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Newport Beach Estate Law Blog

Estate planning for doctors

Doctors work hard, they work long hours, and they have a fairly selfless job in which they take on challenges and even risks to help others when they need it most.

The upside, naturally, is that they are fairly well compensated for it. The statistics from 2018 show that the average salary for a medical doctor was $224,190. While the lowest salaries reported were vastly below that, at $23,500, the highest salaries came in at $397,000. Reports claimed that the majority of people in this field would claim an income that ranged from $150,000 to $312,000.

Advantages you get with a multi-generational business

A multi-generational business is a family business in which members of two (or, in some cases, three) generations all work together. For instance, a man may start a construction company in his 30s and then bring his son on to run it with him in his 50s.

Doing this feels natural in many ways, as it's a simple career path for a child, and it's a chance for the parent to leave a legacy -- and significant assets and earning potential -- for their heir. But that's not the only benefit. Others include:

  • Having multiple generations work together means that they can offer different perspectives and outlooks.
  • Working with a child while still involved with the company makes business succession planning easier for the parent as they prepare to pass the company on.
  • A child may have a better work ethic at a family business because they're proud of the company and the family name, and they care more about a parent's approval than a random boss.
  • Many family companies see lower turnover rates. The children view the company as something they're involved in in a deeper way than if they just landed a job, so they're not constantly on the lookout for something better. This is what they want to do, and they'll work hard to make it a success.

Chronic illness can influence estate planning

Do you suffer from a chronic illness? Whether it is severe or mild, you want to consider it carefully when you do your estate planning. It can have a big impact on the type of planning that you do.

Many people assume that chronic illnesses are not that common, but it's just not true. The statistics show that over 130 million people in the United States have some type of chronic or long-lasting illness. This year, in 2020, that is predicted to rise to 157 million. Cancer is responsible for about 9 million of these cases, as even those who survive the disease may experience long-term side effects.

When should you update an estate plan?

Creating an estate plan is a big step toward making sure your family members are taken care of after you pass away. While some people don't like having to make these plans, they do need to take the step anyway. Failing to do so can leave their family members without the legal means to obtain what you wanted them to have.

You can't just make these plans and then forget about them. Instead, you will have to review them periodically to ensure they still reflect your current wishes. It's a good idea to do this on a set schedule, such as every year or two. However, you might also need to initiate modifications if you go through certain changes in your life.

Bringing children into your company can be difficult

Conventional wisdom says that business succession planning should start with bringing a child into your company and working alongside them. This gives them first-hand experience and you can actively teach them how to run the business well, rather than just leaving it to them when you pass away or retire.

This is a good way to do things, but remember that it may not go as smoothly as you hope. This move can be difficult for the children and they may face some hurdles.

With grandchildren, money left may be money spent

All of your life, you've worked hard to save your assets and put money aside. Now that you're writing out your estate plan, you want to leave some of that money to your grandchildren.

You have some big plans for them. For instance, maybe you know about the crippling rise in student debt, so you want to leave them money to pay for tuition. Or, maybe you know that it's very hard to start a new business without money, so you want to leave them money to get a company off the ground after they graduate from college and start a career.

Estate planning for a child with special needs

If your adult child has special needs, he or she may be eligible for some government assistance programs. Three common examples of these programs are food stamps, Medicaid and Supplemental Security Income payments.

While doing your estate planning to leave your wealth to your child, you want to make sure that you do not accidentally make them ineligible for these benefits. If you directly give them the money, they have to factor those assets into their own estate. If they have too much, they need to spend all of it, depleting the entire inheritance rapidly, before they can qualify for assistance again.

Questions to ask when passing a business to your family

Your company has thrived over the course of your life, and you want to leave it to your family. You want your children to have the financial security that it provides. You're also just proud of what you built, and you don't want to shut it all down just because it's time to retire.

Estate planning is very important for business owners. As you create a succession plan, here are a few questions you need to ask:

  1. Are your heirs actually interested in running the business? Do they want it as much as you want to leave it to them?
  2. Do you need to split it up between multiple children? You're probably not going to just divide ownership and roles evenly. Make sure you set out a clear plan for everyone's jobs within the company.
  3. Do your heirs have the skills and abilities they need to take it over? Hopefully, you can get started long before you give them the business, working with them and teaching them the skills they need.
  4. How long should you stay? Your succession plan does need to address what happens if you pass away unexpectedly, but you also want to think about how long you may stay in the company. Once you retire, you need to put that plan into action, even if you are nowhere near the end of your life.

You must consider your finances when you start a family

Starting a family is not a financial decision. You do it because you love your spouse, you love the idea of having kids, you have always wanted to be a parent or for some other variation on this theme. Maybe it's always been a life goal of yours to have kids. You're at that stage in your life and you want children; you didn't just ask yourself if it was financially feasible.

That's fine, but you do have to understand that your finances change as you start a family. They have to. Things to consider include:

  • Medical costs when having a child
  • The cost of items you'll need at the house, like a crib or baby clothes
  • Health insurance and health care costs
  • The cost of childcare once your parental leave at work ends
  • The money you'll want to put aside for your child to go to college; yes, it feels so far off when you literally just had a child, but it comes sooner than you think
  • Any changes to your taxes
  • Any changes to your income
  • Increases to certain parts of your budget, such as grocery bills
  • Changes in the amount of flexible, disposable income you have
  • Necessary housing changes now that it's not just two of you

It can help for children to have outside work experience

You own a family business. For your child's entire life, you have assumed they would take over that business. They're counting on it. Do you just want to get them a job at the company as soon as you can?

Naturally, this is a personal decision that your family needs to make. There is value in experience and working with your child -- rather than just giving them the company when you retire or pass away -- can help them tremendously.

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