Assante Wealth Management and practice transition planning for doctors

What changes when the letter of intent arrives?

Practice transition planning becomes real when a hospital system's letter of intent puts a price, payment schedule and employment terms on paper. For a physician or dentist, the first question isn't only what the practice sells for. It's what remains after taxes, debt, lost income, tuition and guarantees.

Hypothetical: Kwame and Colleen, ages 52 and 50, open a hospital system's letter of intent. Kwame owns a three-doctor primary-care practice, and Colleen runs its front office. The offer is $1.2 million: $800,000 at closing and $400,000 over four years, plus a $340,000 salary for Kwame. Their youngest starts college in two years, and they have $1.3 million saved.

Today, Kwame earns $420,000 and Colleen earns $60,000. The letter doesn't hire Colleen. Their household income therefore falls by $420,000 + $60,000 - $340,000 = $140,000 before tax. Assuming roughly 36 percent tax for illustration, the after-tax loss is $140,000 x 0.64 = $89,600, about $90,000 each year.

Suppose about a quarter of the price goes to tax and closing costs. The $1.2 million sale then nets $900,000. The payment math is $600,000 at closing, followed by $300,000 divided by four years, or $75,000 each year for years two through five. The simple break-even calculation is $900,000 divided by $90,000, which equals ten years.

Kwame is 52. If he planned to stop at 65, the income he gives up is $90,000 x 13 years = $1.17 million. That exceeds the $900,000 net sale proceeds, so the salary and reset terms deserve negotiation before the price does. A lower base after year five pulls the break-even earlier.

The table answers one practical question: when does the income given up catch the net sale money?

The paperwork changes what the price means

Price allocation between goodwill and equipment drives the tax line, and the practice-sale tax page covers that question in more detail. Assante Wealth Management also earmarks part of the $600,000 closing cash for college so the $1.3 million already saved can stay focused on retirement. If the family expects need-based aid, they should check which tax year the college's aid forms read, because a sale gain can land in that year.

The first thing we read is the salary reset clause after the initial contract term. An employment agreement can end, but a signed noncompete and a closed asset sale can't simply be reversed. The break-even table frames the trade-off; it doesn't replace a business appraiser, CPA or healthcare attorney. It also leaves out investment growth, hospital benefits and the overhead risk the sale removes. Investments can lose value, so the proceeds may be worth less than invested.

Do I need this if a sale is still years off?

A doctor with no offer, no interested buyer and no exit date usually doesn't need paid practice transition planning yet. Keep two clean years of practice financials, read the office lease and every loan for a personal guarantee, and check that the practice 401(k)'s annual filings are current. Those steps cost time, not a planning engagement, and they give you usable facts when a buyer appears.

Guarantees and plan paperwork outlive the closing

Assigning the office lease to a buyer without a landlord's signed release leaves the doctor's personal guarantee attached after the practice is gone. In Kwame's case, $8,000 each month x 48 months = $384,000 still backed by him. Fixing that after closing means asking the landlord for a release when the seller no longer has anything the landlord or buyer needs.

Leaving the practice 401(k) open after an asset sale creates a shell entity that still owes annual filings. Late-filing penalties can accumulate by the day. Before closing, decide whether to terminate the plan. Then, where appropriate, roll Kwame's and Colleen's balances into the hospital's plan or an IRA. Each account closed is one less line on the one-page plan the family has to follow.

Signing the noncompete before reading the salary reset clause can lock in a lower base after the first term and remove the option of reopening nearby. Spending the gross price creates a different shortfall: earmarking $1.2 million for tuition and retirement when about $900,000 nets leaves a $300,000 hole.

Assante Wealth Management asks which promises can still be changed before a signature. A lease release, plan termination decision and salary reset deserve attention while the buyer still needs the seller's agreement.

Can an advisor answer these before we sign?

Yes. A useful practice transition planning conversation should answer who models the after-tax proceeds, who handles the personal guarantee question, what happens to the practice 401(k), and when you see every cost on paper before agreeing to work together. Assante Wealth Management does not replace the CPA, business appraiser or healthcare attorney; each professional should own the part requiring that license or specialty.

• Who models after-tax proceeds with our CPA
• How you handle personal guarantees at closing
• What happens to the practice 401(k)
• How your full cost appears on paper before we agree

Your first pass, then Assante Wealth Management

You can assemble the core file alone: the letter of intent, draft employment agreement, office lease, loan paperwork, two years of practice profit and loss statements, the 401(k) plan's latest annual filing and a list of every personal guarantee. Ask the CPA for an after-tax proceeds estimate.

Call Assante Wealth Management once the offer has a price and an employment draft, before the purchase agreement is signed. The firm reworks the one-page plan four times: when the letter of intent arrives, on the draft purchase agreement, at closing, and then yearly through the employment term. A salary reset notice, a health change for either spouse, a tax law change or a hospital request to renegotiate each triggers an extra review.

After each review, you leave with a revised one-page plan simple enough that your spouse or adult children could follow it. Assante Wealth Management keeps the structure small, with few accounts and few funds. That page shows net proceeds, tuition money and how retirement catch-up continues on the hospital salary. Meetings take place remotely by video conference or telephone. Assante Wealth Management requires at least $500,000 in investable assets.

This service is not a substitute for legal, tax or valuation work. It may also be premature when no buyer, offer or exit date exists. Once those facts arrive, though, the cost of waiting can be measured in a salary clause, a lease guarantee or a missed chance to negotiate.