Life Insurance Policies and Trusts

Tax and Estate Planning for Doctors
Staff Writers

All subscribers to the Executive-Post know that carefully crafted arrangements may minimize estate and income taxes.
Life Insurance Policies
The simplest way for a medical or other professional to avoid estate tax on the proceeds from life insurance policy death-benefit, is having a properly drafted trust own the life insurance policy. [...]

Financial Advisors Not “Up” on Annuities?

Results of a New Survey
Staff Reporters
In the interactive June edition of Investment Advisor magazine, Savita Iyer-Ahrestani reported on a new study of annuities.
Of course, subscribers of the Executive-Post already know that more and more Americans are counting on financial advisors to help them prepare for a secure retirement; rightly or wrongly. And, this includes [...]

Economics of Variable Annuities

The “Ups and Downs” of Variable Investments
Staff Writers
The chief advantage of variable annuities is that investment income or gains are not currently taxable. However, when distributions are made, all gain is ordinary income, even if substantially all of the gains realized on the investment were capital gains.
Investments made directly by a Family Owned Business [...]

Living Trust Myth-Busters

Reality Bites for Some Doctors
Staff Writers
Medical professionals are turning to living trusts in increasing numbers for their estate planning needs. But, two major trust myths need to be explored.
Myth 1:  Living trusts save taxes.
Reality: They do not. Income earned by a living trust is taxable to the physician or other grantor, and when he or [...]

Key-Man Life Insurance Proceeds Ruling

IRS Tax Exempt Treatment Ruling
Robert Whirley; CPA
A recent revenue ruling has been issued by the Internal Revenue Service addressing the tax exempt treatment of life insurance policy proceeds on “key-man” policies of Subchapter S-Corporations; medical and/or otherwise. 
Excerpts
Revenue Ruling 2008-42 concludes that premiums paid by the S-Corporation on an employer-owned life insurance contract, of which [...]

The Annual Gift Exclusion

Avoid Estate Taxes by Giving-it-Away
Staff Reporters
A doctor may transfer up to $12,000 a year as a tax-free gift to another person. This also applies to gifts of present interests, which includes gifts (if they satisfy the rules of Section 2503 (c) of the Code) to trusts. If the doctor or other donor is married and [...]

Ensuring the Welfare of a Disabled Child

Special Financial Planning Techniques Required
By Roger J. Warrum
If a doctor or medical professional has a mentally or physically disabled child, special estate provisions are needed to ensure the continued care and comfort of that child after the parents’ deaths.
Estate Planning
When designing an estate plan for a doctor with a disabled child, it must provide [...]

Estate Planning Glossary for Doctors

Understanding Terms and Definitions
Staff Writers 
Absolute assignment: A policy assignment under which the assignee receives full control over the policy and full rights to its benefits. 
Administration: The process of handling the affairs of a deceased person’s estate or a trust.
Administrator: The person or financial institution that is appointed to take care of the estate of a [...]

Marital By-Pass Trusts

The Unified Credit Shelter Trust
By Lawrence E. Howes; CFP™
By Joel B. Javer; CFP™  
 
A Unified Credit Shelter Trust or Family Trust or By-Pass Trust or an A-B Martial Trust is established to receive property at death equal to the “exclusion amount.” 
Thus, the amount in the trust is carved out of your estate and does [...]

Family Gifting and Physician Loans

Physician Gift and Estate Planning
By Lawrence E. Howes; CFP™
By Joel B. Javer; CFP™ 
 
The annual gift tax exclusion allows the physician, and others, to give any individual $12,000 per year [$24,000 per couple] without paying or filing a gift tax return. 
There is no limit on the number of individuals who might benefit from your generosity.  
Marrieds 
If [...]

Unlimited Marital Deduction

Understanding Physician Estate Planning
By Lawrence E. Howes; CFP™
By Joel B. Javer; CFP™  
 
Under the unlimited marital deduction, virtually all transfers to a spouse, whether made during lifetime or at death, are tax-free.   
Tax Consequences 
However there is a tax consequence for leaving your entire estate to your spouse. 
Leaving everything to your spouse does not utilize your exclusion amount, [...]

IRC §2032A Special-Use Valuation

Understanding Physician Estate Planning
By Lawrence E. Howes; CFP™
By Joel B. Javer; CFP™  

Suppose you are a physician or other individual who own a farm that for many years was located well outside the city limits of a growing community, and now the farm is in the path of this growth?   
The dynamics of determining the fair market [...]

IRC Section §6166 Extensions

Understanding Physician Estate Planning
By Lawrence E. Howes; CFP™
By Joel B. Javer; CFP™  
 
A benefit the IRS allows on the death of a doctor or qualifying small business owner is Internal Revenue Code § 6166.  This provides for the extension of the payment of estate taxes over a period of 14 years.  
Levels of Qualification 
Recent legislation has made [...]

The Qualified Terminal Interest Property Trust

Understanding the QTIP in Estate Planning
By Lawrence E. Howes; CFP™
By Joel B. Javer; CFP™  
 
A qualified terminal interest property trust (QTIP) was designed for physicians and those who have children from a prior marriage.   
QTIP Rules 
The QTIP rules are complicated and deal with legal rights to assets and in whose estate the assets are titled.  Suffice it [...]

IRC Section §6161 Extensions

Understanding Physician Estate Planning
By Lawrence E. Howes; CFP™
By Joel B. Javer; CFP™  
 
The IRS has discretion under Internal Revenue Code § 6161 to grant an extension to a physician, or any estate, for up to 10 years to pay estate tax upon a showing of “reasonable cause.”  
Interest Still Charged 
The IRS charges interest of course, but if [...]

IRC Section §303 Stock Redemptions

Understanding Physician Estate Planning
By Lawrence E. Howes; CFP™
By Joel B. Javer; CFP™  
 
A family business or medical practice may make up the majority of a physician’s estate. Unfortunately, although the practice does have value, it may have very little cash.   
Recognizing the Dilemma 
In recognition of the closely held business owner, the IRS allows stock in the company to [...]

Doctors and the Uniform Transfer/Gift to Minors Act

Dual Estate Planning and Educational Vehicles
By Lawrence E. Howes; CFP™
By Joel B. Javer; CFP™ 
 
The Uniform Transfer to Minors Act (UTMA), or Uniform Gift to Minors Act (UGMA), provides for an account established by a checkmark on most mutual fund applications and/or brokerage accounts.
The account is primarily used by medical professionals as a tool [...]

Non-Probate [De-facto] Estate Assets

Many Different Assets May Trap Uninformed Doctors
By Lawrence E. Howes; CFP™
By Joel B. Javer; CFP™ 
 
There are situations where avoiding probate is desirable for physicians who want privacy for their finances after their death. And, there are relatively simple ways to avoid probate, but they all have consequences.
Several of these mechanisms are reviewed below: 
[A] Joint Tenancy [...]

Charitable Giving Terms and Definitions for Physicians

A “Need to Know” Glossary for all Medical Professionals
Staff Writer’s
 
For most medial professional’s, charitable giving can either be a financial planning goal or an economic tool to achieve other goals more effectively.   
When charitable giving is viewed as a financial goal it becomes a very personal matter to the physician, much like an individual’s other lifestyle [...]

Inheritance “Disclaimer”

What all Physicians Should Know
By Lawrence E. Howes; CFP™
By Joel B. Javer; CFP™ 
 
In some situations, an inheritance might complicate an estate and add to the estate tax burden.  If there are sufficient assets and income to accomplish financial goals, more assets are not needed. A disclaimer may be useful to such physicians.
A Simple Definition
A disclaimer [...]

What is the Probate Process?

Estate Planning for Medical Professionals
By Lawrence E. Howes; CFP™
By Joel B. Javer; CFP™
 
The motivating issue and primary purpose of estate planning is for the physician is to assure the proper transfer of property to desired heirs with a minimum expenses and taxation [not avoidance]. The process of transferring property is called probate.
Definition and Terms
Probate, meaning [...]

A Brief Overview of Estate Planning for Physicians

A “Necessary” Process for all Medical Professionals
By Lawrence E. Howes; CFP™
By Joel B. Javer; CFP™
 
“When we hear about a colleagues’ estate, we often conjure up images of rolling green countryside, horses, sprawling mansions and established family dynasties with more money than elderly Daddy Warbucks. These images of wealth have absolutely nothing to do with today’s [...]

Post-Mortem and Estate Planning Definitions for Doctors

A “Need-to-Know” Glossary for all Medical Professionals
Staff Writers

Activities of daily living (ADLs): Those functions or activities normally associated with bodily hygiene, nutrition, elimination, rest, and ambulation. These are the minimal requirements of mobility, toileting, and dressing, eating, and maintaining continence. Performance of ADLs indicates a person’s degree of physical independence as part of a functional [...]

Non-Resident Alien Physicians

Dual Citizenship
Staff Writers 
 
There may be a number of reasons why a foreign medical professional, especially a physician, may choose to remain a non-resident alien.
But, few realize that the U.S. income tax applies worldwide, and when a doctor becomes a U.S. dual citizen, the IRS is with them forever. 
Also, there is the $100,000 annual [...]

The Non-Citizen Spouse

IRS Code Differences
Staff Writers 
 
Currently, the IRS offers an unlimited estate tax deduction (unlimited marital deduction) by which any spouse can receive an estate tax free, regardless of amount.  
However, the IRS Code has a much different view of a non-citizen spouse, limiting the marital deduction for a legal resident alien to only $100,000.  
Fortunately, this spouse is [...]