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You’re probably familiar with this life: As soon as you begin your 12-hour shift, you’re shuttling from one patient to the next, hoping for enough of a lull to snatch a fast-food bite or maybe a couple hours of sleep.

Balancing work with your personal life is one of the most difficult tasks for physicians. As a result of long hours and little free time, physicians are notorious for procrastinating on important financial decisions. The most detrimental of the postponements is, perhaps, estate planning.

Without a proper plan in place, you could leave your loved ones scrambling to take care of you, incurring exorbitant legal fees court costs. This often requires an outrageous amount of time at exactly the moment they are most vulnerable. Without a proper plan, your family might face a legal battle to control your assets or to control unnecessary legal costs.

You need to plan for your estate.investment fundamentals quiz foster group

The “Big Three” (and Why You Need to Take Care of Them First)

The purpose of estate planning, for most, is two-fold: to designate a person who will act on your behalf if you are incapacitated, and to leave the maximum amount of your assets to your family and/or charity tax-free.

Even if you are young and don’t have many assets, you should consider the three essential documents that go into estate planning: a will and/or trust, a power of attorney, and a health care proxy.

A will lays out how you want your assets distributed. This could create a trust containing assets that become available to your children when they reach a certain age. By having a will, you choose how your assets are passed on to your family. Otherwise, a state-specific formula is applied.

A Power of Attorney is a document identifying somebody who will handle your finances if you are incapable of doing so. If you don’t designate a power of attorney, chances are your spouse or one of your children will have to go to court to be named as a guardian or conservator for you — an expensive and time-consuming process.

Once you’ve designated a power of attorney, you should communicate with them on all the different places your assets are held — from savings and checking accounts to investment accounts and real estate.

A health care proxy is a document that identifies somebody who will make life-or-death health decisions if you are incapacitated. Ironically, physicians — people who make a living treating illnesses — are notorious for not appointing somebody to make these kinds of decisions for them. This is a mistake. If you don’t execute a health care proxy, you could be putting your life in the hands of lawyers and courts.

Once you have these three out of the way, it’s time to figure out how to leave the maximum amount of your assets to your family and/or charity tax-free.

Figuring Out a Method for Distributing Your Money

Usually, when you distribute money to heirs, it’s in the form of a gift. Depending on your total assets, there are several avenues to consider.

Each individual can make tax-free transfers of up to $5.43 million at death in 2015. This procedure goes by several different names: the basic exclusion, the unified credit, the estate tax exemption. The names may be different, but they are one and the same.

You want to keep two things in mind with this procedure: If you don’t use this transfer when you pass away, it is either transferred to a surviving spouse or lost forever. If you go over your $5.43 million limit any available exempt from your spouse, your heirs may be taxed at 40 percent.

download-adIf your estate is worth more than $5.43 million, you can always leave unlimited assets tax-free to your spouse, so long as your spouse is a United States citizen. However; this spousal transfer only defers taxes. Your surviving family may still face a tax liability at his or her death.

As a married couple, you can always create a trust that utilizes your exclusions, so you can pass on an estate to your children estate-tax free. This trust also goes by many names: credit shelter trust, A/B trust, bypass trust.

Depending on your retirement goals and the value of your assets, you can also consider transferring assets during your lifetime. Individuals can gift up to $14,000 (2015 allowance) a year to an unlimited number of beneficiaries without gift tax implications.

How to Have an Estate Plan that Withstands the Years

After drafting a will, a power of attorney and a health care proxy, and after determining how to transfer your assets to your heirs, you should monitor your estate plan.

Depending on when you draft this plan, you will likely experience changes: Perhaps you drafted a will as a single person and now wedding bells are chiming; maybe you and your spouse are anticipating another bundle of joy. Whatever the circumstance, these changes will affect your estate.

As a result, you should occasionally review your plan. Be prepared to make changes that reflect the inevitable stages and various successes in your life.

As a physician, you have a busy schedule and little free time. Don’t let this be an excuse for improper estate planning. By establishing a will, a power of attorney, and a health care proxy, by having a plan for gifting, and by monitoring your estate, you can begin to put a plan in place that will ensure the best for your heirs.

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