Estate Planning for Dentists in California

For most practice-owning dentists, the office you built, its patient charts, its equipment, and its reputation in the community, represents the single largest asset on your personal balance sheet, often larger than your home or your retirement account. It is also one of the most fragile assets in an estate: without an active dentist and a transition plan, goodwill can evaporate within months. Your estate plan has to treat the practice as the significant asset it is, not as an afterthought behind your will.

Why Dentists Need Profession-Specific Planning

Three factors make dental estate planning different from a generic plan. First, the practice is often the largest asset, and its value is inseparable from active patient relationships and a functioning clinical operation. Second, equipment loans, whether for a CBCT scanner, chairs, or a full buildout, create real debt exposure that interacts with your estate in ways a standard will does not address. Third, associate and partner transitions, along with a growing number of DSO (dental support organization) affiliations, add layers of contractual complexity that a generic estate plan was never built to handle.

If you are affiliated with a DSO, whether through a full sale, a partial equity arrangement, or a management services agreement, your estate plan needs to account for what your ownership interest actually is: an equity stake, a stream of deferred payments, or a management fee arrangement, each of which passes differently at death and requires different planning.

Professional Corporation and Entity Requirements

Dental practice in California is governed by the Dental Practice Act, Bus. & Prof. Code § 1600 et seq., which sets licensure and practice-ownership rules for dentists. As with physicians and chiropractors, dentists who incorporate must generally do so as a professional corporation under Corp. Code § 13401, and share ownership is restricted to licensed dentists under Corp. Code § 13406, which requires shares to be sold or transferred, typically within a defined window, following a shareholder’s death or disqualification.

DSO arrangements complicate this picture further. In many DSO structures, the dentist retains ownership of the professional corporation (to satisfy the corporate practice of dentistry restrictions), while a separate management company owns the non-clinical assets and provides administrative services under a management services agreement. Your estate plan needs to distinguish between these two entities: your PC shares are subject to the same licensed-ownership restriction as any other dental PC, while your interest in the management company, if you hold one, may be freely transferable and should be specifically addressed in your trust.

Revocable Living Trust for Dental Practices

A funded revocable living trust avoids probate for the assets you place into it: your home, other real estate, and non-PC investment accounts. Real estate is a particularly important category for dentists, since many practice owners hold their office building separately from the practice entity, often in an LLC, specifically to separate real estate from practice liability and to create a cleaner sale structure when the time comes to transition the practice.

As with any professional corporation, your PC shares are not simply retitled into the trust; instead, your trust and your shareholder or buy-sell agreement work together so that the shares are sold or transferred according to your corporate documents, and the resulting value reaches your family through the trust. A pour-over will catches anything left outside the trust.

Dental Practice Valuation

Dental practices are valued through a combination of methods, but goodwill consistently makes up the largest share, typically 65% to 75% of total practice value, reflecting patient loyalty, location, and reputation built over years of practice. Equipment is valued on a depreciation-adjusted or replacement-cost basis, and its value can shift quickly as clinical technology changes. Patient charts have real transactional value, particularly for a buyer continuing the existing patient relationships, though their value depends heavily on chart quality, recall compliance, and the mix of active versus inactive patients.

Specialty practices, such as orthodontics, oral surgery, and periodontics, often command different multiples than general practice due to differences in overhead, recurring revenue patterns, and buyer pools. If you are affiliated with or considering a DSO buyout, understand that DSO valuations frequently apply EBITDA multiples common in private equity transactions, which can differ substantially from traditional practice-sale valuations, and the deal structure (cash at close versus deferred earnouts versus retained equity) materially affects what actually reaches your estate.

Associate Buy-In and Succession Planning

If you plan to bring in an associate as a future partner, structure the buy-in over time with a written agreement specifying valuation methodology, payment terms, and a mentorship or transition period. This protects you if you become unable to practice before the transition completes, and it protects your associate from overpaying for a practice whose goodwill has not yet been proven to transfer.

Fund the transition with insurance where possible, disability and life insurance on both parties, so that a death or disability mid-transition does not leave one side under-compensated or the other suddenly over-obligated. Non-compete provisions specific to dental practice transitions are subject to the same general California rule, Bus. & Prof. Code § 16600, voiding most non-competes outside the narrow exception tied to the sale of business goodwill, so any restrictive covenant in your associate or buy-sell agreement should be drafted with that limitation in mind.

Disability Planning

Dentistry is one of the more physically demanding licensed professions: your hands, back, and eyes are directly career-critical, and a relatively minor injury or repetitive strain condition can end active clinical practice well before retirement age. Own-occupation disability coverage, which pays a benefit if you cannot perform your specific dental specialty even if you could theoretically do other work, is essential, and generic group disability coverage through an employer or association rarely provides adequate replacement income for a practice owner.

Practice overhead insurance is a separate and often overlooked policy type: it covers your fixed practice expenses, rent, staff payroll, equipment loans, while you are disabled and unable to generate revenue, distinct from disability insurance that replaces your personal income. Arrange, in advance, who treats your patients during a recovery period, whether through a covering dentist, a locum arrangement, or a formal associate, so your patient base and your revenue do not disappear while you heal.

Equipment and Debt in the Estate

Dental practices commonly carry SBA loans, equipment financing, and lease obligations, often with personal guarantees attached. A personal guarantee means the debt does not stay with the practice entity alone; it can reach your personal estate if the practice cannot cover the obligation. Understand which of your practice debts carry a personal guarantee, and make sure your estate plan and any buy-sell or succession agreement address who assumes or pays off that debt in a sale, death, or disability scenario.

Debt with a personal guarantee generally becomes a claim against your probate estate if it is not otherwise addressed, which is one more reason a funded trust, paired with adequate insurance to cover outstanding practice debt, matters for a practice-owning dentist more than it would for someone without significant business liabilities.

Tax Planning for Dentists

Established practice-owning dentists commonly earn in the $200,000 to $500,000-plus range, placing most in higher federal marginal brackets where retirement plan strategy and equipment-related deductions carry real weight. A cash balance or defined benefit plan layered on top of a 401(k) can significantly increase tax-deferred contributions in peak years, and Section 179 and bonus depreciation rules allow significant first-year deductions on qualifying equipment purchases, worth coordinating with your CPA around the timing of major purchases.

If you sell your practice outright, understand the difference between the portion of the sale price allocated to goodwill (typically capital gain, taxed at more favorable long-term rates if held over a year) versus amounts allocated to a consulting or non-compete agreement (typically ordinary income). The purchase agreement’s allocation of price among these categories is negotiated, not automatic, and materially affects your after-tax proceeds. With the federal estate exemption at $15,000,000 per person and no California estate tax, most dentists’ planning priority is minimizing income tax on the practice sale itself, not estate tax at death.

Frequently asked questions

Can I leave my practice shares to my spouse if my spouse is not a dentist?
Not directly. Corp. Code § 13406 restricts dental PC share ownership to licensed dentists. Your trust should direct the sale or transfer of shares under your shareholder agreement, with proceeds, not shares, passing to your spouse.

How does a DSO affiliation change my estate plan?
It depends on your structure. If you retain PC ownership with a separate management company interest, each is treated differently at death, one subject to licensed-ownership restrictions, the other potentially freely transferable. Review your specific DSO agreement with your attorney to confirm how each piece passes.

Is my practice’s goodwill really part of my estate?
Yes. Goodwill typically makes up the largest share of a dental practice’s value and is includable in your taxable estate, which is why a succession or buy-sell plan matters as much as your personal will or trust.

What happens to my equipment loans if I die before they are paid off?
If you personally guaranteed the debt, it generally becomes a claim against your estate. Life insurance sized to cover outstanding guaranteed debt, coordinated with your buy-sell agreement, prevents this from forcing a rushed sale of the practice.

Do I need a separate entity for my office building?
Many dentists hold their office real estate in a separate LLC, apart from the practice PC, to insulate the real estate from practice liability and simplify a future sale. This should be coordinated with your overall trust and estate plan.

Figures verified July 2026.

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