Think You’re Done Once You’ve Sold Your Practice? Not So Fast!
You’ve recently sold your dental practice – Congratulations! You’re ready to start the next chapter of life after what was likely a long and stressful sales process. However, before you take off on a year-long cruise around the world, be sure to tie up these important financial loose ends.
#1 – Make a plan for the sale proceeds.
The first step following the sale of your business should be to incorporate your assets into your overall financial plan. Your wealth manager will help you make decisions regarding the long-term management of your sale proceeds and retirement assets.
You’ll want to invest in a diversified mix of low-cost, tax-efficient assets that complement your overall portfolio and put you on track toward achieving your long-term goals.
#2 – Establish an income stream.
Following the sale of your dental practice, you will need to transition from having a salary and profits to living off your investments and other assets. Your wealth manager will work with you to establish a tax-efficient monthly income stream to cover your living expenses.
#3 – Understand potential tax consequences.
There are unique and complex tax considerations to take into account when you sell a dental practice. Because the IRS typically requires an accounting of every individual asset that was sold with the business, you must be able to categorize each asset as one of the following:
- Capital asset
- Inventory
- Real property
- Depreciable property
Some find the idea of learning the difference between IRS Class IV and IRS Class VII assets to be intoxicating. Others find this very same idea makes them wish to become intoxicated. In either instance, hiring a qualified tax professional can help you minimize your liabilities and find clarity in these murky tax waters.
#4 – Plan for healthcare.
If you sell your practice before reaching age 65, congratulations on achieving early retirement! Unfortunately, your accomplishment likely won’t accelerate your path to becoming eligible for Medicare benefits. This means you need to make a plan for healthcare coverage. Your wealth manager can help you evaluate insurance options and choose a plan that makes sense for your particular situation. He or she can also provide various projections to illustrate how your healthcare costs may impact your retirement cash flow. If you sell your practice within two years of qualifying for Medicare benefits, this evaluation will include the potential impact of an income-related surcharge on your Medicare premiums.
#5 – Revisit your estate plan.
It’s wise to review your estate plan any time you experience a major life event, and selling your dental practice is no exception. Your wealth manager and estate planning attorney can help you review the following designations to determine whether any updates are required.
- Guardian designations for minor children
- Trusts
- Designated trustees
- Healthcare proxies
- Powers of attorney
- Will
#6 – Develop a charitable giving strategy.
After selling their practices, many dentists seek opportunities to give back to the causes that matter most to them. If charitable giving is part of your financial plan, it’s important to have an effective strategy in place. Below are several options that can help maximize your impact while minimizing your taxes.
- A direct gift of cash or appreciated securities
- A donor-advised fund (DAF)
- A family foundation
- A charitable trust
#7 – Find a new dentist
You’re officially off the clock! Yes, patients will still corner you in the grocery store, point to their mandible, and mumble something about needing advice, but you’ll graciously continue to accept this as the sign of respect it has always been. The important thing is that your finances are secured, and it’s finally time to enjoy life and live the retirement of your dreams. You can walk away from your dental practice confident you did all you could to provide for your patients and your family. Just don’t forget to visit your dentist every six months for a checkup.
Need assistance navigating your finances following the sale of your dental practice? Creative Planning Dental is here for you. We support dentists with a team of credentialed, educated, experienced and action-oriented advisors, including Certified Financial Planner™ practitioners, Certified Public Accountants, insurance specialists, attorneys and other professionals dedicated to helping you achieve your goals. For help wrapping up the sale of your practice, or for any other financial matter, schedule a call with a member of our team.
