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Estate planning Face mortality to guard against a legal quagmire
Estate planning can be a real headache, but it is just one more thing that we do in order to protect our spouses and our dependents.
As I write this DVM Newsmagazine contribution, every cable and network television channel in America is awash with stories about Anna Nicole Smith and the litigation surrounding her burial site, the future of her infant daughter and the enormous inheritance that accompanies the child.
I have never been a particular fan of the tabloid press, but I must confess this particularly bizarre story is kind of interesting for lawyers.
The interaction of jurisdictional claims between and among Florida, Texas, California and the Bahamas brings up technical legal questions that most attorneys haven't thought about since law school.
While I have been following the legal wrangling, it occurred to me that I have never written a column offering guidance to veterinarians in the area of law which we all like thinking about the least: the legal challenges of our final illness and the end of life.
There are a number of complex decisions that face professional people as they face the realities of mortality.
Naturally, the nuances are much too complicated to deal with in detail here, but I will offer some insight into the areas that need to be considered by doctors as we approach middle age and the period beyond.
In my experience, the families of veterinarians seem to find themselves suddenly immersed in unexpected legal complications in, among others, these typical situations:
- The doctor dies unexpectedly with no plan in place for disposition of his interest in an active practice as an owner, partner or shareholder.
- The doctor is injured or disabled at an advanced age, and no plan has been made for long-term care. The family suddenly realizes the catastrophic impact institutional care can have on family finances, and the ill veterinarian no longer qualifies for nursing-home insurance.
- The doctor becomes ill during his career without sufficient savings to provide for his spouse and dependent children. At the same time, medical bills may exceed insurance-policy limits or do not cover all of the therapies to which the desperate veterinarian would like to have access.
- The doctor dies with a poorly conceived estate plan, and the process of probating the will leaves his family without sufficient funds for a long period while his estate is held in financial limbo. (This is a particular problem for veterinarians in large cities and highly populated states where court calendars are packed.)
Do it for your family
Naturally, each individual's and family's circumstances are unique and everyone's budget is somewhat different. Nonetheless, I believe that we all owe it to our families to make the hard decisions involved in locating qualified assistance in developing an estate plan and in making the arrangements to protect loved ones if we become incapacitated or die unexpectedly.
Here are the general steps that I believe all doctors should take in preparing for the unthinkable complications of severe illness or death:
Keep an updated will
1. Any veterinarian who has one or more dependents should certainly write a will. The will should be updated at least every five years (more frequently is preferable) and at any time when there is a major life change. For example, a new will should be considered at the birth of a child, after a divorce and if an aged parent becomes incapacitated. In the absence of a will, a person's property is not always distributed at death the way he or she might have expected. To avoid having your state decide who gets your property upon your death, a will is essential.
2. If a doctor is the owner or partner in a practice, he or she needs to always be thinking about the contingency of suffering a long-term disability or unexpected death.
If no thought or planning goes into the question of how the practice interest would be disposed of, it is almost certain that an unexpected disability or death will render the value of that interest deeply diminished or even worthless.
Remember that, for many practitioners' families, the veterinary office and equipment are the most valuable property in the family portfolio.
When a veterinarian is a partner, cross-purchase arrangements should be made in writing. If these plans are delayed and one of the partners is disabled, the remaining partner may find himself splitting profits with a doctor who isn't even able to show up to work. If a partner died without a written cross-purchase deal, the family of the deceased might end up selling his stake back to the other partner for pennies on the dollar.
In the case of a solo practice owner, education is the key, at least for his family. Everyone should know the steps to obtain temporary help in operating the practice during the immediate post-death period. The spouse or eldest child, for example, should become familiar with how relief veterinarians are found as well as how veterinary practices are marketed and sold. It does not take very long for the goodwill equity of a one-doctor practice to disappear after his death if the doors are suddenly closed for months.
3. Consider the value offered by disability insurance, especially if you have dependents. A veterinarian is much more likely to be seriously disabled during his or her career than to die prior to retirement. Yet, many do not carry such coverage. These policies, while they may seem costly, are essential to protect the financial needs of the veterinarian's family and children's education during a protracted illness or after a serious accident.
4. If you are 50 or older, seriously connsider long-term care insurance. In the past, many medical practitioners simply assumed that if they became the victim of a protracted illness, they could transfer the bulk of their property to their children and other relatives in order to qualify for Medicaid (the government agency that assists the poor with medical costs). That way, the bulk of the doctor's estate could be salvaged for heirs while the government would be obligated to see to the medical care.
While this strategy was popular and in some instances actually had some degree of practicality, newly enacted legislation is making this "intentional impoverishment" strategy nearly useless.
The Deficit Reduction Act of 2005 (DRA) instituted a 60-month "look-back" rule, which substantially lengthened the period between when a person transfers assets out of his name and when that person may become qualified to have Medicaid pay for his long-term care. Insurance is a much more sound alternative.
Estate planning can be a real headache, but it is just one more thing that we do in order to protect our spouses and our dependents. While a veterinarian may not end up benefiting personally from the effort, there is a great deal of comfort in knowing that loved ones will not suffer unnecessarily as a result of life-and-death circumstances we can't control.
Dr. Allen is president of the Associates in Veterinary Law P.C., which provides legal and consulting services exclusively to veterinarians. He may be contacted at (607) 754-1510 or firstname.lastname@example.org