Estate planning for physicians is extremely important because they have some concerns that would not be relevant to people in other professions. If you are in this field, we can help you take the right steps to protect your legacy for the benefit of your loved ones.
Asset Protection
Physicians are vulnerable to legal actions, so asset protection is going to be a priority. A business entity should be created to establish separation between your personal property and your professional practice.
A limited liability company (LLC) is one possibility. Generally speaking, your personal property would be out of the reach of litigants that are suing the practice, and vice versa.
Another option is a family limited partnership (FLP). If you establish an FLP, you would be the general partner, and family members that you add would be limited partners. You would have sole decision-making authority as the general partner.
You can register your practice as a professional corporation and convey the stock into a family limited partnership. If you own an apartment building, you could place it into a separate FLP, and you can do the same for your home and your vacation home.
When you segment your property in this manner, you create layers of asset protection. If someone is injured in the apartment building and they file a lawsuit, all of the property that is held by the other partnerships would be protected.
Family limited partnerships are very commonly used by physicians that have asset protection concerns, and there is another benefit.
Federal Estate Tax
High net worth individuals have to be concerned about the potential impact of the federal estate tax, because it carries a 40 percent maximum rate. This tax is potentially applicable on the portion of an estate that exceeds the credit or exclusion.
At the time of this writing, the exclusion is nearly $12 million, but it is scheduled to be reduced to $5.49 million in 2026.
You cannot give large gifts to completely avoid the estate tax, because there is a gift tax in place, and it is unified with the estate tax.
If your estate is going to be exposed to this tax, you have to implement an estate tax efficiency plan. There are ways that you can use a family limited partnership to transfer assets at a tax discount, and this can be part of your strategy.
Assets that are held by an irrevocable trust are not part of your estate for tax purposes, and there are multiple different types of trusts that can be utilized. We can gain an understanding of your position and help you take the right steps to mitigate the damage.
Remarriage Protection
Most people that get divorced eventually remarry, and a significant percentage of them have children from previous marriages. Highly successful doctors that are bringing significant resources into a marriage are going to have estate planning concerns.
Clearly, a prenuptial agreement can be part of the solution, and a qualified terminable interest property (QTIP) trust can be quite useful as well.
When you establish a QTIP trust, you name a trustee to act as the administrator after your passing, and your spouse would be the first beneficiary. Your children would be the successor beneficiaries of the trust.
If you predecease your spouse, the trustee would distribute the trust’s earnings to your surviving spouse for the remainder of their life. They can also use property that is technically owned by the trust, and you can allow for discretionary distributions of portions of the principal.
Your surviving spouse would be well taken care of for the rest of their life, but they would not be able to change the terms. After their passing, your children would inherit the resources that remain in the QTIP trust.
Take Action Today!
Our doors are open if you are ready to work with a Burbank, CA estate planning lawyer to put a plan in place. You can schedule a consultation appointment right now if you call us at (818) 937-2335, and you can use our contact form if you would rather send us a message.