Designations

Beneficiary designations are not a document per se, but a series of documents tied to accounts that may pass outside of a will (for example, a 401(k) account). There are two considerations when it comes to beneficiaries: 1) revisit beneficiary designations as your life situation changes over time, and 2) designate contingent beneficiaries where possible. Because certain, and often important, financial accounts do pass outside of the will, estate documents should be reviewed in their entirety to ensure your assets end up where you want them to be. A piecemeal estate plan or contradictory documents often lead to confusion, additional costs and, in many cases, family strain for years.

Considerations for Practice Owners

For dentists who own their practices, there is the added challenge of making certain your business is looked after and passes through the estate process. When working with dentist clients, we include two additional tools: the incapacity checklist and an office coverage agreement.

The incapacity checklist allows a spouse, surviving child or designated advisor to maintain a central document identifying a legal resource, estate executor, the practice’s organizational structure, an accounting resource, banking information, a creditor list, key office personnel and an insurance resource. The document also identifies key players needed to ensure continuity of the practice’s operation.

Tied to the incapacity checklist is the office coverage agreement. The market value of a practice relies on ongoing collections and patient flow. An office coverage agreement is a non-binding arrangement between peers to provide clinical services to the practice for a defined period of time given the disability or death of the owner. The document is reciprocal.

If you have not had a full estate plan review with your attorney and financial advisor, I strongly suggest you make this a priority for 2018. If it’s been five or more years, it is again time to review your documents with a professional to ensure they still align with your goals and conform to current laws. Estate planning can be a difficult topic, but when it’s completed, this type of review offers immense peace of mind. After your plan is in place, maintain copies of your estate documents in multiple trusted locations. For instance, keep a copy yourself, give one to your financial advisor, and leave one with your attorney.

This commentary originally appeared December 27 on


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© 2018, Buckingham Strategic Wealth®

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Thomas Bodin, CFA, CFP®

As a practice integration advisor, Thomas provides comprehensive financial advisory services to dental and medical offices, including tax, pension and retirement planning. He is motivated by a passion to help medical professionals connect the hard work they put into their practices with their most deeply held values and goals, all through Buckingham’s evidence-based approach to true wealth management.

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