Death and the Owner Dentist
No one likes to talk about death and most people assume that their death will occur after they have retired. Unfortunately this is not always the case. Some dentists pass away while they are still practicing dentistry and still own their practice. One of the hardest aspects of our job is assisting the family through the sale of a deceased dentist’s practice. Whether it is a sudden death or one expected after a lengthy illness, it is never an easy task. A dental practice is affected much more by an owner’s death than other businesses. In dental, the dentist IS the business. Without another dentist quickly stepping in after the owner’s death, the practice can quickly become worthless. PI has worked with multiple families selling a practice on behalf of a deceased loved one. No matter the circumstances, this is always a daunting task but it can be made a little easier if the owner prepares the practice and estate for his or her eventual death. PI would like to share some tips and advice on how to make this difficult process a little easier.
Although it is unpleasant to think about, you need to be proactive and put a plan in place in the event of your death. Hopefully you will have sold your practice and retired long before your death, but you owe it to your family, staff, and patients to have a plan in place just in case. Where to start? Besides having a will, life insurance and estate plan for your personal needs, you should also have a plan in place for the future of your dental practice. A Letter of Direction that is on file with your attorney and Practice Impact is one of the first steps. This document will allow your family to immediately hire Practice Impact to sell your practice in the event of your death or severe disability. Your family will not have to wait for an executor to be appointed for your estate before starting the process which will save valuable time as well as the effort of locating, interviewing and hiring a broker. In this time of need, having a professional dental practice broker is a MUST as it is a very emotional and stressful time for your family and staff. Your family needs time to grieve and by having a Letter of Direction and hiring Practice Impact immediately, your family can have that time while minimizing the loss of value to your practice and speeding up the sale process. Time is not on your side in this situation and you cannot leisurely sell your practice and learn as you go; your family will need an expert with marketing power and strong dental contacts who can get the practice sold quickly for a fair price to all parties involved. For more information on the Letter of Direction please contact Paul Hudanick or Mollie Holleran at our office.
You should also make sure that someone (your spouse, attorney, office manager, or adult child) knows where all of your important documents are stored. This may seem trivial, but on more than one occasion we have run into the case where the executor did not work in the practice before the doctor’s death and therefore does not know where much of the important paperwork is located and must search to find. This can delay the valuation and sale process and any delay causes the value of the practice to drop significantly when selling a practice due to a doctor’s death.
You should also be organized. Keep a folder containing your tax returns for the last three years, financial statements from your accountant, production and collection reports, a copy of your lease, a year end statement for any loans you have on the practice, and your most recent practice valuation report. You should also include computer and account passwords, a list of key advisors for your practice (accountant, attorney, financial planner, etc.) and your Letter of Direction. Also, update this folder every year. By staying organized and having this information together and readily available. Your family will be able to easily access it even if they do not work in the practice. Your family can very quickly give this information to Practice Impact so we can get started on a practice valuation and marketing to sell the practice as quickly as possible.
If you participate in Medicaid or are enrolled with any PPO programs you should also keep a list of all of the programs and their contact information. Before the buyer of your practice can treat your PPO and Medicaid patients, the new owner will need to be credentialed with these programs. The insurance companies will NOT make an exception because of a doctor’s death and let the new owner treat PPO and Medicaid patients without the proper credentials. This process takes time and will be very difficult if you do not have a complete list of the programs readily available. Practice Impact recommends that the buyer be credentialed with most of the programs by the time of the closing so that the buyer can immediately treat patients and not have to hold off scheduling them until the credentialing is complete. Making your patients wait for the credentialing will only cause the practice to lose patients and the value of your practice to drop even more.
No matter how fast your family/executor acts on the sale of your practice, it will still take some time. A buyer must be found, must visit the practice, make the decision to purchase the practice and then the sale itself-attorneys preparation of documents, financing, credentialing, all of that will take time. While this is going on, you need a dentist to work in the practice at least part time to keep it going and retain as much value as possible. Your family/executor will quickly need to find a temporary associate for the practice. This process can be made easier if you join a formal or informal dental mutual aid society. The other doctors in your group will cover your practice until a buyer or other temporary associate can be found. This will ensure that many of your patients are still seen in the practice, keeping them from finding a new dental care provider, and maintaining as much vale for the practice as possible.
Quickly selling your practice is essential in the event of your death. The longer the practice goes unsold, the more the value of it drops and the less money your family will receive from the sale. Your family loves you and needs time to grieve and not worry about the sale of your practice. Do them a favor and give them that time to grieve by being proactive and putting a plan into place before something happens.
