Estate Planning Considerations for Psychologists

March 29, 2012

Washington Psychologist · March 2012 · by Alexandra Gerson

For most professionals, a complete estate plan consists of Wills, Financial and Health Care Powers of Attorney and Health Care Directives. However, psychologists with their own practices need additional documents, including (1) a Discontinuation of Practice Plan; (2) a Limited Power of Attorney over your Practice; and (3) a “Professional” Will. These documents are required for psychologists under Washington law and are invaluable in the event of your death or incapacity.

What is a Professional Will and Discontinuation of Practice Plan?

A Professional Will is simply a Will that, in addition to naming a Personal Representative and directing the distribution of your assets, names an individual (a “limited personal representative”) to transition your practice following your death and references your Discontinuation of Practice Plan. Your Plan is the document that sets forth the timing and terms of the transition of your practice that your limited personal representative must follow. This limited personal representative is often another licensed psychologist who has the skills to contact your current patients, help them deal with your loss, and depending on their needs, refer them to another qualified person with whom your clients can build a relationship. Most importantly, this person is qualified to retain the required confidentiality over patient files.

What is a Limited Power of Attorney over my Practice?

A LPOA is a document that names an individual (a limited attorney-in-fact) to manage your practice following your incapacity. It mandates that in the event of your incapacity, your limited attorney-in-fact follows your Plan, which provides guidelines for the maintenance of your practice if your incapacity is short-term or for the transition of your practice if the incapacity is long-term. Again, the limited attorney-in-fact is often another licensed psychologist who can maintain confidentiality over your patient files.

What happens if I die without a will that references my Discontinuation of Practice Plan or become incapacitated without a LPOA?

If you die without a will that references your Discontinuation of Practice Plan, the court appoints an Administrator to oversee the distribution of your assets. In the absence of a Discontinuation of Practice Plan, the Administrator is also responsible for developing a plan for the dissolution of your practice and the maintenance and retention of your client records. If you are incapacitated without an LPOA, the attorney-in-fact you name under your General or Financial Durable Power of Attorney will be responsible for handling your practice. Without the proper training and experience, such person may be ill-suited to understand the complex confidentiality and record retention requirements under state and federal law and as a result, you or your estate may be exposed to liability. In addition, the development of a plan during probate may result in increased expenses to your estate.

Can I execute one document naming a limited personal representative and a limited attorney-in-fact?

Unfortunately, no. A Will and an LPOA have different legal formalities and execution requirements, and by law are designed to function independently of one another. A document which purports to do both frequently falls short of meeting the legal requirements of either, and as a result is unenforceable under state law.

For psychologists with their own practices, it is important to work with an estate planning attorney to establish the foundational documents and properly integrate your Discontinuation of Practice Plan into your overall estate plan. Doing so will relieve your family and friends of the burden to develop such a plan, minimize potential liability, and ensure the smooth transition of your practice.

Helsell Fetterman