First Citizens Bank
Financial empowerment program for medical professionals
What estate planning strategies should medical professionals implement in their 20s and 30s?
Between ages 20 and 40, people are typically still in their early or mid-career phase. They're focusing on establishing themselves professionally, and this leaves little time to manage their busy lives. So it's easy to ignore the essentials, but we really encourage you to focus on them to make sure that there are no gaps in your planning and you're able to handle any unforeseen circumstances.
There are six key things that we encourage you to focus on.
The first is to establish a will. Everybody needs a will. I know sometimes I hear people say, well, I'm not wealthy yet. I don't need a will. I haven't had kids yet. But honestly, you need a will because a will does a number of things. It not only tells people how to distribute your assets or what assets that you have, it also can designate guardians for minor children. You get to choose who you would like to watch your children or take care of them should something happen to you.
Step two is create a prenuptial agreement. Or if you're already married, consider a postnuptial agreement. So we know prenups get a lot of bad rap. The way that they're portrayed in the media, through TV shows, soaps, books, it seems like they're really egregious, right? That you're going to cut your spouse out of everything if you become divorced. But that's not actually the case.
A prenup is just a financial agreement between you and your spouse. You and your spouse—or spouse-to-be—should be able to talk about finances because—as we all know—despite how much you love them, marriage is a financial arrangement. It can also protect your spouse from potential malpractice claims. So you're in a position of being a highly compensated individual, but you also have that high liability. You want to lay out between your spouse how much they'll get or how much they're protected should you unfortunately ever decide to separate.
Another thing that you probably already know pretty well—considering your line of work—is you really need to set up a power of attorney and healthcare proxy for your finances, as well as for your medical decisions. You want to ensure that somebody is there to make these decisions for you on your behalf if you become incapacitated.
Another thing to really look at, and I think people make this mistake all the time, is review your beneficiary designations. So yes, we've been talking about a will and how a will will distribute all your assets. But actually, for most folks, a lot of their assets are distributed per who they put in their beneficiary designation.
So think of things that have an account or a contract, like a checking account, a savings account, brokerage account, money market, oral contracts, life insurance, annuities. Those types of policies or accounts pass to the person you list, or persons, in your beneficiary designation.
The difference between the beneficiary designation and a will or trust is, should you make a mistake—like let's say you get divorced and you forgot to take your ex-spouse off of your beneficiary designation—a court can't fix that. A court can fix it if you do so within a will or trust because they decide, hey, you know, you probably didn't mean to leave them as the beneficiary, but they don't have jurisdiction to change your contracts. So whoever you leave in your beneficiary designations, that's who's going to get that asset.
Another important feature is to acquire malpractice, disability and life insurance. You want the malpractice to cover you in case you're ever accused or a claim is brought against you. And you need it whether you've actually committed that malpractice or not. Disability is important because you're likely to be the primary breadwinner in your family. Should something happen to you and you're no longer able to work, you need a policy to cover that stream of income.
And lastly, life insurance can do the same thing: cover a stream of income should something happen to you, as well as pay off any debts and give your family the ability to continue on should you pass away prematurely.
Lastly, consider a revocable living trust. A revocable living trust is somewhat similar to a will in that it'll leave a list of instructions as to how your assets should be managed and distributed. But we prefer the revocable living trust a little bit more than the will for a couple of reasons. One is the will is only effective at the time of your passing, whereas the revocable living trust is effective the minute you sign it. So during your life, you have somebody to back you up and handle your financial decisions if you can't. The other reason is it avoids probate. It's private and avoids the probate process, which is a court-overseeing process of distributing your assets.
That can be timely and costly because professionals like an attorney or CPA are now involved.
So avoiding that process, just like the beneficiary designations, can be in your benefit. Consider these six tips to really help you get the basis of your planning in place. That way, should something unforeseen happen, you're at least able to help you and your family move forward faster and better.
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This material is for informational purposes only and is not intended to be an offer, specific investment strategy, recommendation or solicitation to purchase or sell any security or insurance product, and should not be construed as legal, tax or accounting advice. Please consult with your legal or tax advisor regarding the particular facts and circumstances of your situation prior to making any financial decision. While we believe that the information presented is from reliable sources, we do not represent, warrant or guarantee that it is accurate or complete.
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About the Entities, Brands and Services Offered: First Citizens Wealth™ (FCW) is a marketing brand of First Citizens BancShares, Inc., a bank holding company. The following affiliates of First Citizens BancShares are the entities through which FCW products are offered. Brokerage products and services are offered through First Citizens Investor Services, Inc. ("FCIS"), a registered broker-dealer, Member FINRA and SIPC. Advisory services are offered through FCIS, First Citizens Asset Management, Inc. and SVB Wealth LLC, all SEC-registered investment advisors. Certain brokerage and advisory products and services may not be available from all investment professionals, in all jurisdictions or to all investors. Insurance products and services are offered through FCIS, a licensed insurance agency. Banking, lending, trust products and services, and certain insurance products and services are offered by First-Citizens Bank & Trust Company, Member FDIC, and an Equal Housing Lender, and SVB, a division of First-Citizens Bank & Trust Company. icon: sys-ehl
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