When it comes to asset protection for doctors and other medical professionals, there are unique concerns that need to be addressed. Toby Mathis, Esq. explores how to shore up your life and legacy in the final installment of this 3-part series.


Updated September 24, 2021

There’s always tuition we pay in life. Physicians and other medical professionals know this too well. Whether you pay tuition to colleges, companies for continuing education, or through the school of hard knocks, you’re still paying. This is how you’ve built your legacy: through a lifetime of experience and expertise.

When we’re talking about legacy planning, we’re talking about how best to continue your legacy after your passing. All of the intangible benefits you’ve earned through life’s tuition goes into your legacy.

In legacy planning, there are certain things that are inevitable, certain things that are highly likely, and some things that aren’t as likely but should still be planned for. For instance, death is an unfortunate inevitability. You should absolutely prepare for it since there’s no way around this outcome. If you live over the age of 60, it’s highly likely that you’ll need long-term care. The odds are around 50% likelihood. Furthermore, although it’s unlikely that anything will ever happen to both you and your spouse, there’s a chance you’d need guardianship for your children, so it’s also something that should be considered in your planning.

This is your legacy, and it’s critical that you address these things before any of these needs arise.

Planning for Your Estate

If you follow the norm, you’re most likely considering using a will, or have not created an estate plan at all (what I call “doing nothing”). If you have a will or do nothing, this means you’re at the mercy of the state wherein you reside. Your estate will go through the probate system, which you won’t have to deal with, but your family or heirs certainly will. Not only is this process lengthy (the average length of time to go through probate is 18 months), but it’s also incredibly expensive. In California, for instance, the cost of probate is about 8% of the value of the estate: 4% goes to the personal representative and 4% to the attorney. When you compare this to the cost of creating an estate plan for yourself with a living trust, the cost of a living trust is significantly lower. A comprehensive living trust should contain everything needed, including medical power of attorney, financial power of attorney, schedule of gifts, end-of-life decisions/advanced directives, a pour-over will, and other essential documents.

Legacy Planning with Living Trusts

I have spoken to thousands of people around the country about this stuff, and something I always tell them is: “Don’t just think about the next generation. Don’t just think about your kids. Think about 200-300 years down the road.”

Creating a legacy is about deciding this is what’s important to me. Then, you put vehicles in place to preserve those values for future generations.

I encourage medical professionals and anyone else working on their estate plans to think beyond their children. One of the main reasons for this is that, more likely than not, if you give everything to your kids, it will all be gone after five years. There’s only about a 16% retention rate after five years for recipients of inheritance.

Instead of giving your children a chunk of cash, you can create a legacy and give them access to something with an incentive to serve. For example, one of my affluent clients highly values travel. His thinking is that there’s no way to be selfish or unsympathetic to other human beings if you go out and actually experience other cultures and how other people live. Thus, he created an estate plan that mandated travel to international countries for two weeks a year (to a different country every year) in order to access the estate. This is absolutely leaving an imprint on future generations, and instilling his values in his legacy.

Living trusts allow you to do this type of planning. If you use a will or do nothing, you’re at the mercy of the state, and you jeopardize what you’ve taken your life to build by giving it to your heirs in one fell swoop.

Legacy Planning with Charities

Another option to build a legacy that outlives you and your children and lasts for future generations is to set up a charity. The beautiful thing about charities is that they do not have owners, only controllers. This means that they do not die with the people who set them up.

Creating a charity that propagates your values beyond your lifetime is one of the strategies we see the highly wealthy use all the time. One of the biggest charities you may not even realize is a charity is Ikea. Ingvar Kamprad broke Ikea and its control up into different charitable organizations. This ensured that no one organization or person could control it fully, thus ensuring it couldn’t be sold off and destroyed after his passing.

It’s important to keep in mind that legacy planning isn’t just about me and my kids. I can create other, more long-lasting, kinds of legacies.

When it comes to planning, whether it’s tax planning, legacy planning, business planning, or anything else, there are three roads. The first road is the most popular: it’s the one to which all signs point.

I always liken this “mainstream” road to the road to Disneyworld in Orlando. If you go to Disneyworld, all the signs point you to the Orlando freeway to get there. If you take the Orlando freeway, you’ll stop and pay multiple tolls. That’s why the signs point there.

There’s another road to Disneyworld that runs parallel to the Orlando freeway, and it’s toll-free. If you know about this road, you can get to Disney without paying.

There’s also a third, imaginary road. This is the ideal path. It’s in an exactly straight line, it has no imperfections, no potholes, and not only does it have no tolls, but people actually throw money at you on this third ideal road. This is the road of tax-wise individuals.

One of the most beneficial entities you can create to drive down this third road is a charity. As a doctor, you can contribute up to 60% of your adjusted gross income (AGI) to a charity and write it off. You read that right: 60%. If it’s a foundation you donate to, the cap is reduced to 30%. But these are obviously powerful vehicles for tax AND legacy planning. This is a huge chunk of income you can put towards your own charitable organization to prolong your life’s work while receiving huge tax benefits.

Putting It Together

When you use these two tools together (living trusts and a charitable organization), your legacy planning power skyrockets. This is the way of the wealthy. It provides huge tax relief plus a vehicle for doing good in the world.

Ultimately, the most important thing physicians and other medical professionals can take from this is simple: don’t leave your legacy up to chance. If you’re using a will, you’re leaving it up to the state, which is leaving it up to chance. Not creating a plan for your legacy is not being a good fiduciary or practicing sound financial stewardship for your family and future generations.

In this three-part series for doctors, we’ve discussed how to protect your practice, your investments, and your life and legacy. If you’d like more information on any of these facets of asset protection and tax planning, check out the free resources on our YouTube channel, schedule a complimentary Strategy Session, or check out our Tax & Asset Protection Workshop for more advanced planning options. Claim your complimentary Strategy Session online or by calling 800.706.4741.