Preparing for death is a topic no one wants to talk about, but doctors in particular know all too well about it and the importance of making plans for your estate.
In fact, right now you should have a current, valid Will in place, no matter what type of medical practitioner you are.
Creating and updating a Will can be complex for doctors, who have many business, tax and investment factors to consider on top of the general challenges.
Here are the best ways to navigate this process.
Understand your situation
What phase are you in with your career and life journey? What is the dynamic of your family, relationships and business? Understand the complexities in your life and how that will impact your Will.
Junior doctors with no commitments who are perhaps just starting to build up their assets will have a much simpler (and cheaper) Will creation process than a practitioner who is married, has dependants, a company and a mortgage.
Further, doctors who have been through divorce or have estranged children will have even more considerations to factor in to their estate planning.
Sounds a bit messy? Imagine not taking any action, and leaving the stress to your loved ones to manage. Further, if you don’t make your wishes known in your Will, the Court will decide what happens with your estate – meaning your wealth could end up in the hands of people you don’t want it to.
Make it fair
If you have a poor relationship with a family member, then it’s understandable that you’d want your estate to be given to your closest loved ones instead.
But you need to ask yourself whether leaving someone out from your Will is worth all the major legal costs, disputes and hassles that are likely to arise for everyone else. Remember, these costs will be deducted from your estate before distribution, so how does it sit with you knowing your hard-earned assets could be lost to court battles? It’s a huge and damaging event, so we recommend you try and bring some balance to your approach.
Although, every family situation is different, and we know this isn’t always possible. So, if you are adamant in your choices of excluding someone from your Will, make sure to include extensive notes on why you’ve made this decision and inform your lawyer. This will make it easier to understand, especially for the individual, and harder to dispute.
Choose the right executor
An executor administrates your estate and follows your plan, when you’re gone. You can essentially choose whoever you like to be your executor, however we do have some guidelines on selecting the right one. These include:
- Selecting one or two (although you can have as many as you wish),
- Preferably choosing a family member who’s financially savvy, or securing your accountant or lawyer if you don’t have a suitable family member, and
- Choosing someone who can manage the responsibility of the significant administration associated with being executor
Find safe storage
Make sure your Will is stored in a safe, secure and easily accessed location where the original copy won’t become damaged or worn-out. The original needs to be in pristine condition to show that it hasn’t been tampered with or changed without your consent. You should also have multiple copies, some of which are given to your lawyer, accountant and executor.
Ideally you should be updating your Will every three to five years, unless a major change occurs in your life. This can include significant lifestyle changes like a divorce or baby, major event like a wedding or even a business venture. Even if these occur within a short time period, it’s crucial you continue to update and re-evaluate your will.
Reap the tax benefits
If you’re surprised at the notion of tax benefits in your Will, then you’re not the only one. It’s almost shocking the small amount of people that know about these major tax opportunities and income asset protection benefits.
Death is actually a great tool for tax planning, as there are several leniencies in tax legislations which enable your assets to be transferred under your Will without tax and stamp duty obligations. For example, if you had to transfer your shares or investments to your partner while alive, you’d lose significantly in tax. However, if this doesn’t occur until after you’ve passed away, your partner will assume the cost base you paid for them and won’t need to pay stamp duty or tax on the transfer.
The other key opportunity is to create a testamentary trust, which is a discretionary trust that enables your estate to provide income to minors under 18 years old while also saving on tax. For example, if your child is paying private school fees for your grandchild, your grandchild can receive income from your estate and they will be taxed as if they’re an ordinary adult.
Secure help from a professional
There are many avenues of cutting costs and saving money, but your Will certainly isn’t one of them. It’s best to have your Will created professionally by a lawyer in conjunction with a medical accountant to ensure it’s legal and valid. This process will also require a specialised medical accountant, and that’s where the team at DocWealth comes in.
Contact DocWealth, specialists in accounting, financial planning, investment and finance, investment and business for medical professionals. We operate in Adelaide, Sydney, Melbourne and throughout Australia. Managing partner Kym Nitschke is available for a free initial discussion about your situation. Call us on (08) 8379 9950 or send me an email.
Find out more about the importance of Wills for doctors on The DocWealth Podcast below
– Kym Nitschke
The information contained on this web site is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser.
Taxation, legal and other matters referred to on this website are of a general nature only and are based on DocWealth’s interpretation of laws existing at the time and should not be relied upon in place of appropriate professional advice. Those laws may change from time to time.
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