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    Death and the dental practice

    No one likes to think about it, but do you have a plan in place if the unexpected happens?

    The death of a dentist is a tragic event, affecting the friends and family who are left behind. But besides the devastating impact from a psychological stand point, the financial impact also creates an unwanted outcome almost immediately.

    If the dentist was typical of the norm, he or she provided a fairly high income for his or her family. As the early years’ struggles were overcome and the income became higher each succeeding year, the family became accustomed to the lifestyle that the income provided.

    Related article: Why understanding professional fees is critical for dentists

    Writing a willIf the practice was operating as a sole ownership type — whether incorporated or not — the value of the practice probably grew each year. With many dentists, the value of the dental practice became one of the assets owned with the most financial worth and most potential continued growth in equity. On many financial reports, the dentist may have used the value to assist in securing loans, expansion of the practice and in building a retirement nest egg.

    When death comes suddenly

    One of the most horrible consequences of the death of the dentist is the resultant immediate decrease in the value of the practice. When there is little or no planning time because of the possible youth of the dentist, the ability to acquire the assets necessary for the well being of the family is diminished rapidly.

    The younger the dentist when deceased, the more likely that the value of the practice will not yet have peaked, even if the income of the practice was quite high. Learning to live on less is a difficult proposition for the widow or widower of the dentist. Let’s look at some facts that occur when the death of the dentist occurs.

    The timeline

    Unfortunately, there are at least two negative financial consequences from the death of the dentist. The first is that the income that the spouse and family have become used to living on will drop as the receivables are collected and there is little or no continuing work done by the hygienists or other professionals still permitted to practice at the dental office.

    Related article: Transitioning a dental practice after death

    The second financial problem is that as the gross revenue decreases, the value of the dental practice to a potential buyer drops significantly. Any practice valuation prepared by a professional would use the most current data when analyzing value. As the receipts fall, the net income will fall more dramatically, because if the practice continues operating, employees are still needed and they must be paid.

    Bruce Bryen, CPA, CVA
    Bruce Bryen is a certified public accountant with over 40 years of experience and is a part of RKG Tax & Business Services LLP, an ...


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