Hi. Today I’m going to give you some insight into some of your estate planning considerations as an incorporated physician.
An estate plan means a lot more than just having a Will. It’s also about strategies that you can put into place and evolve throughout your lifetime.
There are at least three reasons to have a well thought-out estate plan.
One, to know that your plans will be carried out when you’re not there.
Two, to make sure that your assets are handled properly, both during and after your lifetime.
And three, to enhance your legacy with effective tax planning and management.
Let’s take a quick look at all three.
If a physician passes away without a plan in place, it can leave their affairs in a state of disarray. You could have employees without their payroll and family without financial resources.
But with an up-to-date Will and written instructions for an executor, you can spell out what should happen when you’re not there to take care of things.
For example, you can make provisions for winding down your medical professional corporation. This could include planning for the storage of client files, or the continuation of the practice with a replacement physician. You can also address how to safeguard or dispose of valuable medical equipment.
And you can decide how family members should be cared for, and what gifts might go to family, friends, or charity.
This is all about the management of your assets.
Your plan should address the assets you own personally as well as the assets owned by your corporation. These assets may include cash, mutual funds, stocks, bonds and insurance policies.
Your personal assets would include your shares of your medical professional corporation, and other assets such as real estate or an art collection.
During your lifetime, one of the planning tools you might use to manage assets is a Family Trust.
In some provinces, a medical professional corporation can pay dividends to a Family Trust, and the trust can be used to disperse money to a variety of beneficiaries, including a spouse and eligible children.
During your lifetime, this trust structure can be a way to split your income with family members and reduce your family’s overall tax bill.
Additional tax planning strategies are often relevant after your lifetime. In fact, a trust can become even more important when you can’t be there.
Remember, trust rules change from province to province, so speak to an MD Advisor to find out what’s possible where you live.
Maximizing the value and impact of your legacy is often a matter of smart tax management, and there are many issues and opportunities to consider.
For example, it may be financially advantageous to purchase a life insurance policy within your corporation. This has two major benefits. One, you can pay the insurance premiums using tax-preferred corporate dollars, which is like getting a significant discount.
And two, the life insurance policy can eventually give your beneficiaries a tax-free lump sum that they can use to enjoy, to make donations to charities or to provide for family members.
Another dimension of good tax management is having a skilled executor in place. For example, an incorporated physician could literally pay tax twice on the value of their corporation unless their executor knows how to implement specific post- mortem tax planning strategies.
Estate planning can be a complex area, but my advice is simple: talk to an MD advisor.
An MD advisor can connect you with professional executor services at MD Private Trust to make sure your estate is handled by someone who intimately understands incorporated medical practices.
An MD advisor can advise you on Family Trusts and how they can protect your family’s assets now and in the future.
And an MD advisor can provide expert advice on corporate-owned insurance and other tax-smart strategies than can significantly enhance the value of your legacy.
How do you approach estate planning as an incorporated physician? It’s all about surrounding yourself with the right team of experts. And the person who should be leading that team is an MD advisor.
If you have any questions, speak to an MD advisor.
This has been an MD Quick Clinic.
Thanks for watching.
All examples are for illustrative purposes only and not applicable to US Persons living in Canada.
MD Financial Management does not intend to provide taxation, accounting, legal or similar professional advice to clients or potential clients. The information contained herein is not intended to offer such advice, nor is it intended to replace the advice of independent tax, accounting or legal professionals.
The MD ExO service provides financial products and guidance to eligible clients, delivered through the MD Group of Companies (MD Financial Management Inc., MD Management Limited, MD Private Trust Company, MD Life Insurance Company and MD Insurance Agency Limited). MD Financial Management is owned by the Canadian Medical Association.
Incorporation guidance limited to asset allocation and integrating corporate entities into financial plans and wealth strategies. Professional legal, tax and accounting advice regarding incorporation should be obtained in respect to an individual’s specific circumstances.