While chatting with a physician client of mine recently, an important topic came up that she hadn’t really asked about previously. My client is in her late 40s and is currently single with no plans of getting married. She’s the only child of her aged parents, and after working as a physician for over 15 years, she has become financially successful enough to slow her career down a bit. Her expenses are not very high, and, if she wants to, she can work pro bono. While she is very happy with her single lifestyle, enjoying frequent travel, and her independence, she wanted to know what would happen to her assets should something happen to her. Further, what if she was involved in a lawsuit—what would be the best way to protect herself, as many asset protection strategies such as FLP and Irrevocable Trusts are designed in such a way that a spouse or children must be involved to utilize the strategy? What about physicians who are single or have no children? Of course, people may be single for many reasons, whether through choice, widowhood, or divorce, and some may have children while others do not.
During the conversation with my client, we talked through an estate plan that would continue to provide her with the benefits of her independence while reassuring her in case of future events. Here are some steps that can help other single physicians who are in my client’s situation.
Health care. To designate a trusted person to make medical decisions on your behalf, ensure that you have a health care proxy in place before an emergency arises. The document will provide the details of what exactly you want in terms of intervention should you not be able to communicate those decisions for yourself. Adult children or close siblings are often good choices for your health care proxy. If you have no immediate family who can act in this capacity, you can always ask a trusted friend. The documents must be in place for medical personnel to be able to take your requests from your proxy, so make sure you get everything finalized rather than just leaving it at a discussion.
Power of attorney for financial affairs. In the case you cannot make decisions for yourself as the result of some incapacitation, a power of attorney can act on your behalf when it comes to financial matters. These could include bill payments for care, and without a power of attorney being filed properly, the court will have to appoint someone for you, make sure this is completed and ready to avoid delays and confusion should this happen. As with the health care proxy, you’ll want to make sure you have someone you can trust in this role, and a close friend is the perfect choice if you have no adult children, siblings, or parents.
Name your heirs. Beneficiaries are often a simple choice for those who are married, as their natural heirs will be surviving spouses and children. Even for them, establishing a will to avoid probate is a necessity, and it’s even more necessary for single people to make sure it’s not the court determining who will inherit their estates. To ensure that your estate will go to those to whom you wish to leave it, your estate planning should include clearly stating in a will where you wish your money to go. This includes naming beneficiaries to investment accounts, life insurance, or any other assets that will be distributed after your death. In the absence of children, you can leave your assets to friends, distant relatives, or charitable organizations.
Up-to-date estate planning. This isn’t just a strategy for singles. Anyone with an estate plan should revisit it to make sure that the information is kept updated as life moves on. This could include desired changes as a result of a falling out with someone to whom you’d previously planned to leave a large benefit, or perhaps adopting a child and wanting to make sure they inherit your entire estate, or it may be that there are more organizations you wish to add to your existing charitable giving allocations.
Nevada Asset Protection Trust. There is a known increase in the risk of professional liability for those working in the medical field. As mentioned previously, some of the usual strategies that physicians use to protect their assets favor married individuals, so it can be more complicated to figure out for singles. One method that can be beneficial for self-employed physicians is establishing a Nevada Asset Protection Trust. The grantor can also be a beneficiary on this trust, and once the trust has been funded for two years, any assets that have been contributed should be protected from creditors.
DAPTs. Domestic Asset Protection Trusts, or DAPTs, are other state-specific trusts, similar to the Nevada Asset Protection Trust. These are also irrevocable trusts that put assets out of creditors’ reach. They offer state income tax savings and asset protection, with specifics depending on the state the trust has been established in, and can hold several types of assets, including securities, cash, real estate, and even LLCs.
Maxing out your contributions: Another strategy that applies to single savers just as it does to married individuals is making sure to contribute the maximum amount to any tax-qualified accounts you may have. This means definitely taking advantage of a 401(k) or cash balance plan for asset protection, making sure you contribute up to the limit for each account.
Umbrella policies: As an established physician, you have already have life insurance, home owner’s insurance, and malpractice insurance, but what about when you hit the limit of what those primary insurance policies will cover? An umbrella policy is a type of liability insurance that can be held in excess of your other policies and will bridge the gap. An umbrella policy primarily pays the difference between the primary insurance and the full amount of the claim, or at least up to the limit of the umbrella policy.
Like my client, it’s important to be happy with your own life choices, and the challenges shouldn’t put off those who enjoy the benefits of a single life that it can provide for estate planning and asset protection. There are solutions available that will take into consideration the things that are important to you while also giving you peace of mind for the future. To find the strategies that best suit your own situation, it’s best to speak with a fiduciary financial advisor who has the experience to guide you through a plan that prioritizes your independence in your goals, your future plans, and your legacy.
Securities are offered through Securities America, Inc., member FINRA/SIPC. Advisory services offered through Securities America Advisors, Inc. Wall Street Alliance Group and Securities America are separate companies. You should continue to rely on confirmations and statements received from the custodian(s) of your assets. Securities America and its representatives do not provide tax or legal advice; therefore, it is important to coordinate with your tax or legal advisor regarding your specific situation.
Syed Nishat is a partner, Wall Street Alliance Group. He can be reached on LinkedIn and on Twitter @syedmnishat. He holds the FINRA Series 7, FINRA Series 63, and FINRA Series 66 licenses, along with licenses for life, disability, and long-term care insurance.
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