Estate Planning for Physicians by Gretchen Cliburn
Estate Planning for Physicians
July 15, 2024
Gretchen Cliburn, CFP® Managing Director
Forvis Mazars
• BKD
• BKD/DHG = FORVIS (Forward Vision)
• Forvis Mazars
Client Centered Team Based Approach
Areas of Importance
• Career Stage Advice
• Multiple Areas of Credentials
• Investment Management
• Tax Planning
• Unbiased Insurance Evaluation
• Timely Access
• Implementation assistance
Diagnosing the Problem
Treatment Plan
What is an Estate?
What is Probate?
What is Estate Planning?
How to Avoid Probate
How to Minimize Estate, Inheritance, and Income Taxes at Death
How to Prepare an Estate Plan
Diagnosing the Problem
The
Basics
Diagnosing the Problem
Career Stages
* * * IMPORTANT INFORMATON/DISCLAIMER * * *
I am not an attorney
I am a Certified Financial Planner CFP®
Provide education on the need for estate planning, the types of documents, how to work with your trusted advisor team to create your estate plan
Team should include CFP®, Estate planning attorney, CPA, CFA® real estate and/or business attorney, etc.
What is an Estate?
What you leave behind when you die
All of your money
All of your stuff
What is Probate?
Legal process
- Pays off creditors - Distributes assets as specified in validated will - Expensive and time consuming
Without an estate plan in Missouri
If you die with: here's what happens:
children but no spouse children inherit everything
spouse but no descendants spouse inherits everything spouse inherits first $20,000 of your intestate property, plus 1/2 of the balance
spouse and descendants from you and that spouse
spouse and descendants from you and someone other than that spouse
descendants inherit everything else spouse inherits 1/2 of your intestate property descendants inherit everything else
parents and siblings but no spouse or descendants parents and siblings inherit your intestate property in equal shares
parents but no spouse, descendants, or siblings parents inherit everything
siblings but no spouse, descendants, or parents siblings inherit everything (Mo. Rev. Stat. § 474.010 (2024).)
What is Estate Planning?
Incapacity and Death
Asset protection
Assets go where you want them to go
Desires are carried out even though you can no longer make decisions
Minimize estate taxes
Avoid costly and time-consuming probate
Save money and family strife
What is Estate Planning?
Who Needs to Do Estate Planning?
- Those with assets if you care where they go
- Those with children under the age of 18
- Those over age 18
When do I need an estate plan?
- One in four of today’s 20-year-olds can expect to be out of work for at least a year because of a disabling condition before they reach the normal retirement age.1
- 100% chance of dying at some point
What is Estate Planning?
What Documents Make Up Your Estate Plan?
- Will - Living Will/Advanced Medical Directive/Medical Power of Attorney - Durable Power of Attorney - Revocable Living Trusts - Irrevocable Trusts - Love Letter/Letter of Intent - List of Important Documents
How to Avoid Probate
Beneficiary Designations
Pay on Death or Transfer on Death Designations
Revocable Living Trust
Irrevocable Trust
Joint Ownership - may impact step-up in basis - May impact asset protection
Small Estate Affidavit (under $40,000)
How to Minimize Estate, Inheritance, and Income Taxes at Death
Federal Estate Tax
- Tax that is paid on any amount over the estate tax exemption
• Today Exemption Amount is $13.61 million per Individual
• Jan 2026: Exemption Amount – estimated to be cut in half
- Married exemption is portable
- Top Tax Rate is 40%
Gift Tax
- If you give more than $18,000 in a year to an individual
• Required to file a gift tax return
• Must be subtracted from the estate tax exemption amount
How to Minimize Estate, Inheritance, and Income Taxes at Death
State Estate Tax (State dependent)
State Inheritance Tax (Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania)
Income Taxes
- Step-up in Basis - Tax-Deferred Accounts
How to Minimize Estate, Inheritance, and Income Taxes at Death
If taxable estate:
- Spend your assets
- Give to charity
- Annual gift tax exclusion ($18,000 per person per year)
- Give away appreciating assets
• Directly to the heir
• Irrevocable Trusts
• Limited Partnerships (LP) or Limited Liability Companies (LLC)
• Roth Conversions
How to Minimize Estate, Inheritance, and Income Taxes at Death
How to Minimize Estate, Inheritance, and Income Taxes at Death
- Proceeds are not subject to income taxes
- Still subject to estate taxes
- Irrevocable Life Insurance Trust (ILIT)
• Outside of estate
• Annual premiums are considered gifts to heirs
• Required annual notification
- Life insurance can be a good estate planning tool
- Life insurance is rarely a good investment
How to Prepare an Estate Plan
Build your Net Worth / Personal Financial Statement
Make a Plan for Minors
• Who will be their guardian?
• Who will be the conservator of the assets and/or trustee of the trust funds?
What will the terms of the trust be?
Who do you want in charge? (during incapacity and after death)
Where do you want the assets to go?
How to Prepare an Estate Plan
Plan with your advisor
Hire an Estate Planning Attorney
- Create or update documents (ALL)
- Business exit planning
- Consider estate tax, income tax, and asset protection implications
- Consider asset protection for heirs (creditors and divorce)
Fund your Trust
Fund your Trust
Fund your Trust
How to Prepare an Estate Plan
Plan Re-evaluation
- Review and update after major life event
- Significant tax code change
- Periodically (every 5 years)
Document Storage - Easily accessible copy at home
- Attorney may keep a copy of it
- Provide a copy to those in charge
- Originals in safety deposit box
What Happens After you Die
After funeral, receive Death Certificates
Probate process – state specific
Will is authenticated, Personal representative is appointed
Locate assets
Determine Date of Death Asset Values
Identify and Notify Creditors
Prepare and file income tax return for individual and for estate
Distribute the estate
Questions?
Prescribing Financial Wellness for Physicians
Do today
• Create or update your personal financial statement
• Evaluate if you will have a taxable estate now or after Dec 31, 2025
• Review your estate plan documents with your trusted advisor to ensure your wishes are achieved
• Ensure your trust is funded!
• If updates are needed, schedule meeting with estate planning attorney
