As a dentist, you have a unique opportunity to build wealth not just for yourself, but for your family—both now and for generations to come.
But let’s face it: without a solid plan, wealth can come and go.
The good news? With some straightforward strategies, you can ensure that the legacy you’ve worked so hard to build lasts long after you’re gone.
Let’s dive into five practical generational wealth strategies for dentists to build and pass on to their family.
1) Optimizing the Value of Your Dental Practice
Your dental practice isn’t just your livelihood; it’s a valuable asset that can generate wealth for your family. To get the most out of it, focus on increasing its value over time. Here’s how:
- Cut costs where possible: Look at your biggest expenses. Can you renegotiate supplier contracts or find more cost-effective solutions? Every dollar saved is a dollar in your pocket.
- Upgrade and organize: Invest in tools that make your office run smoother, like modern patient management systems or updated diagnostic equipment. Buyers want a practice that’s efficient and ready to go.
- First impressions matter: Update your office decor, replace outdated equipment, and encourage happy patients to leave positive online reviews. Think of it as curb appeal for your practice.
- Start planning early: Even if selling isn’t on the horizon, keeping your financials clean and organized now can make the process much easier later. A dental-specific CPA can help.
An ideal scenario?
After years of upgrading systems, streamlining processes, and maintaining a stellar online presence, you’re able to sell your practice at a premium, securing funds to support your retirement and set up a trust for your children.
2) Developing a Succession Plan
When it comes to passing down a dental practice, having a dentist in the family makes succession easier, but it’s not a necessity. If your children aren’t dentists, the practice can still build generational wealth. You could sell it to a Dental Service Organization (DSO) or a trusted associate and structure the proceeds through trusts or financial plans, ensuring your children benefit from its value.
Another option is retaining partial ownership, allowing professional managers to run operations while you or your heirs draw income.
If your children are dentists, succession requires thoughtful planning.
Start by gradually integrating them into the practice, from clinical work to leadership roles. Open discussions about timelines, expectations, and financial terms help avoid conflicts. Whether they inherit or purchase the practice, a structured agreement ensures a smooth transition.
In both scenarios, consulting a dental-specific CPA or attorney is key. They can help create strategies to reduce taxes, safeguard your wealth, and preserve the legacy of your practice for the next
3) Planning Your Retirement
A common mistake is relying on the same money for retirement and generational wealth. Treating these as separate goals ensures you don’t shortchange either.
- Save for retirement first: Max out your 401(k), Roth IRA, or SEP IRA contributions to secure your future.
- Build passive income: Rental properties or dividend-paying stocks can provide steady income during retirement without dipping into assets meant for your family.
- Use trusts to protect assets: A trust can ensure that money from selling your practice or life insurance payouts goes to your heirs without extra taxes or complications.
- Simplify as you go: As retirement approaches, trim unnecessary spending to reduce financial pressure.
An ideal strategy might involve using the proceeds from selling your practice to fund both a trust for your heirs and an investment portfolio that generates passive income for your retirement. This way, your retirement is secure, and your family’s future is protected.
4) Consider Estate Planning
Estate planning is about more than avoiding taxes. It’s about making sure your hard-earned wealth goes where you want it to.
- Trusts are your friend: A revocable trust keeps things simple during your lifetime and helps your family avoid probate. An irrevocable trust offers added protection from creditors.
- Life insurance for liquidity: A policy can help cover debts, taxes, or provide an inheritance for your kids. It’s a flexible tool to ensure fairness among heirs.
- Plan for the unexpected: Assign power of attorney and create healthcare directives so someone you trust can step in if needed.
An ideal estate plan could include setting up trusts to divide assets fairly among heirs, while also using life insurance to provide liquidity for taxes or final expenses. This ensures your family can avoid unnecessary stress during a difficult time.
5) Hiring a Wealth Planner
Managing your investments, taxes, and estate planning can feel like a full-time job. A wealth planner takes that off your plate by helping you:
- Build a solid financial plan.
- Reduce taxes.
- Align your assets with your long-term goals.
Yes, there’s a fee, but the peace of mind and financial clarity they provide is often well worth it. Plus, they can uncover opportunities you might miss on your own.
An ideal scenario?
Working with a firm like Core Advisors who handles your dental practice accounting & finances as well as your personal financial planning & investments.
At Core Advisors, we’re different from other dental accounting firms because we handle it all under one roof. Our team includes both CPAs and Certified Financial Planners who specialize in working with dentists. This means your dental practice’s accounting and your personal financial planning are seamlessly integrated.
A firm like ours can help you restructure your investments, save on taxes, and set up a clear roadmap for transferring wealth, all in one team.
This will allow you to focus on your practice while knowing your financial legacy is secure.
Get Help Building Generational Wealth As a Dentist
Building generational wealth isn’t just about money. It’s about creating a legacy that your family can benefit from for years to come.
Start by taking small, actionable steps today to secure your future and theirs.
If you’re ready to get serious about your financial legacy, we’re here to help.
Schedule a discovery call with us, and let’s create a plan that reflects your vision for the future.
Together, we’ll make sure your hard work leaves a lasting impact.
Until next time!
