Do Young Physicians Need an Estate Plan?

July 19, 2018

To most young adults starting out in their careers, estate planning seems like something for much older and much wealthier people.

But even if you don’t have a long list of potential heirs or much property to distribute, documenting your last wishes can give you peace of mind. That’s because it ensures that your loved ones won’t be faced with a legal mess or financial stress if you die prematurely.   

As a medical resident or new-in-practice physician, you have good reason to put off estate planning until you take care of other financial priorities. But estate planning can be as simple or as complex as your situation requires.

Let’s look at a fictional young couple and what components they can include in their estate plan at this point in their lives.

Dr. Ian Gray, 32, is an anesthesiology resident. Joanne Leblanc, 30, is a physiotherapist. The two got married last year, and they’d like to start a family sooner rather than later.  

Dr. Gray’s family helped him pay for his medical education, so he’ll be able to finish residency with little debt. The couple would like to buy a house in a few years—hopefully when the real estate market has cooled off somewhat.

Thinking about an estate plan right now seems premature, since they feel like they’re just starting their lives. 

But tackling just a few items will ensure that their wishes will be known, and that they will be taking care of each other and their future children.

  1. Draw up a will

    The first thing they each need to do is draw up a will, the foundation of an estate plan. The couple can name each other as executors. They should also name an alternate executor, in case they were both to pass away. Even though they don’t have children now, they can appoint someone to have custody of any future children.

    Their wills would also lay out how they plan to distribute their assets—to each other, family members, and so on. They can also include details about funeral wishes or burial plans.

    Wills should be reviewed on a regular basis—say, every five years—and certainly when there are major life changes. 


  2. Get life insurance  

    Dr. Gray has a term insurance policy of $1 million with his provincial medical association, which he can renew.

    Term insurance is a common starting point because it’s less expensive than permanent insurance. It provides pure insurance coverage for a specific period of time, giving beneficiaries a tax-free death benefit if the policyholder passes away during that period. But if the policyholder dies after that, no death benefits are paid out.

    During this period of their lives, life insurance can help Dr. Gray and his wife replace income and protect the financial security of their family, should either of them pass away.

    Later on, they should consider adding permanent life insurance to their coverage. Unlike term insurance, permanent insurance accumulates cash value, which they can access if they ever need it.

    As their wealth increases, permanent life insurance can be used as a tax-efficient way to pay the taxes their estate will owe. This way, they can leave a greater legacy for their children and grandchildren. 


  3. Set up a power of attorney
  4. Giving someone continuing power of attorney allows that person to act on your behalf in financial matters when you are unable to.

    Even though Dr. Gray and his wife own everything jointly, power of attorney would give each of them the ability to do much more on the other’s behalf in financial matters. They can set up their power of attorney at the same time that they draw up their wills.

Creating an estate plan is like planning a party that, in the end, you don’t get to attend. But you can see that it is something you do for your family. Once you have a comprehensive estate plan in place, it will no doubt give you some peace of mind.  

To learn more about creating an estate plan, contact an MD Advisor.

 

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