Ensure That Your Beneficiaries Benefit

Physician's Money DigestApril15 2005
Volume 12
Issue 7

Setting up an estate plan is not as simple as one-two-three. When setting one up, however,there are three key steps that physicians shouldconsider. Taking these steps will ensure that theestate plan ends up functioning in the original wayintended. The three steps include finding the rightestate planning attorney, making sure your heirs andnot the attorneys are the beneficiaries of your estate,and establishing a trust fund.

Acquiring an Attorney

Kiplinger's Retirement


According to an article in , one of five people face estate problems becausethey either didn't have a plan or they had a plan that waspoorly prepared. But you can avoid this outcome byfinding the right estate planning lawyer.

Word-of-mouth referrals are the best place to start.Talk with people you know who might be able to recommendan attorney they've worked with. A professionaladvisor such as your accountant or financial planneris also a good source for estate lawyers.


Next, check with state and local bar associations andother legal groups. The article suggests contactingthe American College of Trust and Estate Counselfor a list of members in your state (www.actec.org). Twoother Web sites, www.lawyers.com and www.martindale.com, list lawyers by specialty and location.

When considering an estate planning lawyer, askthem if they participate in a bar association's estate ortrust committee. If they do not participate, ask themhow they stay current on estate planning issues. Inaddition, find out what size estates they generally handle.Above all else, make sure you have a clear understandingof their fees.

Prudence Proves Wise


An article in suggests that in the case of estateplanning, ignorance is not bliss. Parents and their childrenneed to talk openly about estate plans so that thereare no surprises. And if you're setting up a trust, yourchoice of trustee is especially important.

According to the article, if you're setting up a trustsimply to save on taxes, "your beneficiaries can oftenserve as the trustees or cotrustees."But if the trust'sintent is to protect a beneficiary from creditors or carelessspending, you'll need an independent trustee, suchas a trust company or attorney. In this case, you'll wantto take precautions.


Guard against dubious trustee decision making byincluding a removal clause in the trust. This providesheirs with a mechanism for changing trustees. Thearticle also notes that nine states and the Districtof Columbia have adopted the new Uniform Trust Code.Under this code, even in the absence of a removal clause,a judge can remove a trustee for several reasons, includingfailing to provide information to the beneficiaries.

Choosing a Locale


Establishing a trust fund is one thing, finding theright locale for it is another, suggests an article in. Doing so will enable you to extend thelife of the trust as well as defend it against creditors. Forexample, although trusts are required to pay federaltaxes on capital gains as well as any income passed on tobeneficiaries, you could locate your trust in a state thathas no income tax or exempts trusts from paying it.States with little or no income tax on trusts includeAlaska, Delaware, Florida, Nevada, Ohio, and Texas.

Longevity of your trust is another consideration.Although most states require that trusts dissolve afterapproximately 90 years, some states have changedtheir laws to permit irrevocable trusts with instatetrustees to live much longer. Alaska, Arizona, Delaware,Florida, New Hampshire, New Jersey, Virginia,and Washington are a few.


Lastly, consider a location that will shield your assetsfrom creditors in the event you file for bankruptcy.According to the article, money in anirrevocable trust for someone else, such as your children,is generally off-limits to creditors. However, seven states,including Alaska, Delaware, and Nevada, now havelaws allowing you to name yourself as the beneficiary ofa protected trust.

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