Intentionally devising a plan for what happens to someone’s assets and debts after they pass away is crucial. Medical professionals also need to make plans for what happens to their practice when they pass away. Comprehensive estate planning for Texas medical professionals empowers the physician, dentist, chiropractor or other medical practitioner to take control of the situation and put a plan in place for their personal and professional assets. Many estate planning tools can help with this effort, such as a Last Will and Testament (will) trust, power of attorney, buy-sell agreement, and succession plan.
What Are the Unique Considerations When Creating an Estate Plan for Texas Medical Professionals?
In addition to creating a plan for their personal assets, medical professionals must also put together a plan for selling or transferring their medical practice once they die or no longer practice medicine. One method to accomplish this is through succession planning tools, like buy-sell agreements. Physicians and other medical professionals should think carefully when creating a plan to ensure they comply with their ethical obligations and properly inform their patients (or put together a plan for someone else to do so).
Who Will Take Over the Practice When They Leave?
One of the first questions when creating an estate plan for Texas medical professionals is who will take over the practice when they leave. Those who work at larger offices or are part of a corporate structure may already have a plan as part of the business’s standard procedure. However, medical practitioners at small or solo offices may need to contact an outside office to partner with if they suddenly cannot practice.
All medical professionals should have several contingency plans in place, such as a plan for if they choose to leave and what happens if an emergency or their sudden death keeps them from practicing. This helps to ensure that every eventuality is covered. Doctors, dentists, and chiropractors can speak to colleagues to find one they trust to care for their patients and create a plan for having that doctor take over some or all of the practice on a permanent or temporary basis should the need arise.
How Will the Patients Be Notified?
Another aspect of creating a contingency plan for selling a medical practice is to establish a procedure for notifying patients if the medical professional sells the practice or is unable to practice medicine. Ensure this plan conforms with the applicable ethical rules of Texas, including under the Texas laws about communicating with or about patients.
Patients should be promptly informed about changes (if possible, well in advance of when the change occurs) and given options for whom to see. The ultimate choice about what medical practitioner they visit is up to them, but providing them with alternatives can limit the potential negative repercussions. If the patients do not receive adequate notice, they may become frustrated or blame the medical team for not addressing or prioritizing their health issues.
How to Create a Plan for Selling the Practice?
Medical professionals may also choose to put together a plan to sell the practice. The first step in doing so is to determine the proper market value of the practice. They can do this by calling on accountants for assistance and considering all aspects of the business, from its assets to accounts receivables and debts.
Medical professionals can proactively sell their practice when they reach retirement or are no longer able to practice medicine or healthcare. Alternatively, they can enter into a buy-sell agreement or similar arrangement to allow a trusted partner or colleague to purchase the business if the medical practitioner suddenly passes away or is incapacitated.
What Is Estate Planning?
An estate plan is an individual’s instructions for what happens to their estate after they die. A person’s estate is the collection of assets (i.e., money, ownership interests, and property) they own or financial liabilities (e.g., debts) in their name upon their death. Some estate planning tools, such as a living trust or power of attorney forms, can be implemented before someone’s death, while others do not take effect until the person dies.
Texas law provides default rules for what happens to someone’s estate if they do not have an estate plan in place. However, Texas medical professionals would do well to create an intentional and custom plan that fits their situation, preference, and ethical obligations to their patients. This plan should include instructions for who takes over their practice when they die or become incapacitated.
What Are the Different Tools Used in Estate Planning for Texas Medical Professionals?
Medical professionals can use various tools to properly plan an estate, such as a trust, will, payable-on-death instrument, power of attorney, buy-sell agreement, and succession plan. Each serves a unique role in the process and can safeguard an individual’s assets and help ensure that what they want to happen to their assets is what occurs. Instruments like the power of attorney forms ensure that someone is available to make crucial decisions if an individual cannot do so on their own behalf.
Effectively creating an appropriate estate plan takes careful consideration and time. Individuals with questions about estate planning for Texas medical professionals might consider talking with an experienced attorney.
At its basic level, a trust is a way to set aside assets to benefit one or more individuals or organizations and does not go through the probate process in court. Individuals can create a trust as a standalone document or by adding a provision in their will that creates a trust. When they establish the trust, they are called the settlor, and they name a trustee and a beneficiary. The trustee carries out the instructions in the trust, and the beneficiary (or beneficiaries) benefits from the trust according to its instructions.
There are several types of trusts: inter vivos, testamentary, living, revocable, and irrevocable. Inter vivos and living trusts are created while the individual is alive, whereas a testamentary trust is established through someone’s Last Will and Testament when they pass away. Revocable trusts can be changed by the person who created them, but irrevocable trusts cannot, making them valuable options for people with, for example, a degenerative disease like Alzheimer’s.
A will is a comprehensive document describing the assets a person owns upon their death and how they are distributed. The person creating the will is called a testator or decedent (when they pass away), and they name an executor or administrator (and one or more successors) to oversee the will’s administration upon the testator’s death. The people who inherit assets in a will are referred to as heirs once the testator passes away.
In most cases, the executor must file a legal claim in probate court, which interprets, validates, and carries out instructions in wills. The probate process can be lengthy, especially if someone challenges the will’s validity, but even so, it can be a valuable method of distributing assets after an individual’s death. The will usually covers assets not included in a trust or payable-on-death instrument, but that is not always true.
Payable-On-Death (POD) Instruments
Another essential part of estate planning for Texas medical professionals is the payable-on-death instrument. As the name suggests, payable-on-death instruments transfer or pay out the asset to another when the primary holder dies. For example, an individual can name a spouse or child as the beneficiary of their bank account if they pass away.
Retirement accounts, stocks, bonds, and jointly-owned real estate are other assets that may automatically transfer to someone else upon an individual’s death. Payable-on-death instruments can be a beneficial and efficient way to distribute certain kinds of assets without going through the probate process. Depending on the property in question and the applicable laws, the transfer may also be exempt from the estate or gift taxes.
Durable Power of Attorney for Property
As the Texas State Law Library explains, the Durable Power of Attorney for Property is a way for an individual (the principal) to give someone else (the agent) authority to act on their behalf. The principal can designate an effective date and an end date, which can either be a specific date or an occurrence (such as the principal’s incapacitation).
In the form, the principal also indicates the individual’s authority and the kinds of property decisions they can make. For example, they might allow the agent to make decisions about the principal’s real property but limit their control over other financial matters.
Power of Attorney for Healthcare
A power of attorney for Healthcare is similar to the Power of Attorney for Property, but as the Texas State Law Library describes, it allows the principal to name an agent (and a successor) to make healthcare decisions. The agent is given the authority to make important healthcare choices on behalf of someone else in certain situations.
The principal can state a specific day or date range during which the agent has the authority or a set of events (such as someone’s incapacitation) that triggers the agent’s power to make decisions. Additionally, the Power of Attorney for Healthcare is also where the principal indicates what life-saving measures they would like taken if they are unresponsive.
Medical professionals who are in business with one or more trusted partners might consider entering into a buy-sell agreement as part of their overall estate plan. Buy-sell agreements empower business partners to buy out a partner’s shares at a certain price if a qualifying event occurs. The specific triggering event varies from situation to situation, but in many cases, it includes a partner’s death, incapacity, retirement, or similar occurrences.
Buy-sell agreements can be standalone contracts or included as a provision in an existing partnership agreement. The benefits of having a buy-sell agreement in place are that the current partners receive priority over outside parties that may be interested in buying the outgoing partner’s interest.
Texas medical professionals can also create an internal succession plan about who takes over their portion of the practice administratively when they pass away or no longer practice medicine. For example, they can determine what doctor will take over their patient list and how the team will notify the patients and staff.
Further, they can establish a guide to their practice to help whoever steps into their role be adequately educated about how the practice runs. Ideally, the doctor can choose someone to take over the business and will train them on how it operates. Doing so helps ensure a smooth transition when the change occurs.
Consider Intentional Estate Planning
Thinking about and planning for what happens after someone passes away can be a challenging topic, but it is essential to do. Without intentional estate planning for Texas medical professionals, loved ones may be confused or not receive the inheritance their loved ones would have wanted. Further, patients and partners may be left behind without a clear answer about what happens next. Creating a plan for what happens to a doctor’s assets and medical practice when they die can provide much-needed clarity.