You learn a lot of things in medical school: how to diagnose everything from the common cold to a rare disease, how to keep your cool when delivering bad news, and even the art of surviving on coffee and three hours of sleep.

But one thing you don’t learn is estate planning for physicians.

Navigating the intricacies of wills, trusts, malpractice lawsuits, and business succession plans might make you feel like a first-year med student all over again. But it’s important for safeguarding your personal assets, ensuring your practice’s continued success, and providing for your loved ones after you’re gone. 

Let’s take a closer look at what exactly estate planning for physicians involves and how you can make informed decisions for your estate and practice.

What should an estate plan for physicians include?

A successful estate plan for physicians considers both personal assets and the future of their medical practice. This requires a thoughtful, personalized approach that encompasses a comprehensive set of estate planning documents and insurance options.

Estate planning documents

Estate planning is a highly customized endeavor, requiring an analysis of your goals and the creation of documents to back them up. 

There are seven essential estate planning documents that you might need to cover your  personal, professional, and financial future:

1. Durable financial power of attorney (POA): This document appoints someone you trust to manage your financial affairs if you can’t do so yourself. Since physicians typically make a high annual income, this could include making sure that bills get paid and financial decisions are made in your best interest.
2. Advance directive for health care: Also known as a medical power of attorney, this document allows you to appoint a trusted person to make healthcare decisions for you if you’re incapacitated.
3. Last will and testament: A will specifies how you want your assets distributed after your passing. It can include instructions for the care of dependants, as well as how and to whom your professional assets should be distributed.
4. Revocable trust: A revocable trust is often used in conjunction with a will. It offers more control over when and how your assets get distributed to your beneficiaries. While it doesn’t protect assets from malpractice claims, it can be an effective way to manage both personal and professional assets during your lifetime and after your death. And the best part is that it can help reduce frustrations associated with the probate process.
5. Asset protection trust: Since a revocable trust doesn’t protect assets, you also need an asset protection trust to protect your personal and real estate assets from creditors and malpractice claims. It’s often combined with a limited liability company (LLC), family limited partnership (FLP), or private retirement trust to fully protect your assets.
6. Living will: This document outlines your wishes for lifes sustaining treatment, in the event of an irreversible and terminal condition. you can’t communicate with them yourself.
7. HIPAA authorization form: This form allows designated people to access your medical records so they have the information needed to make informed decisions about your care.
8. Power of Attorney for Professional Practice:  This document appoints another physician as the person that can run your practice and see your patients in the event of your unavailability or incapacity. 

Incorporating these documents into your estate plan protects your personal and professional legacy, ensures your wishes are respected, and helps guarantee your loved ones are taken care of, no matter the circumstances.

Asset protection strategies

Working in the medical field offers the possibility of a long, rewarding career. 

It’s also a line of work where malpractice lawsuits are a possibility; 31% of physicians get sued at some point in their careers. Physicians have several options available to protect their assets.

Method of protection	Pros	Cons
Establishing a separate business entity	Assets held within a separate entity (e.g., an LLC) are generally protected from personal creditors and lawsuit judgments against the physician personally.	Some assets may be exempt from protection, and separate entities don’t provide cover for legal fees associated with a lawsuit. Additionally, requirements and protection vary by jurisdiction.
Malpractice insurance	Malpractice insurance can provide financial protection, defend your reputation, and provide peace of mind in the event of a lawsuit.	Some claims may exceed insurance limits and expose personal assets, and holding malpractice insurance policies can create a false sense of security for the policyholder.
Excess liability insurance	These policies can bridge gaps in coverage and limits, and may help meet compliance requirements.	Certain exclusions may limit or prevent coverage.
Domestic Asset Protection Trust	Assets held in a domestic asset protection trust are protected from third party creditors, and can be used by the Trustmaker during their lifetimes.	There are some exceptions for pre-existing claims.  The trustmaker gives up substantial control over the assets in the trust, and a third party licensed trustee is in charge of the assets. The set up cost requires a large investment.
Whole life insurance	In Texas, life insurance is an exempt asset, protected from judgment creditors. Utilizing some life insurance products allows you to bank funds, protect funds, get a return, and borrow against these funds in the future.	Requires a long term commitment. Returns are lower than traditional investments.

 

Because each approach has unique pros and cons, a multifaceted approach is generally the best move for physicians and healthcare professionals looking to protect their assets as part of their estate plan. 

Beyond creating separate entities and investing in the right levels of insurance, you can also keep the creditor from collecting on the judgment by creating an asset protection trust or strategically gifting assets to a non-physician spouse or family members. 

Each of these methods is very intricate and governed by ever-changing, strict laws, so it’s crucial to work with an experienced business attorney and estate planning attorney to structure and update them correctly.

Business operations and succession planning for physicians

While estate planning protects your personal assets, you also need to work with an experienced business attorney to safeguard your medical practice’s future through strategic business and succession planning.

Set up business entities

As discussed above, establishing a business entity—be it a single-member LLC, a partnership (multi-member LLC), or an S or C corporation—separates your practice from your personal life so that your personal assets don’t get affected by lawsuits or financial issues in your practice. 

You can also form a professional entity such as a Professional Association (PA), Professional LLC (PLLC), or a professional corporation (PC) to separate yourself from another doctor’s medical malpractice.

Structure your operating agreement correctly

An operating agreement outlines how your business should be run, detailing aspects such as:

• Ownership
• Financial management
• Dispute resolution
• Succession planning

By clearly defining roles, responsibilities, and processes, you’re taking steps to protect your professional interests and your practice. It also prevents misunderstandings among partners so that your practice continues to run smoothly.

Create an ironclad succession plan

Your staff and patients might face closure or legal headaches if you become incapacitated or pass away without a solid succession plan in place. A succession plan specifies who takes over the business in these cases, be it family members, business partners, or an external party. (Note that, in Texas, a family member cannot take over operating a medical practice unless they are a licensed health care practitioner.)

Once you finalize your succession plan, include it in your operating agreement to make it legally binding and enforceable. 

It’s important to note that if your succession plan and operating agreement have discrepancies, the operating agreement generally wins out. Therefore, you should meet with your partners and make sure everything is in line to avoid conflicts before they occur.

Formalize a buy-sell agreement

A buy-sell agreement outlines what happens if a partner decides to leave, becomes incapacitated, or passes away. By setting clear terms for valuation and transfer of ownership interests, this agreement helps to make changes in the partnership smooth and conflict-free.

Protect your assets and business with Texas business and estate planning attorneys

Juggling all these complexities can be daunting and time-consuming for any physician. The stakes are incredibly high, and the consequences can be devastating if you make even the slightest mistake.

That’s why it’s so important to work with business and estate planning attorneys with vast experience serving physicians, such as our team at the law firm of Shann M. Chaudhry Esq., Attorney at Law, PLLC. 

We understand the unique challenges and opportunities that come with being a physician, and we’re dedicated to helping you by:

• Offering tailored advice
• Structuring your business for protection and future growth
• Setting up a comprehensive estate and succession plan 
• Mitigating risks from malpractice liability
• Making sure everything is compliant with state and federal laws

We strive to empower you to manage your personal and professional assets with confidence, safeguard your legacy and loved ones, and enjoy true peace of mind. Contact us today to schedule a consultation and see how we can help you protect what matters most to you.