As a practice transition consultant, I write this article with dismay at what happens following the untimely passing of a dentist.  I’d like to outline what I believe is the preferred course of action in handling the practice sale.

While nobody likes to think about it, accidents and unfortunate events happen that can lead to an untimely death or disability. Unfortunately, some of you know or know of colleagues who have passed away unexpectedly. These tragic events have left family members and dental staff members overwhelmed and unsure of “what to do next.”  So, while it is unpleasant to consider, it does happen, making this topic important to address.  

Just as you would prepare a will or make a loved one aware of your wishes in the unfortunate event of death, you should also make a plan for your dental practice.  Taking some time now to prepare for the unexpected is important. 

First and foremost, please make sure you have a properly prepared and established will or trust in place that addresses the ownership of your company or corporation, and ergo your practice assets in the event you pass away. Consult with and hire a knowledgeable and competent attorney to put your affairs in order. If you are incorporated or organized as an LLC, some attorneys recommend having your spouse added as a corporate officer and/or member of the board of directors, or in the case of a limited liability company, added as a manager or member so authority to act on behalf of your corporation or company transfers to them seamlessly.  Some states do not allow non-dentists to be owners or officers of a professional corporation or company. Moreover, it may be preferable to avoid the liability exposure created by having a spouse as a co-owner or officer in the practice.  In those instances, an alternative solution involves drafting a corporate resolution appointing your spouse as a corporate officer in the event of your passing, or adding a provision to your LLC’s operating agreement appointing your spouse as a company manager, as the case may be.  When a dentist dies unexpectedly, time is of the essence when it comes to the sale of the practice. A practice loses substantial value the moment its dentist-owner passes away, and it continues to lose value with each passing week before it is sold. If proper provisions are not in place to allow the practice to continue to operate and to be sold quickly, precious time may be lost in the estate administration process before the estate can proceed with a sale, which means a potentially greater loss in value.

Prepare a document with important contact names and numbers, along with steps for handling the situation.  Once this document is prepared, make your office manager aware of its location and keep a copy with your will and/or trust papers.  Hopefully, your family members and/or staff members will never need to access this information, but if they do, your preparation will be invaluable.

The following are important steps to consider:

First, the estate representative needs to have someone to oversee the operation of the practice until a purchaser is found.  This usually requires finding a locum tenens (substitute dentist) so the practice can continue to provide treatment for patients until a purchaser is located and can acquire the practice.  Sometimes, this substitute doctor is the same person who will acquire the practice. It may be helpful to enter into an agreement with a dentist pre-death to agree to act as a temporary associate or even to buy the practice. If you have a few colleagues who would be willing to share the duties of the locum tenens, regardless of whether or not they would want to acquire your practice, write their names and contact information in the document you are preparing. The State Dental Association can also serve as a resource in this area. Since calls are received by the estate and/or staff members about the practice, it may be wise to have someone (i.e. practice broker or consultant) who is in touch with a lot of other dentists that could help field the calls as it relates to finding a locum tenens dentist and purchaser.  

Second, have the practice appraised, or an opinion of value established, as soon as possible. The representatives of the estate (i.e. spouse, children, attorneys, etc.) may lack “credibility” in the eyes of any potential buyer unless these individuals specialize in serving the dental profession, so seek an appraisal or opinion of value from a professional with knowledge and experience specifically in dental practice sales.  

Next, with a reasonable asking price established, every effort should be made to access as many available avenues for finding potential buyers as possible, as soon as possible (i.e. study clubs, trade journals, dental associations, practice brokers, supply representatives, etc.).  The estate representative–or whomever the representative has hired to facilitate the sale–needs to expeditiously find an “able and willing” buyer who will pay a fair price for the practice in a timely manner.  The operative phrase here is “fair price for the practice in a timely manner.”  To think about selling a practice immediately after an unfortunate event may seem insensitive and callous.  However, as noted above, the practice value may drop as much as 20 percent the day the doctor passes away, and 5 to 10 percent per week thereafter. Family and staff may not know this. Unfortunately, the estate does not have the luxury of “holding out” for the highest, all-cash offer.  The time element is paramount to preserving the value of the practice. Usually, the first offer will be the best offer.

Lastly, the transaction should be structured so the potential buyer will acquire the practice in a timely manner. Many estates do not act fast enough on selling a practice because emotions are high, and it is difficult for the spouse and/or heirs to concentrate on keeping the practice going and getting it sold. Placing undue trust in a friend or individual who does not specialize in dental practice transitions may be another factor contributing to delay.  Estates generally seek to save money, so they are understandably reluctant to hire a practice broker/transition consultant. They may perceive that a practice broker will capitalize on the situation by selling the practice below market price in order to generate a commission. While that may be true for some, most are genuinely seeking to do their best for the benefit of the estate.

Hopefully, your spouse and heirs are never faced with this situation, but if they are, you and they will be well served to have reviewed this information and made a plan accordingly.

Planning for the Unexpected

1. Meet with staff and talk about finding a dentist(s) (preferably someone who is 10 miles or more away from the practice) to continue to see patients until a final buyer is located.  When patients call, they should be informed that the office is locating a qualified dentist to assume patient care and their loyalty and patience is appreciated.  Also, convey to patients that they will be contacted in the near future for their next regularly scheduled appointment.

2. Contact your attorney, accountant, and practice transition consultant.  Talk to them about your planning efforts and make sure to note their contact information for your staff and/or estate representatives.

3. Discuss and make note of who will oversee paying bills and collecting the accounts receivable.

4. Instruct your staff, spouse and/or estate representative to have the practice appraised, or an opinion of value established, as soon as possible after your death.

5. Do some research and make notes on how to advertise the sale of the practice – look into a local practice broker, study clubs, dental supply companies, and the state dental association. Share these notes with your staff, spouse, and/or estate representative.

6. Establish a checklist with phone numbers of all insurance companies, suppliers, lab companies, loan companies, credit companies, bank accounts, investment companies, advisors, and passwords, as well as the names of trusted colleagues who could help a spouse or estate representative with critical decision making.