A topic that we’ve thought about recently is the special financial demands placed on certain highly trained professionals. We’re talking about doctors and others whose educations take much longer than average to complete. Even though they usually end up being very well paid, they start their professional lives well behind their peers, at least economically speaking.

Any student considering going into medical school, or pursuing other post-graduate or professional degrees, has to be concerned with the cost of that education. Not everybody is fortunate enough to have wealthy parents or a well-invested 529 college fund. Student loans are typically a much heavier burden for doctors and other professionals than they are for most college graduates – and that’s not to minimize their burden on even the average bachelor’s-degree graduate.

Then consider this: unlike those typical graduates who start working full time in their early 20s and can soon buy homes and start investing, a doctor or PhD may not be done with school and working full-time until a decade later. That means they have significantly fewer years for the magic of compounding, and dividend reinvesting, and real estate appreciation to help them build wealth.

But even though full professional qualifications — and full earning potential — come late, the financial obligations of adulthood often don’t wait.

It’s not at all uncommon for marriage and families to come during, not after, those advanced academic studies. And so that medical intern or aspiring professor carries all the expenses of maintaining a household and raising kids.

For a newly minted doctor or professor or lawyer, the burdens of tuition are still fresh. And so, it has to be a big deal for them to consider how to help their own children through higher education.

No sooner do these new graduates hang up their shingles than they face the pressures of staying current with the state of the art in their profession while keeping a practice running. Which includes all the overhead of a small business. Insurance, payrolls, personnel hassles, and taxes are just some of the higher-profile headaches.

Anyone in a demanding career knows, of course, that long hours and lots of midnight oil make it all the more difficult to focus on longer-term concerns. Who can blame you if you choose to spend your non-working time with your family or with hobbies, recreation, sports, etc.  Those uses of precious leisure carry more immediate rewards than do financial planning or following the latest market gyrations.

All of which suggests that highly skilled – and highly stressed – professionals should themselves rely on professional help — from a qualified financial expert.

Look at it from the point of view of, say, a doctor. Doesn’t it make sense that complex and rapidly evolving professions would require specialists who keep up with the latest research and have access to the most relevant data? In that way, finance is exactly like medicine or the most demanding physical sciences. Sure, some financial tasks, like balancing your checkbook, are things anyone can handle. It’s like how anyone can put on a Band-Aid or take aspirin for a headache. But planning for retirement or children’s education or making tax-and-insurance decisions for a complex business, are not do-it-yourself tasks, any more than brain surgery or chemotherapy would be.

That’s especially true for professionals who might be as much as ten years behind others their same age when it comes to saving and investing. To safely overcome a late start, good advice can be critical.

Take the challenge of catching up on retirement savings. An intelligent amateur might give in to the temptation of buying risky securities because of the prospect – not a promise, just a possibility – of high returns. A carefully worked out financial plan should distinguish between investment and speculation and specify how many dollars are available for each. Putting the assets you need for your nest egg into risky, speculative ventures could end up leaving you in the lurch.

Then there’s that too-common pitfall that high earners encounter when the real money starts rolling in. It’s so tempting to splurge on luxuries, after years of scrimping, at the expense of thoughtful investing in your own and your family’s future. Again, a sound long-term plan can help a newly prosperous professional steer clear of those impulsive bad decisions.

An appropriately tailored plan can make it easier to take advantage of the tax code, making it work to your benefit in such areas as setting up retirement accounts and college funds.

The right advisor will also help you think through a host of downside risks, making the right choices in such areas as professional liability insurance, health coverage, and even planning for potential business problems. A medical or legal or architectural practice, after all, has all the headaches of any small business, but with far greater potential liabilities than a typical retail or service outfit. It has to balance malpractice coverage on top of the usual slip-and-fall and product-liability coverage that most businesses need. And that’s not to mention business interruption insurance and protection against calamities like embezzlement by employees.

Because a self-employed professional doesn’t have a corporate safety net, it’s important to consider the possibility of being unable to work – and unable to earn. Obtaining disability insurance, and possibly coverage to keep the office running if an owner is unable to work, is another of those vexing problems that a good financial adviser can help with.

Precisely because of all these burdens, many professionals have decided against running a solo practice or partnership. Instead, they merge with or go to work for a larger corporate enterprise. Weighing the pros and cons of either approach can require the expertise of a specialized business consultant.

A patient may sometimes need to consult a cardiologist or rheumatologist in addition to seeing his general practitioner. Likewise, a self-employed professional might well need to have his regular financial planner call in a specialist’s expertise, too. The best financial professionals have access to well-qualified, trustworthy specialists, and can involve them when their clients’ needs require.






Old North State Trust, LLC (ONST) periodically produces publications as a service to clients and friends.  The information contained in these publications is intended to provide general information about issues related to trust, investment and estate related topics.  Readers should be aware that the facts may vary depending upon individual circumstances.  The information contained in these publications is intended solely for informational purposes, is proprietary to ONST and is not guaranteed to be accurate, complete or timely. 

In our work of helping people manage their financial affairs, we constantly wrestle with a legal tool that’s often misunderstood and sometimes misused. We’re talking about the POA, which can stand for either “power of attorney” or “power of appointment.”

The legalities are complex and can be eye-glazing, so we won’t get too deep into the technicalities. We do want to make the case that exercising a POA can be a tricky problem for someone who doesn’t have the expertise to handle it properly. There’s also the danger that mismanaged POAs can create huge problems and ill-will in families.

The best way to think about a POA is that it’s a document. It may be part of a will or could be a stand-alone piece of paper, depending on which acronym it stands for. Either way, it grants to a person or a company the right to act in someone’s behalf. That person or company becomes “attorney in fact,” who can make certain decisions about certain assets. (That doesn’t mean a lawyer; an “attorney at law” has a very different sort of relationship to the client.) Where this gets even more confusing is that these attorneys in fact are often referred to (incorrectly), for convenience, as POAs.

Are your eyes glazed over yet? We understand but bear with us, because it’s important to understand how this arcane business can create a crisis.

First, a simple example. If your mother named you as her attorney in fact, the document she signs is the POA. It might be what the law considers a “limited” POA, the most common type. Maybe she’s going to be out of the country and needs you to be her attorney in fact in case she needs something done while she’s gone. Or maybe she needs you to sign a deed on her behalf and doesn’t want to have to travel back just to write her name on the dotted line.

The other type, a “general” POA, lasts longer and grants more powers. For instance, if your father recognizes that he is developing dementia, he would need a POA that would remain in force even into his incapacity. Because it lasts, this instrument is called a “durable power of attorney.” That would let you act on his behalf when he couldn’t do so for himself.

A somewhat different wrinkle, a “general power of appointment,” is something built into a will or trust, and governs what happens when the grantor or primary beneficiary dies. The person named in this type of POA has the power to name other beneficiaries to receive the remainder of the estate or trust. The key word in this is “general,” because it gives POAs carte blanch to do whatever they want. Before we get too far into the weeds on this, let us offer a cautionary example.

In two different cases we’ve handled recently, with family members at odds with each other, conflicting POAs created disastrous situations. A POA is controlled by state laws, which means each state recognizes its own POA. That also means that you can create as many POAs as you want—and name as many attorneys in fact as you want! Now that might not be a problem if those POAs are all carefully limited and define responsibilities that don’t overlap or clash. But too often that’s not how it works.

And if you should decide to name somebody new to act on your behalf, be sure to revoke any previous POA. If you don’t, every one of those dueling attorneys in fact can act in your name, often at cross purposes.

We worked with a family in which the father was the one who handled all of the finances. As so often happens, he died first, and his widow soon developed dementia. One of the couple’s four children moved in to take care of her mom and was named the attorney in fact. The other three siblings lived in other states. But then, while the mother was visiting her two sons in Pennsylvania, they decided to keep her there. Despite her full-blown dementia, they took her to a lawyer and got her signature on a POA. This named one of the brothers as her attorney in fact. Suddenly this woman had two POAs in two states, and two different people empowered to make decisions for her.

Meanwhile, the daughter here had been paying all the bills, writing checks on an account in her mother’s name. Suddenly she couldn’t do this, as the brother had the bank account changed to his name. He accused his sister of stealing money from their mother.

We knew that wasn’t true, but rules of confidentiality didn’t allow us to say anything to the brother. To resolve this mess, we called a family meeting and told them that we couldn’t work with any of them. Because of the conflicting POAs, we warned them, their mother would be the one to suffer.

Finally, the feuding siblings agreed to let our company be their mother’s attorney in fact and returned her to her home here. Working everything out came at the cost of hard feelings within the family and a lot of stress on the mother.

Had the parents done better planning much earlier, this family crisis could have been avoided.

Some takeaways from this:

  • You can’t know who will die first, that’s why we always say, “Plan for the worst and hope for the best.”
  • It’s essential that the POA is held by a completely trustworthy person or institution. You can’t always trust even your loved ones to do the right thing.
  • A disinterested third party is sometimes the only way to go.

Aside from having no stake in family disputes like we just described, a professional management company like Old North State Trust has one other important asset, that is our expertise in the tricky legalities and practicalities of POAs.




Old North State Trust, LLC (ONST) periodically produces publications as a service to clients and friends.  The information contained in these publications is intended to provide general information about issues related to trust, investment and estate related topics.  Readers should be aware that the facts may vary depending upon individual circumstances.  The information contained in these publications is intended solely for informational purposes, is proprietary to ONST and is not guaranteed to be accurate, complete or timely. 



Client Case Study

ONST- The Perfect Partner


Sam and Katie Smith (not actual names) have been clients of ours for several years.  They have various types of accounts that we manage, but I’d like to tell you about one, their insurance trust.  It contained a variable life policy on Sam’s life worth $940,000.  The annual premium on this policy was over $34,000, and the trust was the beneficiary of the policy with their daughter originally being named as trustee.  As part of our routine estate planning process with the Smiths (as we do with all our clients), we discussed the trust and this policy.  Since it had been purchased some years earlier, we felt that the policy should be reviewed, as it could potentially be replaced.  We contacted an independent insurance advisor to review the policy.  He did so and advised that, since the policy had been purchased when rates were much higher, he felt that he could exchange the policy for a much more suitable one.  He shopped around and we found a new, second to die policy on both spouses’ life worth $1.2MM and the premium was reduced to $14,000!  Obviously, this was a win-win situation all the way around.  The clients were ecstatic and so were we!  They decided that it would be in their best interests to change the trustee to Old North State Trust (ONST) as their daughter was just too busy to be able to keep track of the policy and to manage the funds upon their passing.  They were extremely grateful for our help and appreciative of the fact that we were able to bring in an outside partner to provide the expertise that we did not have in-house.  At ONST, we don’t always expect to have all the answers, but we do answer all the expectations of the clients!  We are also able to collaborate with other advisors to meet the needs of our clients, no matter what the needs may be- whether it is a service we offer in house or not.  Our goal is to be flexible and a full-service provider to our clients and to assist them in every way.  We are so much more than just a financial service company as you’ll see by this article and from future examples. You can also call one of our advisors who would be more than happy to discuss any issues with you.






Old North State Trust, LLC (ONST) periodically produces publications as a service to clients and friends.  The information contained in these publications is intended to provide general information about issues related to trust, investment and estate related topics.  Readers should be aware that the facts may vary depending upon individual circumstances.  The information contained in these publications is intended solely for informational purposes, is proprietary to ONST and is not guaranteed to be accurate, complete or timely. 

On December 22, 2017, President Trump signed into law the Tax Cuts and Jobs Act, a sweeping $1.5 trillion tax-cut package that fundamentally changes the individual and business tax landscape. While many of the provisions in the new legislation are permanent, others (including most of the tax cuts that apply to individuals) will expire in eight years. Some of the major changes included in the legislation that affect individuals are summarized below; unless otherwise noted, the provisions are effective for tax years 2018 through 2025.


Individual income tax rates

The new bill lowers most of the individual income tax brackets and widens the margins for each of those brackets.  Formerly, the brackets were 10%, 15%, 25%, 28%, 33%, 35%, and 39.6%.  The new rates are now: 10%, 12%, 22%, 24%, 32%, 35%, and 37%. The legislation also lowers and widens the income tax brackets for estates and trusts, and replaces existing “kiddie tax” provisions (under which a child’s unearned income is taxed at his or her parents’ tax rate) by effectively taxing a child’s unearned income using the estate and trust rates.

Standard deduction and personal exemptions

The legislation roughly doubles existing standard deduction amounts, but repeals the deduction for personal exemptions. Additional standard deduction amounts allowed for the elderly and the blind are not affected by the legislation and will remain available for those who qualify. Higher standard deduction amounts will generally mean that fewer taxpayers will itemize deductions going forward.


Itemized deductions

The overall limit on itemized deductions that applied to higher-income taxpayers (commonly known as the “Pease limitation”) is repealed, and the following changes are made to individual deductions:

  • State and local taxes— Individuals are only able to claim an itemized deduction of up to $10,000 ($5,000 if married filing a separate return) for state and local property taxes and state and local income taxes (or sales taxes in lieu of income).
  • Home mortgage interest deduction— Individuals can deduct mortgage interest of no more than $750,000 ($375,000 for married individuals filing separately) of qualifying mortgage debt. For mortgage debt incurred prior to December 16, 2017, the prior $1 million limit will continue to apply. No deduction is allowed for interest on home equity indebtedness.
  • Medical expenses— The adjusted gross income (AGI) threshold for deducting unreimbursed medical expenses is retroactively reduced from 10% to 7.5% for tax years 2017 and 2018, after which it returns to 10%. The 7.5% AGI threshold applies for purposes of calculating the alternative minimum tax (AMT) for the two years as well.
  • Charitable contributions— The top adjusted gross income (AGI) limitation percentage that applies to deducting certain cash gifts is increased from 50% to 60%.
  • Casualty and theft losses— The deduction for personal casualty and theft losses is eliminated, except for casualty losses suffered in a federal disaster area.
  • Miscellaneous itemized deductions— Miscellaneous itemized deductions that would be subject to the 2% AGI threshold, including tax-preparation expenses and unreimbursed employee business expenses, are no longer deductible.

Child tax credit

The child tax credit is doubled from $1,000 to $2,000 for each qualifying child under the age of 17. The maximum amount of the credit that may be refunded is $1,400 per qualifying child, and the earned income threshold for refundability falls from $3,000 to $2,500 (allowing those with lower earned incomes to receive more of the refundable credit). The income level at which the credit begins to phase out is significantly increased to $400,000 for married couples filing jointly and $200,000 for all other filers. The credit will not be allowed unless a Social Security number is provided for each qualifying child. A new $500 nonrefundable credit is available for qualifying dependents who are not qualifying children under age 17.


Alternative minimum tax (AMT)

The AMT is essentially a separate, parallel federal income tax system with its own rates and rules — for example, the AMT effectively disallows several itemized deductions, as well as the standard deduction. The legislation significantly narrows the application of the AMT by increasing AMT exemption amounts and dramatically increasing the income threshold at which the exemptions begin to phase out.


Other noteworthy changes

  • The Affordable Care Act individual responsibility payment (the penalty for failing to have adequate health insurance coverage) is permanently repealed starting in 2019.
  • Application of the federal estate and gift tax is narrowed by doubling the estate and gift tax exemption amount to around $11.2 million in 2018, with inflation adjustments in following years. The Generation Skipping Tax (GST) exemption will also receive an increase as it is tied to the basic exclusion amount.  Therefore, any transfers made to skipped persons will receive favorable treatment.
  • The legislation creates a new deduction for qualified businesses that have passed through entities. The deduction is available to individuals, trusts, and estates.  Any of these entities may deduct from income 20 percent of qualified business income from a partnership, S corporation or sole proprietorship, subject to certain limitations.
  • In a permanent change that starts in 2018, Roth conversions cannot be reversed by recharacterizing the conversion as a traditional IRA contribution by the return due date.
  • For divorce or separation agreements executed after December 31, 2018 (or modified after that date to specifically apply this provision), alimony and separate maintenance payments are not deductible by the paying spouse, and are not included in the income of the recipient. This is also a permanent change.

For more questions about the Tax Cuts and Job Act, please contact one of our advisors.

Source- Broadridge Investor Communications Solutions, Inc.



Old North State Trust, LLC (ONST) periodically produces publications as a service to clients and friends.  The information contained in these publications is intended to provide general information about issues related to trust, investment and estate related topics.  Readers should be aware that the facts may vary depending upon individual circumstances.  The information contained in these publications is intended solely for informational purposes, is proprietary to ONST and is not guaranteed to be accurate, complete or timely.