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Hope for the Best, Prepare for the Worst

Hope for the Best, Prepare for the Worst

None of us want to discuss or think about death or long-term disability. Humans cope with the possibility of death by ignoring it, which leads to a lack of preparation when the inevitable happens. In any given year, 10-40% of our dental practice transitions are the result of an unexpected death or disability, and less than half of those clients are adequately prepared for it. I’ve lost count of the different ways dentists find to die or cripple themselves, from the run of the mill heart attack to freakish accidents you would swear came from a movie. No matter how it happens, though, it usually happens suddenly and with little warning. As I write this, I am preparing to attend the funeral of my 35-year-old cousin. He died unexpectedly of a heart attack after a brief bout with pneumonia.
Usually, I receive those dreaded calls about someone I don’t know well, and I try to comfort the family left behind. There are no words that really provide comfort, so my primary job is to see if I can assist in maximizing the return on the sale of the deceased’s dental practice. Time is the greatest enemy in distressed practice sales; purchase offers decrease immediately upon death, and all but evaporate within a few short months. Consequently, practitioners should prepare their spouse or loved ones to bring the practice to market quickly once a tragedy occurs.

When a death occurs, the survivors move in a fog and are usually unable to think clearly or make important decisions.  So, please be sure to leave your family and employees some guidance on what to do with your practice.  If the data is readily available, we can act quickly.  However, we are often left piecing together records and searching for information in order to bring the practice to market.

  1. Have a will and update it every few years. Either execute a codicil with instructions for your practice, or leave a letter of direction for your heirs to follow.  Designate a lead advisor for the practice sale (CPA, attorney, broker, etc.)
  2. Have an emergency plan with the office staff. Make a list of possible substitute dentists who might help keep your practice open in an emergency.  Have a plan for rescheduling patients.  Providing a game plan to the staff helps keep morale up during a highly stressful time.   
  3. Write down user IDs and Passwords for your practice management software and other accounts. Review this list every three months to make sure it is still up to date.
  4. Start a spreadsheet with all of your assets, including account numbers. If have a safety deposit box, write down the bank name and address and the place you keep the key.  If you have any debt, please include a section with bank names, account numbers and amounts.  Mark your phone to review and update this list yearly and tell your spouse or eldest child where to find this list.
  5. Gather the information needed for a practice appraisal: 3 years tax returns, staff payroll data, office lease or building appraisal, etc. Update it yearly.
Although your dental practice may not be the largest asset you own, the sale of your practice will help your loved ones to start moving on. Obligations to patients for completing treatment and record maintenance do not end with death. Payroll, rent, and other office debts will continue to accrue, and the additional burden of office management is highly stressful to surviving family members.
Finally, a word about insurance. If you are not married and have absolutely no one depending on your assistance for their future, you don’t need life insurance. You do still need disability insurance, unless you can live off social security disability benefits (hint: you probably cannot). “Own occupation” insurance is the best. Many policies terminate payments at age 65, although there are a few that continue for life if you are disabled by a given age. Shop wisely and purchase now if you have not done so already.
If you are a young dentist with a spouse and children, it is your obligation and duty to have both a disability policy and a life insurance policy. They come in all sorts of flavors and sizes, but the least expensive life insurance policy will usually be a straight term policy.
I hope all of you have a long and happy life and retire long before you become disabled or turn up your toes. However, it surely would help if you took just a little time to prepare for the worst.

Written by: Preston Lovelace, JD., MS.

Lovelace and Associates