Succession Planning: Preserving Your Practice for the Next Generation For healthcare professionals, your days and nights are often so busy that it’s impossible to plan for the future. But, while those days and nights may seem long, the months and years go by with astonishing speed. Soon it’s time to think about succession planning and what you are going to do with one of the most significant assets, your practice. There are some key considerations a practice owner should attend to, especially in collaboration with their family members and a team of trusted advisors. Every practice owner needs the aforementioned team working together to develop the plan and strategy for who, when, and how to transfer their assets to their chosen successors. Whether your practice will go to family heirs or an outside interest, the “what if” details will help to prepare for unforeseen contingencies. I have had many clients who mistakenly thought that simply having a Will was going to take care of everything. While important, a Will often falls short of ensuring that your wishes for your practice are addressed.
Dani Collins, SVP Healthcare Banking Team Leader
There are enormous tax implications for the transition of a practice and/or corresponding commercial real estate. In addition, there are estate considerations. As such, it is vital to begin the succession planning process early. A good rule of thumb is five to seven years in advance of your desired retirement date. This will provide adequate time to address every aspect of your financial picture. Assembling a team of advisors is the best place to start. Your team should include a financial planner, attorney, CPA and banker who work closely with independent healthcare professionals. As a banker, I work closely with clients and their team of advisors to identify the considerations and to develop a thorough plan that ensures their heirs are taken care of tomorrow, while providing peace of mind and security today. Your advisory team can assist with an insurance policy and investment review, drafting or redrafting of a Will, and determination of the best estate planning options. Once you have established a plan, I recommend clients meet with their advisors annually to ensure the plan still meets their needs. Working with your banker, CPA, and attorney to develop a sound succession and estate plan is going to protect you from three key problems – overpayment of taxes, executor or trustee issues, and liquidity issues. I’ve heard troubling stories about healthcare professionals who never thought they would make enough money to trigger significant estate taxes upon their death. This underestimation can truly burden your heirs. Further, clients who own their practice jointly with a spouse may not foresee problems with the unified credit for joint ownership and end up exceeding exemption limits. Making sure you work with your trusted advisors to prepare for a future tax burden is critical. It is also important to select the right executor or trustee. Executing a Will or estate is challenging work and shouldn’t just be left to a family member who may lack the necessary skills and experience. Professionals might want to consider the use of a bank trust department, as the bank is well prepared and capable of performing all the duties required by the trust document. Finally, there is the issue of planning for liquidity to cover costs associated with the transfer of an estate. A lack of sufficient cash planning could create a burden for their heirs. Developing a plan with your trusted advisors is a critical part of the plan. The challenges of the past two years have served to remind us all about the need to effectively plan, professionally and personally. Just as prudent healthcare professionals plan for growth and expansion of their practice, so too must they plan for the transfer their practice and plan for their estate.
WINTER 2022
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