Death, disability, directives, and your dental practice
Hang on because this article is not going to be pleasant. We're going to talk about things that are uncomfortable and easy to ignore. Nevertheless, it's important to have this discussion, and it’s even more important to take some action.
Dr. Steve Wolff
For more on this topic, go to www.dentaleconomics.com and search using the following key words: disability coverage, sudden death, practice directives, estate planning, Dr. Steve Wolff.
Hang on because this article is not going to be pleasant. We’re going to talk about things that are uncomfortable and easy to ignore. Nevertheless, it’s important to have this discussion, and it’s even more important to take some action. Most of us would like to believe that we are on a smooth, gentle path to the end of our practice, and that any obstacles are in plain sight. But I will tell you that this was not the case for my career, and I fear it will not be the case for a good number of you. Perhaps a little informed planning would be helpful for you, your practice, and your family. Let’s take a look at some sensible steps that you can take in the event that your career prematurely ends as a result of disability or death.
Most of you will grudgingly admit that you are going to die. The plan is that it will happen many years after you have successfully transitioned your practice, and that you and your family will be well prepared for the inevitable. That may or may not be the case, but we’ll talk more about that later.
What about the very real possibility that you are forced to stop practicing as a result of a disability? We have recently had clients leave their dental practices as a result of degenerative joint disease, back pain, mild strokes, and neurological disorders. None planned or expected it to happen, and most agonized over how to deal with it.
One of the problems with a progressive disability is figuring out when to “pull the trigger.” Most of those affected are in the prime of their careers and sincerely want to get better. Unfortunately, as someone’s health declines, his or her efficiency in the office decreases. Patients and staff notice the difference.
Treatment plans may get altered or delayed and productivity slips. As revenue goes down, so does one’s quality of life, and with it, the value of the practice. To top it off, any compromise in someone’s ability to render treatment may increase his or her risk of some potential liability.
At some point the dentist may be forced to deal with some very difficult decisions, and those will be even more painful if they have not done any planning for this very real possibility.
What to do?
First, make sure that you have quality disability coverage. I understand that coverage is available on some policies until age 70. If that option is available to you, consider it, especially since the eligibility age for Social Security is creeping upward. Be sure that your policy is specific to your “own occupation” so that you do not lose benefits in the event of a future alternate occupation.
The next step is the hardest, and that is to be realistic about your future and to take action. Almost no one wants to start a new career or new practice late in life, but if your persistent health issues are eroding the value of one of your largest assets, then steps must be taken to sell or transition the current practice to a new owner.
If competent, informed medical opinion cannot provide an endpoint to your problems, or if treatment is expected to give you no better than a 50/50 chance of a full and productive recovery, then now is the time to act. Practices that have been beaten down by declining production, anxious staff, and shifting patient bases are difficult to sell for anywhere near their predisability value. Don’t make the mistake of hanging on too long. If you ever eventually recover enough to return to practice, opportunities will present themselves.
In the worst case ...
As I mentioned earlier, all of us will die. Hopefully, your death will be long after your dental career ends and you have had many, many blissful years enjoying your grandchildren and hobbies. But what about the possibility that life doesn’t work out that way? What position would you, your practice, and family be in if you were to receive a terminal medical diagnosis? While we would all hope and pray for a full recovery, immediate steps must be taken to get the practice on the market. The sooner the practice can be sold, the better it will retain its value, and more importantly, the less of a burden it will be to you and your family.
Finally, what about the tragedy of sudden death? In our office, we have witnessed the agony of families struggling with disposing of practices after doctors have died from strokes, heart attacks, choking, and motorcycle or auto accidents. You owe it to your family, staff, and patients to prepare for this very real possibility.
Now that you are motivated to be better prepared for an unplanned and unfortunate end to your career, what do you do? This list, while not complete or all-inclusive, should provide a starting point.
- Have a current will, estate plan, and appropriate medical directives.
- Obtain a quality disability insurance policy for your “own occupation” payable to at least age 65.
- Obtain adequate life insurance that at the very least will cover any practice-related debt, including real estate.
- Tell someone where all of your documents are located.
- Meet with a dental practice broker. I know this sounds self-serving, but in spite of the fact that we all have attorneys, accountants, and estate executors, I feel no one is better able to quickly get your practice valued and sold. A broker who is familiar with your practice and market will be in the best position to find a buyer, and can even help in finding temporary coverage while the sale is pending.
- Consider organizing or participating in a dental mutual aid society. John Cahill of Western Practice Sales has written extensively on the subject and has organized groups of doctors who will come to the immediate aid of a fallen comrade. A formal agreement between six to 10 doctors can provide peace of mind by knowing that your practice will be immediately covered in the event of your unexpected loss. (Go to DentistryIQ.com and search John Cahill, three-legged stool.)
- Have a Memo of Direction on file with your estate attorney and the transition specialist/broker to facilitate a quick sale of your practice. This document, executed by the dentist and witnesses, makes it clear who should be contacted in the event you are not able to make decisions about the sale of your practice. A short, proactive meeting will give the broker some insight as to your wishes, and you will know what services he or she can provide. All dentists with any ownership in a dental practice (regardless of age and physical condition) should have this document on file.
- At least annually, organize important information about your practice as if you were preparing for a sale. A good starting point is financial statements for the last three years, along with a current profit and loss statement, current lease, any contracts you are party to, and a current list of major equipment. The broker you meet with will be happy to provide you with a complete list of necessary documents.
- Tell someone where your documents are kept. (This is not a typo — it is often the biggest reason for a delay in moving forward as no one knows where anything is kept.)
The brutal reality of sudden death or a medical crisis is something that none of us want to face. I don’t know that any hard data is available, but it seems to me that as many as half of all doctors or their families mayhave some hard decisions to make in the future A little planning now will go a long way in ensuring the continuation of your legacy.
Dr. Steve Wolff is a member of ADS (American Dental Sales, Inc.) and the broker/partner in EMA Dental Practice Sales (formerly Evan Myers and Associates) in Kansas City, Mo. He can be contacted at (888) 419-5590 ext. 816, or visit the company’s website at www.emadentalpracticesales.com.