A FRUSTRATED PHYSICIAN ASKS: How Much Insurance is Enough?


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I currently have no fewer than 10 separate insurance policies associated with my plastic surgery practice. I understand very little about the policies other than that somebody at some point told me I needed each and every one of them, and each made sense when I bought it. But, I often wonder:  

  • Am I over-insured and thus wasting money? 
  • Am I under-insured and thus at risk for a liability disaster? 

I never really had the means of answering these questions …. Until Now!

Lloyd M. Krieger; MD MBA

[Beverly Hills, CA]


Risk Management, Liability Insurance, and Asset Protection Strategies for Doctors and Advisors : Best Practices from Leading Consultants and Certified Medical Planners™ book cover

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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. The best approach is for the trust to purchase the policy, but if you already own it, you can transfer the policy to a trust. If the doctor survives the transfer by no less than three years, the proceeds will escape estate taxation [three year throw-back rule]. The settlor can retain the right to remove the trustee and appoint a successor, who is not related or subordinate to the grantor. Most grantors wish to retain such a right.

Periodic Gifting

Generally, the insured provides funds for the premium payments through periodic gifts to the trust. In most cases, the gift qualifies as a gift of a present interest (rather than future interest), qualifying for the $12,000 exemption.

By using a Crummey withdrawal power, the beneficiary is permitted to withdraw property whenever a contribution is made. The right usually is given each year with a specified period (30–60 days). If an affirmative election is not made, the power will lapse. This notice should provide reasonable time for the election and be in writing. Generally, the withdrawal right must be exercised affirmatively. In any event, if the beneficiary does not take action or respond to the letters, the Tax Court has previously indicated that 15 days is a reasonable period of time.

Minor’s Guardian

The Crummey power can be exercised by a minor’s guardian (parents). However, it is best if someone else can exercise the withdrawal right if the donor is also the parent. An unrelated guardian can always have the right to exercise the Crummey withdrawal power.

Last-to-Die Insurance

A popular use of insurance for physicians is the so called last-to-die insurance policy. Such insurance is payable upon the death of both the donor and his spouse.

For a Family Owned Business [FOB], this permits the owner to bequeath or gift the stock to the spouse free of transfer tax when the second spouse dies the insurance proceeds are paid to the trust and utilized to pay the estate taxes on the FOB stock. The insurance proceeds are free from both estate and income tax.


Your thoughts, opinions and comments are appreciated.

Related Information Sources:

Practice Management: http://www.springerpub.com/prod.aspx?prod_id=23759

Physician Financial Planning: http://www.jbpub.com/catalog/0763745790

Medical Risk Management: http://www.jbpub.com/catalog/9780763733421

Healthcare Organizations: www.HealthcareFinancials.com

Health Administration Terms: www.HealthDictionarySeries.com

Physician Advisors: www.CertifiedMedicalPlanner.com

Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com  or Bio: www.stpub.com/pubs/authors/MARCINKO.htm

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