Why you need an Estate Plan

Financial Planning Dentist

Everyone needs to plan and when you fail to plan; you will create a storm of questions and controversy your family may not be prepared to solve. When we hear the term estate plan, most times we think it is for the super-wealthy. But everyone, especially dentists, need to have an estate plan that resolves issues for your family, and your practice. Dentists have a fantastic capacity to generate wealth both in and outside of their practice. As a result, the issues that arise from a practices owner’s passing are made more complex by their role as breadwinner at home, and the chief source of cash flow for the practice. 

“If you fail to plan, you are planning to fail” ~ Benjamin Franklin

By Kevin T. Taylor AIF® and Peter Locke CFP®

After working for decades to make the grin on other people wider and whiter, they will be required to have a series of documents that will explain specifically how they want their hard work distributed. This is made increasingly complicated if the dentist has an ownership stake in the practice, has a child that may take over, and has employees that rely on them.  In order to execute a proper estate plan you should consult professionals that understand both the nuances of your profession and the intricacies of asset management/transfer. 

A properly executed estate plan fulfills your healthcare directives, provides liquidity at death, property transfers and wishes, all while maximizing the net assets that pass to heirs or charity and minimizing costs and taxes.  This is not simple and can have a huge effect on the legacy you leave behind. It ensures your financial matters are organized so when your loved ones deal with your grief they don’t have the added stress of trying to figure out your financial affairs. 

This should be done and reviewed annually for the following reasons:

Your wishes stay granted

As stated earlier, an estate plan contains instructions that you leave when you die or become incapacitated where you can no longer decide for yourself what needs to be done next. Whatever decision or wish you have will be included in this plan. You get to choose who gets this or that, and what portion goes to a particular person or charity.  If your children are young, you will choose who takes care of them and with what financial support. Your wishes will be carried out the exact way you want them to be and all your instructions will be respected.

legacy estate planningProtect your family, business, and legacy

After years of hard work, or worse a life cut short, you don’t want your family to go through the challenges of distributing your assets when you are no longer with them.  An estate plan will have multiple choices and decisions that must be made in order to best execute on what you want to happen when you’re no longer able to make those decisions on your own. It can ensure your business and family have liquidity. If you have partners in your practice, it will provide them liquidity to buy your portion of the practice to enable your family to get the support they need when you’re no longer there.  An estate plan will help your loved ones avoid expenses and legal hassles and helps protect your children’s future. It prevents your assets from going through the public process of probate which is not only expensive but cumbersome. With a proper plan, your family has money to live, without a plan or sufficient assets, your family could be left in a hard place.  If you’re the sole owner of your business and you pass, your family could be left with a fraction of what you had built. 

Think about a scenario where you listed your practice as a sole proprietorship because when you started it you didn’t have clients or a family.  Overtime, your net worth grows and your practice is generating a large amount of revenue.  You start a family and have two young daughters. Then one morning, you’re involved in an accident on your drive into work and you pass away.  Unfortunately, without a proper estate plan, your business could cease from existing or best case, your family or a legal representative is appointed by the courts after months of waiting and sells it to a third party for a fraction of what it was worth.  Closely held business interests generally represent a considerable portion of the business owner’s net worth and generally aren’t liquid.  This creates a need for liquidity within the estate and often for the surviving spouse. However, if you haven’t done an estate plan you probably don’t have adequate funds saved to provide the cash flow necessary to sustain your family’s current lifestyle let alone future needs. 

When an individual becomes incapacitated or is suffering from cognitive impairment, life doesn’t stop, neither do the bills or your practice.  You and/or your kids may need a guardian to support you.  Without planning, who will support you? How? Would it cause your family to fight?  While this gets decided, no changes can be made on your behalf to your accounts or practice. Simply adding joint ownership doesn’t resolve your issues and it may even make matters worse depending on the circumstances.  By planning for these events which are becoming very common, you can help support yourself, practice, and family with the right plan.  

Authority Granted 

Besides adding a joint owner to your accounts (which not all accounts are eligible for) who is responsible for what happens to you in the event of “I just never thought it would happen to me” disability or incapacitation. A Durable Power of Attorney can grant someone to act on your behalf when something happens but ends at death.  The goal of a Durable Power of Attorney is to grant authority to act on your behalf to the extent legally possible, and with regard to all of your assets and accounts.  A General Power of Attorney is non durable, and must be given to every institution prior to actually being used to exercise said powers.  You could go with a narrower set of powers if deemed necessary called Limited Power of Attorney.  Unlike the Power of Attorney or nondurable Power of Attorney, which ceases when the Principal (you) becomes incapacitated, the Durable Power of Attorney, stays in effect until you pass. Or you may grant someone Springing Powers of Attorney, which goes into effect when an event occurs, which could cause it’s own problems as well.  Health Care Powers of Attorney are even nondurable in nature.  If the power is non-durable, it ends at the Principal’s death, revocation of said power, expiration date that is built in, or incapacity/ mental incompetence.  So what good is it to have a Power of Attorney if when you need it, the powers become null.  

It is important to understand what powers you’ve granted and when they’re able to be used as the wrong selection could mean the wrong result.  Since we’ve only touched on a couple of the “flavors” of authority you can grant, make sure you take the time to meet with a professional or do your due diligence to make sure you know exactly what you’ve done and also to make sure since life changes very quickly and often, that they’re up to date. Besides granting authority through different Powers of Attorney, you can set up a Revocable Living Trust and name a trusted person as a co-trustee

Revocable Living Trusts

One direction you can take with your Estate Plan is creating a Trust. An individual might use this in order for a trusted family member, friend, or corporate trustee to help manage assets, for which the trust is the owner, in the event of incapacity. Once created, the trust must be funded which means, when of sound mind and body, the individual must open up new accounts and move assets into those accounts or re-title assets into the name of the trust, like their home.  Simply having a trust doesn’t do anything unless the asset is titled in the name of the trust.  Until then, the co trustee has no power. 

Prevent Transfer Tax

After acquiring wealth as a Dentist, you will want to protect it from a large tax liability. An estate plan does that for you.  You don’t want to build a large nest egg to see it reduced by up to 40% because of bad planning.  Although the federal estate tax exemption is high now, there is a good chance it is reduced in future years.  


Humanitarian goals

Do you have a goal to leave a legacy behind? If yes, an estate plan can be used to shape how you want to be remembered after you pass on. For some individuals, this incorporates setting up humanitarian goals and building up a plan to guarantee that such objectives are executed into what’s to come. As a dentist, you may choose to build a Dental foundation in your name, set up a charity trust, or partake in a fund that supports what is important to you. The sooner you begin to design your estate plan, the more you can make your goals known to your family and charities.


Putting assets into joint ownership, granting power of authority, and creating a revocable trust are some of the more common ways people plan for incapacity but there are many ways that we haven’t reviewed.  Other estate planning options include irrevocable trusts, family limited partnerships, and LLCs which can all be used to plan for the unexpected or worse death. 

To make sure you’ve taken the appropriate steps to protect yourself, family or business, consult a professional.  As a CFP®, we can offer you the insight you need to take the appropriate next steps before having a legal professional draft up your documents. 


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