RSNA News - March 2005

Taking Care of Your Financial Health:
Estate Planning for Physicians

Part 2 of 3

Probate is a necessary process for young, active medical professionals because they are frequently signing agreements and contracts. They can take advantage of the probate process in order to limit the claims of potential creditors.
—Brian T. Whitlock, J.D., C.P.A.

Legal Documents Provide Peace of Mind

About 70 percent of the people who die each year in the United States do not have a will, according to Alan L. Cates, J.D. Some of the deceased have other legal means for passing on property, such as joint tenancy, but many do not.

"They just didn't think about the financial futures of their loved ones or they kept putting it off until it was too late," said Cates, the 2004 president of the Chattanooga Bar Association and a shareholder with the firm of Shumacker, Witt, Gaither & Whitaker in Chattanooga, Tenn.

"If someone is satisfied with the laws governing the disposition of assets in his or her state, a will is not needed," he said. "However, a will lets your heirs know exactly how you want your assets divided, who should receive your assets and when they should receive them." This important legal document can also reduce court costs and other expenses.

What is a Will?

A will is simply a set of operating instructions upon death. It directs the transfer of assets and sets the stage for probate. Probate is the process by which assets are collected, bills are paid and property is divided among heirs.

"When there is no contractual arrangement, such as joint tenancy for a home or a beneficiary designation in an insurance policy or pension, then the will directs the transfer of the assets," said Brian T. Whitlock, J.D., C.P.A., partner-in-charge of the Wealth Transfer Service Group at Blackman, Kallick, Bartlestein, L.L.P., in Chicago. He is also the chairman of the Illinois C.P.A. Society.

"Frequently, people read about the 'evils of probate.' It can be an expensive process, particularly in some jurisdictions," he explained. "However, probate is a necessary process for young, active medical professionals because they are frequently signing agreements and contracts. They can take advantage of the probate process in order to limit the claims of potential creditors."

The Probate Process

Whitlock said a will must be presented to the local probate court to make sure it meets the statutory requirements of the state. Several questions are raised:

• Is it a valid will?
• Does the will name an executor?
• Does that executor need to pay a bond or has the deceased waived that right in the will?

The executor then publishes a notice in the county where the deceased lived calling on creditors to come forward within a four- to six-month period if they have any claims against the estate. For example, a physician who ordered supplies before his or her death may not have paid for them. This is the time for any unpaid bills to be paid. After the four- to six-month period, no financial claims can be made against the estate.

These limits also apply to potential malpractice claims. "Probate provides certainty and limitation of claims. That's one of the most positive aspects of probate," Whitlock said.

What is a Trust?

A trust is a contractual arrangement for the holding and disposition of assets. Unlike a will, which takes effect upon death, a trust takes effect as soon as an asset is registered in the trust.

A trust can manage assets during lifetime due to incapacity or the inability to manage assets, such as for children who lose their parents. Trusts can last for many years beyond the life of the person who created it, even over multiple generations.

"A trust can provide protection from creditors," said Whitlock. "For example, when a physician's spouse dies, the spouse leaves his or her assets to the physician. If the spouse had the assets in a trust for the physician and their children, the assets would be protected from the physician's creditors."

Whitlock added that physicians can set up trusts for their children to protect family assets from the claims of legal creditors, malpractice suits and even from the children's spouses in the event of divorce.

Trusts can also organize the process to create estate tax savings. "The trust creator sets the rules," said Whitlock. "You can decide how narrow or broad to organize your financial wishes."

Another advantage to a trust is that it is a private document. While a will is a public document filed in county court and open to view, a trust is private. Whitlock said the only time it could possibly be made public is in the event of a legal dispute where the beneficiaries of the trust might take the trustee to court in order to argue over the tears or management of the trust.

When choosing a trustee, Whitlock said consider a bank. "You don't need to have a professional trustee. Most people are more comfortable with a family member. However, banks are very good at this and have a lot of experience," he said.

Charitable Donations

If someone dies without a will (intestate), the state essentially writes a will for you and gives your assets to the closest living relatives. Assets go first to a spouse, then to children, grandchildren and other relatives. Court costs will eat up a lot of those assets.

What if you wanted to leave money to a favorite charity? "There are no adequate provisions in state laws addressing a person's thoughts about charitable contributions. A will specifies your intentions," Cates explained.

There are many ways to leave gifts to charity while first providing for the financial needs of your family.

You can designate:

• Specific amount to be transferred to one or more charities
• Specific percentage of your estate
• Amount left over after other gifts to family and friends have been made

"You can support the financial needs of your family and still help support a charitable organization that was important to you in your lifetime," said Deborah Kroll, managing director of fund development for the RSNA Research & Education Foundation.

Along with a will, Kroll suggested setting up a living trust to help accomplish estate planning objectives. "Special trusts can be used to help reduce or eliminate state and federal taxes on capital gains," said Kroll. "The assets you can designate include cash, personal property, stocks, bonds, retirement plans, life insurance, livestock, real estate and a family business."

Consult with an attorney or professional tax advisor for more information on wills and trusts.

For more information about contributing to the Foundation, contact Deborah Kroll at (630) 368-3742 or at .

 Next month: Insurance and Planned Giving