Estate Planning for Dentists: Protecting Your Practice and Family

A dental practice worth $1.5M is the largest asset on most dentists' balance sheets. It is also an asset that cannot be inherited the way a brokerage account can — it requires licensed practitioners, trained staff, and established patient relationships to have any value at all. Without a plan, that $1.5M can evaporate inside 60 days after a death or serious disability.

Most dentists have disability insurance and homeowners insurance. Far fewer have a written succession plan or a funded buy-sell agreement. This guide covers what a solid dental practice estate plan looks like and why it matters at every career stage, not just as you approach retirement.

What happens to the practice if you can't practice anymore

The three most common outcomes, from worst to best:

The difference between the first and second outcomes is almost entirely preparation: a relief associate relationship in place, patient records and systems documented for someone else to step in, and a broker engaged before you need one.

Buy-sell agreements: the foundation for practice partners

If you own your practice with one or more partners, a buy-sell agreement is non-negotiable. It specifies what happens to each partner's ownership interest if they die, become permanently disabled, voluntarily exit, retire, or are involved in a divorce or bankruptcy. Without one, you may find yourself involuntarily in business with your partner's spouse or heirs.

Two structures, different tax outcomes

Cross-purchase agreement: Each partner buys life insurance on the other and owns the policy. On a triggering event, the surviving partner uses the death benefit to purchase the deceased partner's interest directly. Key advantage: the surviving partner receives a stepped-up cost basis in the purchased interest — important when the practice is eventually sold, as it reduces the taxable gain.

Entity redemption agreement: The practice entity (PLLC, LLC, or PC) buys insurance on each partner and owns the policies. On a triggering event, the entity redeems the departing partner's interest. Simpler to administer with more than two partners, but surviving partners do not receive a stepped-up basis, which creates a larger capital gain exposure on a future practice sale.

Many practices use a wait-and-see hybrid: the entity has the first right to redeem; if it declines, individual partners may cross-purchase. This preserves flexibility to choose the more tax-advantaged structure at the actual time of the event.

The disability trigger: the overlooked piece

Death is not the most common buyout trigger for dentists. Given the profession's dependence on fine motor skill and hand function, permanent disability may be more likely to end a career than death. A buy-sell agreement should include a disability trigger — typically defined as the inability to perform the material duties of a dentist for 12–24 consecutive months.

Disability buy-sell insurance is a separate product from ordinary disability income coverage. It pays a lump sum or installment amount to fund a partner buyout on disability. The waiting period (elimination period) is typically set to match the disability trigger definition in the agreement, usually 12 or 24 months.

If you're a solo dentist with no partners

A solo dentist has no automatic buyer. Options:

• Build toward an associate buy-in. Hire an associate with an explicit ownership track. The future succession is built into the working relationship from day one, giving you the most control over timing, valuation, and structure — and the most favorable tax treatment of the eventual sale.
• Pre-identify a dental group or DSO as a backup buyer. DSO consolidation has made many practices more saleable than they were a decade ago. Understanding what a DSO would pay — and under what structure — before you need them is valuable optionality.
• Engage a broker before you need one. The 60-day window after a sudden death or disability is not enough time to run a proper sale process. A broker with an established relationship and emergency coverage protocol already in place can compress the timeline significantly.
• Your personal disability income policy is part of this plan. For a disability scenario, a well-structured own-specialty disability income policy provides a monthly income stream while a sale is being arranged. It does not solve the practice continuity problem, but it addresses the personal income problem during the process.

Estate tax in 2026: the OBBBA effect

The One Big Beautiful Bill Act (enacted July 2025) permanently set the federal estate and gift tax exemption at $15 million per person, up from the $13.6M 2025 exemption that had been scheduled to sunset to approximately $7M in 2026. For married couples using a portability election, the combined exemption is $30 million.¹

In practice: a dentist with a $2.5M practice, $1.5M in retirement accounts, a $700K home, and $400K in taxable investments has a $5.1M estate — well below the $15M federal threshold. Federal estate tax is simply not a planning concern for most dentists in 2026.

State estate taxes are a different matter. Several states impose their own estate tax with exemptions far below the federal threshold. Oregon taxes estates above $1 million. Massachusetts taxes estates above $2 million. Washington imposes its estate tax above $3 million (as of July 2026).² A $5M estate in Oregon could generate $300,000 or more in state estate tax alone. For dentists in these states, planning tools like irrevocable trusts, charitable deductions, and careful portability elections remain important.

Annual gifting as an estate reduction tool

Even below the federal threshold, systematic gifting is a straightforward planning strategy. You can give up to $19,000 per recipient in 2026 without using any lifetime exemption.¹ A married couple can give $38,000 per recipient. For a practice owner with three adult children and two grandchildren, that is $190,000 per year moving out of the estate entirely — without gift tax, without return filing, and without touching the $15M lifetime exemption.

Life insurance in the dental estate plan

Life insurance serves three distinct purposes, and conflating them leads to under-insuring some needs and over-insuring others:

1. Fund the buy-sell agreement. Coverage equals the agreed buyout price. Owned by the entity or by partners depending on the buy-sell structure. This is almost always term coverage — the need ends at retirement when ownership transitions are complete.
2. Income replacement for your family. If you are the primary earner with dependents, 10–15× your income is the conventional target. A dentist earning $400K/year would carry $4–6M in death benefit. Term coverage for a dentist in their 40s in good health is more affordable than most expect; the premium is substantially lower the earlier you purchase it.
3. Estate liquidity. If your estate is large and illiquid — practice, real estate, concentrated retirement accounts — life insurance provides cash for estate taxes, administration costs, and any forced sale scenarios. This use case favors permanent insurance owned by an irrevocable life insurance trust (ILIT), which removes the death benefit from your taxable estate entirely. The policy is owned by the trust, not by you, so the proceeds pass to beneficiaries estate-tax-free.

Retirement accounts: the most commonly overlooked piece

Your 401(k), IRA, SEP-IRA, and cash balance plan pass to your named beneficiaries on file with the plan custodian — regardless of what your will says. Beneficiary designations are among the highest-leverage documents in an estate plan, and they frequently go out of date after divorces, remarriages, and births.

Spouse as primary beneficiary: The surviving spouse can roll inherited retirement accounts into their own IRA and continue tax-deferred growth over their lifetime, deferring distributions until their own Required Beginning Date. This is almost always the optimal structure for married dentists.

Non-spouse beneficiaries (children, siblings): Under SECURE 2.0 and the final regulations in T.D. 10001 (2024), non-spouse beneficiaries in the "10-year group" who inherit from a decedent who had already reached their Required Beginning Date must take annual RMDs throughout the 10-year drawdown period — not simply empty the account by year 10.³ This accelerates income tax recognition. For a high-earning dentist with a $2M IRA, this could push children into 32–37% marginal rates on inherited distributions. Roth conversions during high-income practice years can significantly reduce this burden.

Roth accounts are estate-planning-friendly. A Roth 401(k) or Roth IRA passed to heirs is still subject to the 10-year rule — but all distributions are income-tax-free. Leaving a Roth account to heirs is effectively a tax-free income stream for a decade.

Trust as beneficiary: Occasionally appropriate for minor children or special-needs dependents where you want to control how funds are distributed. Drafting errors here are costly — an improperly structured trust can collapse the 10-year drawdown to a 5-year rule. This requires an estate attorney who specifically understands retirement account rules.

Business continuity: powers of attorney and day-one operations

A durable financial power of attorney names someone to act on your behalf if you are incapacitated but alive. For a solo practice owner, this document needs to explicitly authorize managing business accounts, signing payroll, and making staffing decisions — otherwise your agent may lack the legal authority to keep the practice operating during a recovery period.

The first 30 days after a sudden incapacity are the most fragile. Practices that survive this window almost always had a trusted office manager or senior associate who knew where accounts were held, could authorize payroll, and could communicate with patients. This needs to be documented in writing — not in your head and not just understood informally.

Building the team that coordinates it all

Estate planning for a practice owner requires multiple professionals working from the same set of facts: an estate attorney to draft the documents, a CPA to model the tax implications of different structures, a dental practice broker to provide valuation input for the buy-sell, and a financial advisor to connect all of it. The financial advisor's role is ensuring the pieces are coherent — that the buy-sell coverage matches the current practice valuation, that retirement account beneficiary designations align with the estate plan, and that life insurance ownership is structured correctly so it accomplishes the intended purpose without creating a new problem.

The best time to build this plan is well before any offer, diagnosis, or emergency. The second-best time is now.