There is one constant in tax law - nothing is permanent. Estate taxes used to reach rates as high as 60%. Then, for one brief year, they were abolished altogether. If you are reading this article, then you didn't die in 2010 in time to save your family any and all possible estate taxes.

In our physician-focused consulting practice, we meet many physicians who have made poor legal, financial and tax mistakes because of misinformation or inappropriate advice (for them). In 2011, we are already seeing misinformation leading to potential missed opportunities. The purpose of this article is to clarify this phenomenal planning opportunity that applies to planning that can be done in 2011. Since we do not know when this unprecedented law may be repealed or changed again, we think this is something that should skyrocket to the top of your financial planning priority list.

Fortunately, there are a few simple tools doctors can use to help circumvent such mistakes and allow their families to avoid the unnecessary costs that come with poor planning. Let's discuss some signs of poor planning and discuss solutions that can help doctors manage these avoidable mistakes.

Mistakes #1 through 4: Is Your Estate Planning Attorney Helping You?
Under the new laws (that may or may not last beyond 2012), tools exist for doctors to easily leave $10-$15 million tax free to their children, grandchildren and future generations. More importantly, doctors can do this in a way that allows them to retain control and access to the funds while alive and leave the funds to the children in a way that protects the kids from: a) losing their drive to be productive; b) losing the inheritance to a divorce or lawsuit; or c) having to do estate planning for their kids.

Unfortunately, as is the theme with almost all planning that doctors get, you need customized planning and often get "off the rack" solutions that don't work for you. Over 90% of American families will never earn more than $150,000, never be in the highest marginal tax bracket, and never be worth more than $2,000,000. This means that accountants, financial advisors, insurance agents and even estate planning attorneys do not spend the majority of their time dealing with people who have the relatively unique challenges you do.

There is nothing wrong with advisors wanting to streamline and scale their businesses so that they do not have to reinvent the wheel with each client. In fact, by doing so, they can become more efficient and work less expensively to help you. The problem arises when you hire advisors whose average client is NOT in a similar financial situation to you.

Have You Outgrown Your Advisors?

Has your CPA offered you suggestions to save tens, or hundreds, of thousands of dollars in taxes OR do you al always bring up the ideas to your accountants?

Has your attorney brought up strategies to transfer millions of dollars to your heirs without losing control OR discussed multigenerational planning that protects your heirs from lawsuits and divorce?

Have your investment advisors focused exclusively on funds and domestic investments? Have they shared strategies for emerging markets, currency plays, commodities and other alternative investments AND explained their strategies for managing tax liabilities associated with the gains?

Are you comfortable that your insurance agents regularly handle clients of with your lawsuit and tax liability, understand asset protection, and readily explain ways they can make less money for your long-term benefit?

Are you certain that your advisors all communicate with one another and are qualified to give you second-opinions on the planning the rest of the team has done for you?

Make sure you talk to attorneys who handle clients much bigger than you and whose clients are very happy with their services and results. If you would like a no-cost review of your plan, the authors are happy to do a quick review for you to see if there are any glaring weaknesses.

Mistake #5: Are You Getting Bad Advice from Your Insurance Agent
Has your financial planner or insurance agent explained to you that there are two very different, but equally acceptable, ways to purchase life insurance? Do you understand how "max funding" and "minimum funding" options work and why everything in the middle is a waste of your money? Do you fully understand how funds in insurance policies may or may not be protected even if you had to file bankruptcy? Are you aware you could get a partial net tax deduction for your life insurance premiums or that you could buy life insurance within your retirement plan (pre-tax) dollars and leave almost all of the death benefit to your spouse tax-free? Did you know you could buy life insurance, leave the death benefit to your heirs and still have access to the cash value while you are alive?

If you answered, "no" to any of the questions above, then you either hastily purchased the insurance you have or the agent hastily sold it to you. Cash value life insurance CAN BE a very valuable tool for asset protection, tax management, wealth accumulation, and estate planning. BUT (yes, all caps), it must be used properly. Unfortunately, to use it properly, the advisor needs to know a lot about your situation, needs to take a great deal of time explaining the countless options, and needs to coordinate the insurance purchase with the other advisors on the team to make sure you maximize the benefit you receive.

In our experience, the insurance purchases of most doctors are either a) poorly designed so cash values are not accumulating as well as they could with a better design; b) owned improperly so that funds will be left in the estate; or c) owned in irrevocable trusts where cash values are not available to you in the event you need them. There is a great deal of discussion on insurance in our book, For Doctors Only: A Guide to Working Less and Building More available for free at http://www.docworthy.com/ebooks Please take some time to get a better understanding of how life insurance may work for you and don't just assume that you did everything right because your agent told you that you did.

Mistake #6: Unwitting Leaving Your IRAs and Pensions to Uncle Sam
Did the advisor who set up your retirement plan explain, "you must spend your retirement plan FIRST once you retire?" The vast majority of the assets in pensions, 401(k)s, and IRAs could end up being owed to state and federal tax agencies at death. It is an unpleasant truth that after paying taxes for a lifetime of work a physician's tax qualified plans could be taxed at rates above 70 percent. When hearing these facts, most physicians are shocked and want to learn how to do something about it. The good news is that there are techniques that can be incorporated to avoid this loss of wealth. Some strategies are to simply spend the retirement assets first or take advantage of a Roth IRA conversion before that option goes away. More advanced strategies may include the purchase of insurance within a retirement plan (to avoid tax on benefits for your spouse) or the creation of significant deductions (from $10,000 to $1,000,000) to offset the tax on taxable withdrawals. Such techniques are too involved to be described in a short article, but more importantly the right strategy is dependent on your family financial goals, your net worth, your income and tax levels and the types of assets you want to leave to your family.

Conclusion
In medicine, doctors in each specialty have a certain set of health concerns they are uniquely trained for, and dedicated to, address for their patients. What many high income and high net worth Americans (especially doctors) fail to realize is that their financial, legal and tax concerns are not well managed by generalists. Doctors need to build an advisory team of subspecialists who not only work with high income, high liability and high tax rate paying clients but also understand the unique challenges of working within the constraints of a more complicated healthcare system (Stark I, Stark II, HIPAA, Insurance fraud risk, reduced Medicare reimbursements, and more).

With the right team of sub-specialists, you can protect your assets from lawsuits, taxes and divorce while maintaining control and access to funds AND successfully transferring $10-$15 million or more to future generations. If you aren't confident that these goals are being met by your advisors who have worked together to adjust your plan since the tax law changes in December 2010 or you would like a second opinion (review) of what you do have, please seek out the advice of those who may be able to help you get to a place that you want to be. The authors can be reached via email at jarvis@ojmgroup.com or at (877) 656-4362 to set up a time to discuss your particular situation.

Christopher Jarvis, CERTIFIED FINANCIAL PLANNER­™, is a mathematician and financial consultant to doctors. He has co-authored nine books for doctors and spoken to hundreds of groups nationwide. He now lives in the Dallas/Ft. Worth area. Learn about his unique perspective and process at www.jarvispartners.com or call (817) 749-5000 for a free consultation.