An Estate Planning Q & A for Health Care Professionals

How do you help medical practitioners balance the many financial and estate priorities such as retirement planning, investing, student loan repayment, and taxes?

Much like medicine, the field of finance has been the subject of much scientific research and data, and should be approached with the same level of discipline and thoughtfulness. Making the most of your earning years requires a plan to address each of these areas.

The years spent in advanced training and perhaps the additional costs of launching and building a practice can put medical professionals behind their peers outside the health-care field by a decade or more in starting to save and invest for retirement. Some struggle with debt from years of college, internship, and residency; later, there’s the ongoing juggling act between making mortgage payments, caring for parents, paying for college tuition and weddings for children, and maybe trying to squeeze in a vacation here and there. Because starting to save early is such a powerful ally when it comes to building a nest egg, a sound financial plan early on can help. Here are a few tips:

Automate savings. If you don’t see the money because it is auto-deducted, you will not miss it as much! A financial plan can help allocate savings to various “buckets” depending on your priorities: retirement, 529 plans, student loan reduction, vacations, home improvements, charity, etc.

Develop and stick to an investment strategy.  As health care professionals anticipate a financial windfall - whether it’s an inheritance, a higher salary, or an annual bonus - plan to save a higher percentage of the increase. Find an investment advisor that you trust and will help you stick to a long-range plan. For an investor, time works like gravity. An early start on savings is like riding a bike downhill. Conversely, a late start means pedaling uphill.

Taxes. Once the lean years are behind you, success means you probably need to pay more attention to tax-aware investing strategies that help you keep more of what you earn. Good communication between your CPA and financial advisor is important to ensure coordination in implementing the optimal strategy. Your plan should take into account the big picture for both taxes today, and what the tax picture will look like in retirement.

• Estate Planning. Review your estate plan at least every three years or any time a major life event happens (i.e. birth, death, divorce, inheritance, etc). A good estate plan can both potentially minimize taxes and further personal and philanthropic goals. Titling and beneficiary designations are important to review regularly to ensure your estate will ultimately flow as intended. Trusts are an effective way to plan for life insurance, charitable intentions, and asset protection strategies. How can health care professionals protect themselves both personally and professionally from the financial consequences of legal action or an accident?

Physicians carry insurance on their homes and cars. They also have a medical malpractice policy. They may even insure their smart phones. But many physicians do not insure their most valuable asset: their ability to generate income. Here are a few things to consider:

• One choice physicians face is how early in their career to purchase disability insurance. Age plays a role in determining premiums so looking into this relatively young may result in qualifying for lower premiums. Also, when evaluating disability income policies, pay special attention to how the policy defines disability. Look for a liberal definition which can help ensure that you are covered in case you can’t practice in your chosen specialty.

• In addition to potential malpractice claims, physicians may also face the same potential liabilities as other business owners. Consider an umbrella policy for the home as well as coverage that protects against business related exposures and overhead expense. An insurance professional can help evaluate these needs.

• In addressing family concerns, a couple is encouraged to be involved in understanding the financial plan, and agreeing about how to manage money and spending that works for both partners. Many families are also working closer with their advisors for assistance in raising financially-literate children.

Just as patients need periodic checkups, physicians also need regular estate and financial checkups to ensure their “vital” signs are healthy and on track!