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Estate Planning Basics for Young Doctors

January 9, 2018 by Chuck Krugh, CFP

As much as none of us want to admit it, we’re all going to check out one of these days. The time to lay the groundwork for our eventual deaths is now. Accident, illness or violent crime can strike any of us at any time. Most of these steps for estate planning have to be taken while we are still in relatively good health, or at least conscious and able to make financial decisions.

Here are some of the basic things any doctor should be squaring away, at any stage of his or her medical career.

1. Get life insurance.

Get life insurance in place. Start with a basic term policy. For healthy young physicians who are nonsmokers, term life insurance is very affordable, and there’s no excuse for not applying for it yesterday. Especially if you have a family.

Estate Planning Basics for Young DoctorsA rough rule of thumb is 10-20 times your annual salary in life insurance death benefit in your 20s. Some planners recommend $5 million to $6 million for young physicians. The suggested amount gets lower as you get older and your future expected earnings decline and your financial nest egg increase.

Those in medical school or residency may get less, but should lock in the ability to purchase more later in their careers, regardless of their medical condition.

Owning life insurance is a basic, foundational step in protecting your family. It also makes later estate planning measures much easier, as it preserves your flexibility to qualify for whole life or universal life insurance later if desired.

2. Update your beneficiaries

You need to keep your list of beneficiaries up to date. That’s not just on life insurance policies – you should also update your named beneficiaries on all 401(k), IRA and other retirement accounts as well.

Otherwise, when you die, you may find yourself leaving assets to ex-spouses and accidentally disinheriting your current spouse or partner or children or stepchildren.

Furthermore, even if accidental disinheriting is not a factor, designating beneficiaries by name helps your heirs get their money much faster, as these assets bypass probate. If you don’t designate beneficiaries by name, all these assets will go into probate along with the rest of your estate, and it could take months before the courts release the money to your family and loved ones.

3. Draft a will.

All doctors should have a last will and testament, and keep it updated. If you die without a will, you run the risk of accidentally disinheriting loved ones. Your will can also appoint someone to raise your children. Otherwise, the state will do it according to your state’s intestate laws, and that may not be the best decision for them.

Make sure that your family knows where the latest copy of your will is. It’s a good idea to have a trusted attorney or other professional known to the rest of the family keep a copy.

4. Update titles on property

If you own property with another entity, check to ensure that your interest in that property will pass on to your family, and not to the other owner. This is one of the most commonly overlooked aspects of estate planning.

When it comes to estate planning and probate, the type of title you have on property with other owners will determine how the courts treat it in probate. For example, if you own a property in joint tenancy with right of survivorship, when you die, the ownership will pass directly to the other owners. It won’t go to your spouse or children. This may not be what you want.

A tenancy in common may preserve your family’s interest in the property after your death, but it will go through probate first. This can be time consuming and costly, and subject the value of the property to the claims of creditors.

There are many other forms of titling, and each has advantages and disadvantages depending on the circumstances. If you own titled property, either on your own or within a corporation or LLC, have a qualified attorney go over your documents. You may want to change the form of title. You don’t want to have your heirs blindsided by titling issues after you’re gone.

About Doctor Disability, Inc.

Doctor Disability, Inc., the parent company of DoctorDisability.com, is an independent insurance agency that focuses on serving the financial needs of doctors, dentists, medical students and their families. President and founder Charles Krugh is a certified financial planner (CFP) with more than 15 years’ experience in providing physicians and their families with individualized insurance and financial advice.

The website, DoctorDisability.com, makes it easy for physicians to get an up-to-date, individualized quote from the best disability insurance companies on the market today.

The best values in the insurance industry are located in one place and are available any time doctors are ready, including late at night and on weekends. Though we’re based in San Clemente, California, we can work with physicians and their families in all 50 states.

Call us today at 866-899-7318 to speak to one of our disability insurance professionals.

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