Estate Planning for Orthopedic Surgeons: Practice, ASC Equity, and the 2026 Tax Landscape

A senior ortho surgeon with private practice and ASC ownership might hold $2M in retirement accounts, a $1.5M practice interest, a $2M ASC equity stake, and a growing taxable portfolio. That is an $8.5M estate — well below the new $15M federal exemption after OBBBA, but still an estate that requires active planning to transfer efficiently and without disrupting the practice or the ASC.

Why orthopedic surgeons need specialized estate planning

Most estate planning guides focus on brokerage accounts and real estate because those are the dominant assets for most wealthy households. Orthopedic surgeons are different in three specific ways:

• Practice and ASC equity are illiquid and professionally constrained. Your $2M ASC interest cannot be inherited by a non-physician family member and retain its value. Partnership agreements typically require that a deceased partner's interest be sold back to the group or to the ASC entity — ideally at a pre-agreed price funded by insurance. Without that structure, a surviving spouse may receive far less than fair value, or the surviving partners face forced financing at an awkward time.
• Income is high but compressed in a specific window. Most orthopedic surgeons earn peak income between ages 40 and 62, then reduce practice. Unlike a business owner who might hold appreciating equity for 40 years, an orthopedic surgeon's highest-value asset — procedure capacity — depreciates to zero at retirement. The wealth-building window is finite, which makes planning the disposition of accumulated assets especially important.
• Estate complexity increases with partnership track. A hospital-employed surgeon with no practice ownership has a relatively straightforward estate: retirement accounts, taxable investments, home, life insurance. A private practice surgeon who is also an ASC partner, perhaps with practice real estate held in a separate LLC and a cash balance plan, has four to six distinct ownership interests to transfer — each requiring its own plan.

The 2026 estate tax landscape after OBBBA

The One Big Beautiful Bill Act (OBBBA), signed July 4, 2025, permanently raised the federal estate, gift, and generation-skipping transfer (GST) tax exemption to $15 million per person, indexed for inflation starting in 2027.¹ For a married orthopedic surgeon, this means up to $30 million can pass estate-tax-free using portability or a credit shelter trust.

Before OBBBA, the TCJA-era exemption was scheduled to sunset from $14 million (2025) to approximately $7.1 million in 2026 — a cliff that would have captured many surgeons with practice equity and ASC ownership. That cliff is gone. For most orthopedic surgeons with estates under $15 million, federal estate tax is no longer an immediate concern.

What this means in practice:

• A surgeon with a $10M estate — practice, ASC equity, retirement accounts, taxable portfolio, home — is fully sheltered under the federal exemption.
• A senior spine surgeon with a large ASC stake, significant retirement accounts, and real estate holdings could be approaching or exceeding $15M. That surgeon should model the estate trajectory and consider structures like ILITs or SLATs.
• State estate taxes still apply. Twelve states and D.C. impose separate estate taxes with lower exemptions — Massachusetts and Oregon begin at $1 million, Washington at $2.193 million.² If your practice or domicile is in one of these states, planning matters even below the federal threshold.
• The top federal estate tax rate remains 40% on amounts above the exemption.

The foundation: will, revocable trust, and powers of attorney

Revocable living trust

Most estate planning attorneys recommend a revocable living trust as the centerpiece of an orthopedic surgeon's estate plan, rather than a will alone. Assets held in the trust at death transfer directly to beneficiaries — no probate, no public record, no court supervision. For a surgeon with partnership interests and ASC equity, probate can be slow and costly, particularly if you hold real property in more than one state (office real estate in one state, vacation property in another means probate in each).

The trust is fully revocable during your lifetime — you can amend it, refund it, or revoke it entirely. The practical cost of this flexibility is low. The benefit in estate administration efficiency is high.

Durable power of attorney and healthcare directives

A durable financial POA designates someone to manage your financial affairs if you become incapacitated. For a private practice surgeon or ASC partner, incapacity without a POA can paralyze practice operations and prevent partners from executing transactions requiring your signature. The person you designate should understand your practice structure or be advised by counsel who does.

A healthcare proxy (medical POA) and living will designate who makes medical decisions on your behalf and what your wishes are. These are distinct from financial planning — but preventing family conflict and ensuring your preferences are honored is a professional obligation many surgeons take seriously, given their first-hand experience with serious illness and injury.

Practice succession: what happens to your share

For private practice orthopedic surgeons, the single most important estate planning document beyond the basic will and trust is the buy-sell provision within the partnership or shareholder agreement. This controls what happens to your practice interest when you die, become disabled, or retire.

Without a funded buy-sell, surviving partners are not obligated to buy your interest at fair value. Your estate negotiates from the weakest possible position — with the practice running without you, income already stopped, and partners holding all the information about what the practice is actually worth today.

Cross-purchase vs. entity redemption

Most private practice orthopedic groups use entity redemption for simplicity. For a 2–4 surgeon group expecting a PE sale within a decade, the cross-purchase basis step-up is worth modeling — it can save 15–20 cents per dollar of gain on the eventual exit. See the practice sale guide for PE acquisition context.

Disability buyout provisions

Death is not the only trigger. A career-ending injury — a hand infection, a serious accident, a progressive neurological condition — can terminate a partner's surgical capacity. Partnership agreements typically define a disability trigger period (commonly 12–18 months of inability to perform material surgical duties) after which the group can or must buy out the disabled partner.

Disability buyout insurance provides a lump sum to fund that purchase. A surgeon whose practice interest is worth $1.5M needs either disability buyout insurance or a clear promissory note structure in the partnership agreement. Without one, surviving partners typically pay via installment note — which works but creates financing pressure at an already difficult time. See the disability insurance guide for individual income replacement planning.

ASC equity: the estate planning wild card

ASC interests are substantially more complex than practice interests from an estate planning perspective. Three features combine to create specific challenges:

• Physician ownership requirements. Most ASC operating agreements require equity holders to be licensed physicians in active clinical practice at the facility. On your death or disability, the agreement typically provides for mandatory redemption — your interest must be sold back to the facility or to qualified physician partners within a specified window.
• Valuation is not automatic. ASC valuation uses an EBITDA multiple (typically 5–10x depending on case mix, payer contracts, and growth profile).³ The fair market value of your ASC interest for estate tax and redemption purposes should be documented by a qualified independent appraiser — both to establish the estate value and to provide a defensible figure in any redemption negotiation with remaining partners.
• Timing risk for your estate. If your ASC agreement requires redemption within 6 months at a formula price, your estate may receive significantly less than a negotiated fair market value. The solution is a buy-sell funded at agreed value — ideally reviewed and updated annually as the ASC's valuation changes. Use the ASC investment calculator to model current value against distributions and exit multiples.

For surgeons whose estate is primarily ASC equity plus retirement accounts, the ASC buy-sell is the most important estate planning document in your stack — more important than the will, because it governs your largest asset.

Gifting strategies: moving wealth during your lifetime

Lifetime gifting reduces your taxable estate and transfers appreciation out of your name. The primary tools:

Annual exclusion — $19,000 per recipient (2026)

You may give $19,000 per year to any number of individuals — children, grandchildren, anyone — without using any of your $15M lifetime exemption.⁴ A married couple can give $38,000 per recipient per year using gift splitting. For a surgeon with three children and four grandchildren, that is $266,000 per year in gift-tax-free transfers. Over 15 years, compounded, this meaningfully reduces estate size before accounting for appreciation of the gifted assets.

529 plan superfunding

Section 529 plans allow five years of annual exclusion gifts to be made in a single lump sum — $95,000 per beneficiary from one donor ($190,000 from a married couple) in 2026. For an orthopedic surgeon with multiple grandchildren, 529 superfunding transfers significant assets at once while removing investment growth from the taxable estate.

Charitable remainder trust (CRT) for large liquidity events

If you plan to sell a large illiquid appreciated asset — ASC equity, practice interest, investment real estate — a charitable remainder trust can defer capital gains tax while providing an income stream for surgeons with charitable intent. You contribute the asset to the CRT before the sale. The CRT sells it with no immediate capital gains tax, pays you an income stream for a defined period, and the charity receives the remainder. The donor receives a partial charitable deduction in the year of contribution.

CRTs require an irrevocable commitment and the income stream is taxable. They are appropriate for surgeons facing a $3M–$5M ASC exit with meaningful charitable goals. For a surgeon without charitable intent, a direct sale and deliberate reinvestment strategy is typically more favorable.

Irrevocable life insurance trusts (ILIT) for surgeons approaching $10M+

Life insurance death benefits — when the insured owned the policy — are included in the taxable estate under IRC § 2042.⁵ A surgeon with $5M in life insurance and a $12M estate has a $17M gross estate. An ILIT removes the policy proceeds from the estate by having the trust own the policy instead of the insured.

The trust pays premiums using annual exclusion gifts from the insured. At death, proceeds flow to the trust — available for heirs or to provide liquidity while the practice interest and ASC equity go through their respective redemption processes. At the $15M exemption level, most orthopedic surgeons will not need an ILIT purely for federal estate tax reasons. But it remains useful in states with lower exemptions, for surgeons whose estates are likely to grow above $15M, and as an estate liquidity tool regardless of taxability.

Beneficiary designations: the most overlooked item

Retirement accounts and life insurance transfer by beneficiary designation — not by your will or trust. A will stating "everything to my spouse" does not supersede a 401(k) with an outdated beneficiary. Common errors:

• Naming a minor child directly as beneficiary (a court-appointed guardian manages the account until adulthood)
• Naming the estate as retirement account beneficiary (eliminates the 10-year stretch under SECURE 2.0 and accelerates income tax)
• No contingent beneficiary (primary predeceasing you defaults assets to the estate)
• Not updating after divorce or major life changes

Review beneficiary designations after every material life event: marriage, divorce, birth of a child, death of a named beneficiary.

Estate planning by career stage

What advisors get wrong with orthopedic surgeon estates

Treating the estate plan in isolation from the practice structure. An estate attorney who does not understand ASC operating agreements, physician ownership restrictions, or partnership capital contribution mechanics may draft technically valid documents that do not account for how the equity actually transfers. The buyout price in your estate plan must mesh with the mechanics in the ASC and partnership agreements.

Overcomplicating at the wrong career stage. A 34-year-old associate two years into attending practice does not need a GRAT, a family limited partnership, and a spousal lifetime access trust. They need a will, a trust, correct beneficiary designations, and disability insurance. Estate plan complexity should scale with estate size and the number of ownership interests to transfer.