Written by Josh Lantz, CRPC®/ Chief Investment Officer, Financial Advisor
Estate planning centers around a plan for your assets upon cognitive decline, disability, or death. It is a written plan to formalize your wishes in advance. At the heart of it, estate planning is about protecting you and your loved ones.
We’ve written on this topic many times. There’s a lot on the internet about the standard estate planning documents (will, trust, power of attorney, healthcare directive, etc).
This article isn’t about that. Below are 3 commonly missed topics from doctors’ estate plans.
#1 – Implementation of the Estate Plan
Doctors will commonly visit with an estate planning attorney to get their basic estate plan. While we suggest this for every doctor, it becomes even more important once you have children to make sure you have a written plan in place to take care of your kids upon your premature death.
They visit with an attorney and often pay $3,000 to $6,000 dollars for their initial, basic estate plan. Attorneys will draft the lengthy documents, but often the documents seem like a foreign language. What doctors don’t often realize is the attorneys usually are not in the business of implementation. They give advice, but often it stops there.
You are expected to take the attorney’s advice and implement the changes. If you don’t implement the changes, then all you did was pay for expensive documents gathering dust on your bookshelf. They’re largely worthless without implementation.
Implementation is making the advised changes to your account ownership and beneficiaries. Many doctors have not fully implemented their estate plans. For example, your attorney might suggest your retirement account beneficiaries be:
Primary Beneficiary: Spouse
Contingent Beneficiary: Trust
But if you never actually change your beneficiaries and there’s no spouse named or the contingent beneficiary is not changed, your new trust you paid for is probably worthless. Without implementing the estate plan, your spouse may still inherit that asset (depending on your resident state’s rules), but likely only after going through the long and expensive process of a probate court proceeding. There’s also the chance the intended beneficiary does not receive the asset.
In order to avoid this common problem, we suggest you request a “funding letter” from your attorney. The funding letter is meant to be easy-to-understand instructions on what to do with your new estate planning documents. It spells out things like your beneficiaries and new account ownership.
The second most important thing to do is involve us as your financial advisor. A financial advisor can help bridge the gap between the attorney and implementation. Please forward us your latest estate planning documents. We suggest we always keep a copy in your Vault on your private website along with your funding letter. We also suggest carving out time in your review meetings to make sure we have your beneficiaries as instructed by your attorney.
#2 – Haven’t discussed end of life discussions with loved ones
You will die at some point. So far death is undefeated in the game of life. Yet very few doctors have the important conversations with their loved ones.
Here’s what I mean by this- Part of your estate planning documents will include a healthcare directive. A healthcare directive is a written document that informs others of your wishes about your healthcare so that a designated agent can make those decisions in the event you cannot communicate.
A common example would be whether to proceed with life saving measures. As you know as doctors, that topic is not black and white. There’s a lot of nuances.
I went through this with a family member and our choices were not black and white. It was very unclear if the life saving measures would help or make things worse.
A crucial aspect to this topic is to eliminate as much of the decision making from your loved ones prior to needing this type of care by having a conservation. It is devasting to your loved ones to have to guess your desires when you’re unavailable to express your wishes. Healthcare directives are typically very broad and mostly outline the authority to make decisions and typically don’t go into detail about the types of decisions themselves.
Your loved ones can be at risk of second guessing what they think you may have wanted. It is already devasting enough on your loved ones for you to pass away. You don’t want to add to that heartache second guessing of whether they made the right choices for the situation. Do them a favor and share your wishes in advance so they don’t have to make those decisions at that emotional time.
When to proceed with life saving measures is one topic, but this could also mean discussing funeral arrangements, burial versus cremation, and other end of life discussions.
Below is a link to free healthcare directive templates for each state. You can setup a healthcare directive for free. Store a copy with your doctor, share it with the appropriate family members, and you may even store a copy in the glove box of your car in the event of an accident.
https://www.aarp.org/caregiving/financial-legal/free-printable-advance-directives/
#3 - Preparing for Cognitive Decline
We’re all going to experience some sort of cognitive decline. Obviously, some more than others. We all must prepare for the reality that we might reach a point of cognitive decline where we can no longer make financial decisions for ourselves.
The estate planning document that helps with this is a Durable Power of Attorney. The document allows others to make financial decisions if you cannot.
One aspect of preparing for cognitive decline is planning around who should make these financial decisions for you. Remember, this is like handing the control of your check book over to someone else. It’s a big deal.
For those of you that are married, your spouse is a common choice. However, your spouse might be going through cognitive decline shortly after you, so you want to make sure to have selected successor agents as well. Successors are commonly children. However, you should be aware that elder financial fraud is currently most common among family members.
What if you’re single and don’t have a spouse? What if you don’t have any children or children trusted to make financial decisions? Then you need additional planning.
You can also select friends to be your power of attorney. You can also hire a corporate trustee, but there’s a cost to those services.
As you can see this could be a difficult topic depending on your situation. This is why it is important to start having these conversations now as well as reviewing your successor powers of attorney to make sure they’re current. We suggest talking about this with your financial advisor so we can plan around this topic many decades in advance.
Lastly, if you have cognitive decline, you need to think about who is going to manage your investments later in life. I’m sure you all know a colleague who’s very outspoken about managing their own money. Those same colleagues most likely have not thought through there could be 10 to 20 years in their retirement investing lifetimes that they will need someone else’s assistance in managing their funds due to cognitive decline.
Our clients at MD Financial can be confident that they have a partner in managing their money for their entire life. Even if they reach the point of cognitive decline. MD Financial continues to add financial advisors and will be a multi-generational firm helping doctors for centuries to come.
Josh Lantz, CRPC®/ Chief Investment Officer, Financial Advisor With over a decade of financial planning experience, Josh has worked on more than 450 doctors’ financial plans. “It’s very hard to find a doctor’s situation I haven’t seen before,” says Josh. This is only a snapshot of the expertise Josh brings to MD Financial. He is a four time Five Star Wealth Manager Award winner. In 2022, Josh was recognized as a Five Star Wealth Manager Under age 40. He can be reached at Josh@mdfinancialadvisors.com.