Estate Planning for Patent Holders

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For inventors, engineers, entrepreneurs, and business owners, patents are often among the most valuable assets. In addition to their financial value, patents may represent years of innovation, technical development, and personal legacy. Effective estate planning for patent holders should address how intellectual property assets will be maintained, managed, transferred, and monetized over time.

Understanding Patent Assets in Estate Planning

Patents are time-sensitive intellectual property assets with strict legal and administrative requirements. In the United States, the two primary categories of patents are:

  • Utility patents, which protect how an invention is structured, functions, or is used
  • Design patents, which protect the ornamental appearance or visual design of a product

Utility patents generally remain in effect for up to 20 years from their earliest effective filing date, while design patents last 15 years from issuance. Utility patents also require regular maintenance fees to remain in force. Missing these deadlines can result in the loss of patent rights and a significant reduction in estate value.

For patent owners with international intellectual property portfolios, estate planning should also account for foreign patent registrations, renewal deadlines, and jurisdiction-specific filing requirements.

Organizing Patent Documentation and Ownership Records

Estate planning documents should clearly identify all patents, pending patent applications, licensing agreements, royalty streams, and joint ownership arrangements. Pending applications may also hold significant business value and should not be overlooked during planning.

If a patent is co-owned, the estate plan should address how shared control, decision-making, or potential buyout rights may continue after death. If a patent is licensed, whether exclusively or non-exclusively, those agreements should be reviewed to determine whether they continue after death and how related income will be handled.

Planning for Business-Owned Patents

Some inventors hold patents personally, while others assign them to a business entity. If the patents are owned by a company, but the estate includes ownership interests in that business, the plan should account for how control of both the company and the underlying intellectual property will transfer.

It is also important to confirm that ownership records and prior patent assignments are properly documented to avoid disputes or complications during estate administration. In situations where patents are valuable but not actively commercialized, a fiduciary, trust beneficiaries, or heirs may eventually decide to sell or license the rights, which may require guidance from experienced legal and tax professionals.

Preserving an Inventor’s Legacy

Estate planning for patent holders may also involve personal considerations. Many inventors feel a strong connection to their innovations and want to help shape how those inventions are used in the future. Even if those preferences are not legally binding, they can often be expressed through trust provisions or written guidance to fiduciaries.

Working With Estate Planning and Intellectual Property Counsel

As with other complex intellectual property assets, involving experienced legal and tax professionals is important when structuring trusts, business entities, or licensing arrangements involving patent rights. Careful planning can help avoid unintended income or estate tax consequences while preserving the long-term value of intellectual property.

For assistance planning for patents and other intellectual property, contact your Varnum attorney or a member of Varnum’s Estate Planning or Intellectual Property Practice Teams.

How Not to Use AI with Your Lawyer

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A Client’s Guide to the AI Habits That Can Backfire

Artificial intelligence is transforming the way businesses operate, so it’s no surprise that clients are bringing it into their legal matters. As the Chair of Varnum’s AI Task Force, which advises the firm on optimal usage of AI and led to our adoption of Harvey, I can attest that these tools are impressive, the instinct to use them is understandable, and in many contexts, AI genuinely helps. Nevertheless, in the lawyer-client relationship, a handful of common AI habits can quietly work against you, driving up costs, creating legal exposure, and in some cases stripping away legal protections that would otherwise apply by default.

The following scenarios represent the most prominent use cases that my colleagues and I most often observe, with practical takeaways designed to inform clients on how they should think about their use of AI. 

The “AI Draft” That Costs More Than It Saves

Many clients come to us having already asked ChatGPT, Claude, or another AI tool to draft a contract, letter, or business document. The reasoning is sound: get a head start, save attorney time, and save money. In practice, it usually works the other way.

General-purpose AI drafts tend to be both overinclusive and underinclusive at the same time. They may produce a simple vendor agreement with overly complicated structures designed for multinational transactions, while missing a straightforward concept that is standard in your industry. They can surface theoretical risks and gloss over practical ones. The result is a document that looks polished and complete but is built on assumptions that do not reflect your deal or your circumstances.

An experienced attorney already has a head start: tested templates built for the transactions and matters we handle every day. Analyzing and revising a misaligned AI draft often takes more time than starting fresh, because we inevitably end up comparing it to a form that we already know works. The better approach is to let us set the foundation, then focus your time and ours on the issues that require judgment and experience.

Feeding Legal Documents to a Chatbot

This is perhaps the most consequential AI habit for clients to reconsider. Attorneys routinely send clients privileged work product that is protected from disclosure in litigation, such as draft agreements, legal memos, and strategy summaries. When a client drops that material into a consumer AI platform to generate a plain-English summary or a list of questions for their attorney, they may be inadvertently handing it to a third party with no obligation of confidentiality.

In July 2025, OpenAI CEO Sam Altman stated plainly that, unlike conversations with a therapist, lawyer, or doctor, there is no legal privilege for what you share with ChatGPT, and that OpenAI could be required to produce those conversations in litigation. “We haven’t figured that out yet for when you talk to ChatGPT,” Altman said during a podcast, calling the absence of any equivalent of attorney-client confidentiality “very screwed up.” (TechCrunch, July 25, 2025)

Courts have only begun to grapple with the legal fallout. Earlier this year, in United States v. Heppner, a federal judge in the Southern District of New York ruled that documents that a criminal defendant generated using a consumer AI platform were not protected by the attorney-client privilege or the work product doctrine. Because the platform’s privacy policy disclosed that user inputs could be used for model training and shared with third parties, the court found there was no reasonable expectation of confidentiality in the defendant’s exchanges with the platform. The decision made two points clear: material that lacks privilege when created does not acquire it later, and privileged information does not stay privileged once shared with an AI platform that operates like a third party. This area of law is evolving rapidly, and while Heppner is unlikely to be the last word, clients should proceed with extreme caution until the issue is settled.

The practical takeaway is that if you receive a document from us and want to understand it better, call or email us. That conversation is exactly what we are here for: breaking complicated concepts into digestible pieces, while keeping your confidential information protected.

The AI Notetaker in the Room

Many businesses now invite AI notetaking apps, such as Otter.ai, Fireflies, and Zoom’s AI Companion, into meetings as a matter of routine. The instinct is reasonable, and the efficiency benefits are clear. But when those tools are present on calls with your attorney, they may be processing, storing, and potentially exposing conversations that would otherwise be protected.

Unlike a paralegal or outside consultant working under attorney supervision, an AI notetaking application is not an agent of your attorney. It operates under its own terms of service, which may permit the vendor to access, store, or otherwise use the data it captures. That exposure can give an opposing party grounds to challenge the confidentiality of the meeting, and it creates a lasting, potentially discoverable record of discussions that previously would have existed only in notes or memory.

Therefore, before inviting any recording or notetaking tool into a sensitive meeting or call with your lawyer, check with them first. It can make a meaningful difference.

AI as a Sounding Board: It Tells You What You Want to Hear

Some clients use AI to stress-test legal advice or size up their negotiating position, asking a chatbot whether a contract term is standard, whether a deal structure is sound, or whether their attorney is missing something. The appeal is obvious. The problem is that AI is structurally inclined to agree with you.

A March 2026 study published in the journal Science and covered by the New York Times found that leading AI models were highly sycophantic, siding with users in interpersonal disputes far more often than human respondents did, even when the users were clearly in the wrong. The researchers found that a single conversation with a sycophantic model made participants significantly less likely to reconsider their own position.

This pattern shows up in business negotiations with real consequences. We have seen deals stall or even fall apart because a client came to the table with an inflated sense of their leverage after running their position through an AI that validated their assumptions rather than challenging them. AI does not know your counterparty, the deal’s history, the dynamics in the room, or what the market will bear. It knows how to sound confident and keep you engaged.

An experienced lawyer’s job is to give it to you straight, even when that’s not what you want to hear. That is not something AI is built to do.

Where AI Adds Value in the Legal Context

None of this is an argument against AI, nor is it an attempt to gatekeep the legal industry or scare clients away from using these tools. Varnum uses AI tools extensively in our own practice, and through our AI Task Force, we have spent considerable time thinking through where these tools add genuine value and where they introduce risk.

Broadly speaking, it helps to think about client use of AI on a spectrum. On the safer end are tasks like organizing background materials, summarizing public filings or other non-privileged documents, conducting preliminary market or industry research, and preparing agendas, talking points, or questions in advance of a meeting with counsel, in each case, making sure anything you disclose to AI is anonymized. Using AI to explore an unfamiliar legal concept or to pressure-test your own thinking before a conversation with your lawyer can also be productive. The critical factor is to treat AI as a starting point rather than a substitute, and to keep confidential or privileged information out of the prompt.

The uses to avoid are those where AI is asked to make or validate the actual legal decision. For example, you should not ask AI to help you interpret a contract you are about to sign, choose between deal structures or litigation postures, decide how to respond to a demand letter, or second-guess whether your lawyer’s advice is “right.” Those judgments turn on facts, history, and context that the model does not have, and as discussed above, the model’s instinct is to agree with you rather than push back.

AI is genuinely exciting, and it holds real promise for the practice of law. But like any powerful tool, its usefulness depends on knowing where it helps and where it does not. When in doubt, talk to us before you talk to the bot.

Eric Post is a partner in Varnum’s Corporate Practice Team and chair of the firm’s AI Task Force. He advises startups, private and family-owned businesses, and multinational corporations on mergers and acquisitions, commercial transactions, and a broad range of business matters.

Dilution 101: A Guide for New Startup Investors

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Varnum Viewpoints

  1. Dilution is inevitable in startup investing, but manageable with the right strategy.
  2. Structural dilution reduces your ownership percentage, while economic dilution can also reduce value.
  3. Anti-dilution protections and pro-rata rights must be negotiated, they’re not automatic.
  4. Option pools, SAFEs, and convertible notes often cause more dilution than expected.
  5. Strong diligence, thoughtful negotiation, and experienced legal counsel are critical to protecting your investment.

What Is Dilution?

Dilution occurs when a company issues additional shares, reducing an existing investor’s percentage of ownership and, in some cases, the value of the shares.

A simple way to think about dilution is to imagine a pizza cut into 100 slices. If the company later cuts the same pizza into 120 slices, each slice becomes smaller. You still own the same number of slices, but your percentage of ownership decreases. The smaller slice has two main consequences: a smaller share of future profits or exit proceeds, and reduced voting power and influence over company decisions if voting is tied to share count.

Dilution often takes two forms:

  1. Structural Dilution: when your ownership percentage decreases because more shares are issued.
  2. Economic Dilution: occurs when new shares are issued at a lower price than you originally paid, reducing the value of your investment, which is most common in a down round.

Key Startup Investment Terms

Understanding dilutions starts with a clear grasp of common startup financing terms:

  • Pre-Money Valuation: the company’s value immediately before a new investment round.

  • Post-Money Valuation: the company’s value after the new investment is added. This number determines your initial ownership percentage.

  • Fully Diluted Share Count: the total shares that would exist if all convertible securities, such as stock options, warrants, SAFEs, and convertible notes, converted to equity.

  • Option Pool: shares reserved for employees and advisors. Expanding the option pool is one of the most common sources of investor dilution.

  • Down Round: a financing round at a lower price per share than a prior round, often resulting in significant dilution.

Common Startup Dilution Scenarios

New Equity Financings
Each equity financing round creates new shares. The impact can be significant, particularly if valuations decline or option pools are expanded as a part of the round.

SAFEs and Convertible Notes
SAFEs and convertible notes convert into equity, often at a discount or subject to a valuation cap, creating additional shares on conversion. Because they may not initially appear as stock on the cap table, many first-time investors underestimate the dilution they will cause.

Equity Compensation and Option Pools
Option pools allow startups to hire and retain talent, but every option granted today becomes a share tomorrow.

Managing Dilution Risk

Anti-Dilution Protections

Anti-dilution provisions, typically included in preferred stock terms, help protect investors in down rounds. These provisions must be negotiated at the time you invest. The two classic formulas are:

  1. Full Ratchet Resets your conversion price to the lowest price of a subsequent round, increasing your share count. While highly protective, it is less common because it can deter future investors. Seasoned investors seldom demand them unless a company is in serious distress.
  2. Weighted Average Adjusts the conversion price based on both the size and price of the new issuance. This approach is more common and balances investor protection with company flexibility. There are two variations:

    1. Broad-based uses the fully diluted share count, resulting in a smaller adjustment.
    2. Narrow-based uses a smaller share count, resulting in a larger adjustment.

Certain issuances, such as equity granted under a board-approved option plan, are typically excluded from triggering anti-dilution adjustments.

Pro Rata (Participation) Rights

Pro rata rights allow you to invest in future rounds in proportion to your existing ownership, allowing you to maintain your percentage stake. These rights are valuable but require additional capital, so planning ahead is essential.

For example, suppose you invest $250,000 at a $2.25 million pre-money valuation, yielding $2.5 million post-money valuation and 10% ownership on a fully diluted basis. A year later, a new round doubles the fully diluted share count, and if you do not participate, your ownership may drop to roughly 5%. Exercising pro-rata rights can help maintain your 10% ownership, but requires an additional corresponding investment.

Option Pool Considerations

Be mindful of the “option pool shuffle”: when a company expands its option pool immediately before closing your investment round. This can shift dilution to existing investors rather than new ones.

Practical Tips for Startup Investors

Conduct Thorough Diligence: Review the cap table, all convertible instruments, and the board-approved option plan. Model potential dilution scenarios before investing.

Plan for Follow-On Investments: If maintaining ownership is important, negotiate pro rata rights and budget for future rounds.

Balance Protection for Growth: Overly aggressive anti-dilution terms can hinder future fundraising. Long-term value often depends on the company’s ability to raise capital on favorable terms.

Work with Experienced Advisors: Small differences in deal terms can have a significant financial impact. Experienced legal and financial advisors can help identify risks and negotiate effectively.

Stay Engaged: Monitor company performance, track dilution over time, and review the cap table regularly.

Next Steps

Dilution is a normal part of startup investing, but it does not have to be a surprise. With a clear understanding of the mechanics, careful planning, and well-negotiated terms, investors can better protect both ownership and value.

If you have questions about a specific investment or upcoming financing, contact Varnum’s Venture Capital and Emerging Companies Practice Team to evaluate risks, structure terms, and make informed decisions.

Multigenerational Wealth Planning: Building a Legacy That Lasts

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For families who have spent decades building wealth, multigenerational planning ensures that assets benefit not just children but future generations. This approach goes beyond distributing assets, it preserves family values, strengthens unity, and protects wealth from gradual erosion over time.  

Standard estate planning tools, such as wills or revocable trusts, may not fully meet the long-term objectives of high net worth families. Multigenerational planning asks a crucial question: how can wealth be protected from external threats and used wisely, generation after generation?

Dynasty Trusts: Protecting Wealth for Generations

Dynasty trusts are long-term, irrevocable trusts designed to preserve family wealth over multiple generations. They can help protect assets from creditors, ex-spouses, and imprudent beneficiaries, while minimizing estate and transfer taxes for future generations. Choosing the right jurisdiction and trust structure is essential to maximize these benefits.

Family Limited Partnerships and LLCs

Family limited partnerships (FLPs) and family limited liability companies (LLCs) are powerful vehicles for multigenerational planning. These structures allow family members to hold ownership in centralized investments or businesses while preserving control, limiting transferability, and promoting responsibility. When paired with thoughtful operating agreements and gifting strategies, FLPs and LLCs help maintain family unity and strategic oversight.

Governance and Communication

Strong multigenerational planning includes clear governance and open communication. Tools such as family mission statements and shared governance frameworks guide decision-making and encourage responsible stewardship. These frameworks are not legally binding but provide a roadmap for managing wealth, resolving conflicts, and maintaining family cohesion.

Educating the Next Generation

Preparing heirs to manage family wealth is essential. Early education through family meetings, trust workshops, university courses, or mentorship programs helps beneficiaries understand both the purpose of the plan and their role in preserving and growing family assets.

Wealth planning must adapt to changing family dynamics, laws, and financial markets. Effective multigenerational plans incorporate flexibility through mechanisms like powers of appointment, trust directors, or periodic reviews with trusted advisors.

The ultimate goal is to empower future generations to pursue personal, professional, and philanthropic goals. Well-designed planning structures provide guidance and create a lasting family legacy that extends beyond wealth alone.

To begin or review a multigenerational wealth plan aligned with your family values, contact our Estate Planning Practice Team for guidance.

Michigan Estate Planning for Unmarried Partners: Protect Your Relationship and Assets

Unmarried partners in Michigan, whether cohabitating, in long-term relationships, or otherwise committed, face unique estate planning challenges. Unlike married couples, they do not receive automatic legal protections. Proactive planning ensures your partner is recognized, protected, and empowered if something happens to you.

Why Estate Planning Is Critical for Unmarried Partners

Without marriage, your partner has no automatic inheritance rights, health care decision-making authority, or legal standing. A foundational Michigan estate plan is essential and typically includes:

  • A last will and testament;
  • A durable power of attorney;
  • A Designation of Patient Advocate with a living will; and
  • Often, a revocable living trust is used to avoid probate, preserve privacy, and provide structured, long-term support

Without these documents, Michigan’s intestacy laws generally prioritize blood relatives and exclude unmarried partners entirely.

Plan for Incapacity and Medical Decision Making

A durable power of attorney authorizes your partner to act on your behalf with respect to financial and legal decisions. A Designation of Patient Advocate authorizes your partner to make medical decisions on your behalf if you become incapacitated, and should include HIPAA releases to ensure access to medical information.

Without these documents, Michigan hospitals and financial institutions typically defer to next of kin, leaving your partner without authority or information when it matters most.

Coordinate Property Ownership and Avoid Probate

For jointly owned real estate and other assets, clear titling is critical:

  • Join tenancy with rights of survivorship allows automatic inheritance by your partner.
  • Lady Bird deed (enhanced life estate deed) transfers property outside probate while preserving lifetime control.
  • Revocable living trusts can hold property to avoid probate, preserve privacy, and provide structured management.

Titling alone is not enough. Your will or trust should reinforce your intentions and plan for contingencies, such as simultaneous or near-simultaneous deaths.

Protect Children and Parental Rights

Couples raising children should confirm legal parentage and guardianship:

  • Unmarried biological parents should file an Acknowledgment of Parentage and consider custody orders under the Child Custody Act.
  • Non-biological parents may need adoption or a parentage order.
  • Nominate guardians and include provisions in your will or trust to protect your children’s inheritance and stability.

Keep Your Estate Plan Current

Life changes quickly. Revisit and update your plan after milestones such as:

  • Purchasing property or combining finances
  • Having or adopting children
  • Changes in beneficiary designations for retirement accounts, life insurance, or transfer-on-death accounts

For Michigan real estate, periodically evaluate whether joint ownership, a Lady Bird deed, or a revocable trust aligns with your non-probate transfer goals.

The Bottom Line

Thoughtful estate planning is not just a legal formality; it ensures the person you trust most is supported, informed, and empowered in times of need.

Before making changes to property ownership or relying on outdated documents, consult with Varnum’s estate planning attorneys to ensure your plan protects your assets, supports your family, and aligns with your long-term goals.

Key Takeaways from the 2026 Community Association Director Symposium

Varnum recently hosted its 2026 Community Association Director Symposium in Naples, Florida, bringing together board members to discuss governance, legal compliance, and operational best practices. Presenters Steven Adamczyk, Kyla Thomson, Chris Miller, Jessica Rodriguez, and Joseph Bare shared actionable guidance to help Florida community association directors lead their communities effectively. The symposium also provided statutory continuing education hours for both condominium and homeowners association board members.

Below are several key takeaways from the program.

2025 Florida Legislative Changes

Recent legislation, including House Bill 913, is reshaping compliance expectations for Florida condominium and cooperative associations and community association managers (CAMs).

At the board level, enhanced responsibilities now include recording requirements for video conference Board and membership meetings, allowing voting for Directors via email, revised budgeting requirements, verifying CAM licensure, overseeing reserve planning and structural integrity reserve studies (SIRS), and making insurance determinations.

More broadly, updates include requirements for maintaining online licensure accounts with the Florida Department of Business and Professional Regulation, expanded conflict-of-interest disclosure obligations, and stricter enforcement, including potential long-term licensure bans. Associations should review current governance and operational practices to ensure compliance.

Contract Basics for Community Associations

Vendor relationships are critical to community association operation, but should always be governed by a written agreement.  Presenters reviewed critical contract provisions, shared real-world examples, and outlined a number of best practices to help protect the community association’s interests.

Key provisions include termination rights, insurance requirements, indemnification clauses, and liability limitations.  Even a one-page estimate can be strengthened in a cost-effective way. Legal guidance is highly recommended for complex or high-value arrangements.  

Running Effective Board and Member Meetings

Well-run board and membership meetings are essential for transparency, compliance, and community trust. Best practices include following statutory notice and agenda requirements, understanding fiduciary duties under the business judgment rule, and using appropriate voting procedures, including proxies and ballots.

Directors should also implement meeting management strategies that improve efficiency, strengthen documentation, and encourage member engagement.

Ongoing Education

Proactive education remains essential as legal and operational requirements evolve. Varnum regularly hosts educational programs for community association members to provide timely updates and practical guidance on emerging issues.

Associations with questions about the symposium topics or interest in future programs are encouraged to contact Varnum’s Condominium and Homeowners Association Practice Team.

IEEPA Tariff Refund Process Sparks Consumer Class Actions

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Companies that imported goods subject to tariffs imposed under the International Emergency Economic Powers Act (IEEPA) and passed those costs along to consumers may face a growing wave of consumer class action litigation. These lawsuits seek to compel importers to return tariff costs that were embedded in retail prices, particularly where the importer is also seeking a refund of those same tariffs from the federal government.

IEEPA Tariffs and Refund Landscape

Beginning in February 2025, the United States imposed tariffs on imports from multiple countries under IEEPA authority. Importers paid those tariffs to U.S. Customs and Border Protection (CBP) and, in many cases, passed those costs along to consumers through higher retail prices. 

On February 20, 2026, the Supreme Court struck down the IEEPA tariffs in Learning Resources, Inc. v. Trump, 146 S. Ct. 628 (2026), and tariff collection ceased. 

On March 4, 2026, the Court of International Trade (CIT) ordered CBP to immediately issue refunds to importers of record; however, it later paused the immediate refund order to allow CBP to develop an adequate refund process. CBP estimates that approximately $166 billion in IEEPA duties were collected. Only importers of record, not the consumer, have standing to seek refunds in the CIT, prompting consumers to file claims in state and federal courts under equitable theories.

Emerging Class Action Litigation

One example is a proposed class action filed March 27, 2026, against Lululemon USA Inc. in the U.S. District Court for the Eastern District of Michigan, Case No. 2:26-cv-11029.

The complaint alleges that the company passed approximately $240 million in IEEPA tariff costs on to consumers through higher prices while simultaneously seeking a full refund of those tariffs from the government. Plaintiffs characterized this as a “double recovery,” asserting the company retained tariff-related revenue while pursuing reimbursement.

The lawsuit asserts claims for unjust enrichment and money had and received and seeks certification of a nationwide class covering the period from February 1, 2025, through February 24, 2026. Plaintiffs seek damages or restitution, declaratory and injunctive relief, and attorneys’ fees.

Key Takeaways for Importers

Lululemon could be an early indicator of potential issues for importers seeking IEEPA refunds. The claim provides a few key takeaways, including: 

  1. Expect Increased Litigation Risk. Companies that raised prices in response to IEEPA tariffs and are pursuing refunds may face similar class action claims.  
  2. “Double Recovery” is a Central Theory. Courts may scrutinize whether companies retained tariff-related revenue while also seeking government reimbursement.
  3. Document Pricing Decisions. Internal records related to tariff-driven pricing strategies are likely to be central in litigation and early discovery.
  4. Monitor Legal Developments. Both the refund process before the CIT and the related class action litigation continue to evolve.

Companies with significant import exposure should consult with a Varnum attorney to assess refund eligibility and navigate the evolving litigation landscape.

Estate Planning for Health Care Professionals

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Health care professionals face estate planning challenges that extend beyond drafting a simple will or creating a revocable trust. Physicians, dentists, and other licensed providers must also plan for professional liability exposure, practice ownership, and succession. A well-structured estate plan should help distribute assets efficiently while protecting accumulated wealth and supporting continuity of care for patients.

Asset Protection Planning for Health Care Providers

Even with malpractice coverage, health care professionals often face elevated liability risks from personal injury claims, business disputes, or regulatory actions. As a result, asset protection is a critical and sometimes overlooked component of estate planning for providers.

Separating business and personal assets may help reduce exposure. For example, practice-related real estate is often held in a separate limited liability company and leased to the operating entity. This structure can help shield the property from practice-related liability and limit the practice’s exposure to real estate-related claims, such as premises liability.

Other ventures or investment properties should also be maintained in properly structured entities. In some cases, irrevocable trusts or similar advanced planning tools may provide additional protection when implemented proactively and in compliance with applicable laws.

Practice Succession Planning

Professional practices are frequently tied to licensure, reputation, and the provider’s direct involvement. This makes succession planning especially important for health care professionals. In the event of death or incapacity, a practice may need to transition quickly to another provider, be sold, or wind down while addressing patient care obligations, records management, and contractual commitments.

Effective succession planning identifies a clear path forward. Options may include a temporary manager, selling to a colleague, or coordinating an orderly closure. If the practice continues operating, the designated trustee or agent must be legally qualified to hold or control ownership interests in the professional entity. If the plan involves a sale, the provider should also consider a gradual transition to the purchaser, such as an overlapping period between the closing of the transaction and the official retirement date. This can be less disruptive for patients, especially in a small or solo practice.

Estate planning documents, including powers of attorney and trusts, should authorize practice management or transfer if incapacity occurs. Planning should also create documents to transfer custody of patients’ medical records, including a medical records custodian agreement that complies with state and federal laws, a document that informs patients of the transfer and their related rights, and a document that provides written notice to the state licensing board.

Buy-Sell Agreements for Medical and Dental Practices

For providers who own practices with partners, buy-sell agreements are essential for preserving continuity and minimizing disputes. These agreements establish how ownership interests will be valued, purchased, and transferred following death, disability, or retirement.

By setting expectations in advance, practice owners can reduce the risk of forced asset liquidation or conflicts with surviving spouses or heirs. Regular review of buy-sell agreements is recommended to reflect changes in valuation, ownership structure, or tax law. Funding mechanisms such as life insurance can also support smooth ownership transitions.

Coordinating Insurance and Retirement Plans

Health care professionals often hold significant wealth in qualified retirement accounts and maintain multiple insurance policies, including life, disability, and professional liability coverage. These assets should be coordinated with the broader estate plan.

Life insurance may help fund buy-sell obligations or provide liquidity for taxes and estate equalization. Beneficiary designations on retirement accounts and insurance policies should be reviewed regularly to ensure they align with long-term financial and family obligations.

Strategic Estate Planning for Health Care Professionals

Estate planning for physicians, dentists, and other providers requires a comprehensive and forward-looking approach. Planning should address family priorities as well as professional realities, including liability, exposure, regulatory requirements, and practice succession.

Whether building a practice or preparing for retirement, proactive estate planning can help protect your legacy, support business continuity, and provide financial security for loved ones.

To learn more about tailored estate and succession planning strategies for health care professionals, contact a member of Varnum’s Estate Planning or Health Care Practice Teams.