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Doctors Selling Medical Practices Able to Capitalize on Remarkable Tax Deduction Strategy

SmallCaps Daily April 22, 2023

207 2 minutes read

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Scottsdale, AZ – (NewMediaWire) – April 21, 2023 – The health sector in America is witnessing a rise in consolidation across all areas. With an increasing number of medical practices merging into larger medical groups or hospitals, physicians face a complicated dilemma:

What is the best way to sell the practice to maximize financial gains, maintain wealth and leave behind a lasting legacy?

There may be no easy answer; however, great advice is available. The overriding guidance is to find support from an advisor and tax attorney with the skill, expertise, and drive to achieve your goals.

“My number one recommendation for physicians looking to sell their practice is to speak with a private wealth advisor early on,” said Tanya Smith, a former M&A attorney and a private wealth advisor at Goldman Sachs. “Find an advisor who will roll up their sleeves to walk you through every step of the transaction (e.g., deciding who you want to sell to, structuring the deal in a tax-efficient manner, and helping you with exit planning).”

One such tax-advantaged strategy, known as an “Optimized Charitable Lead Annuity Trust” (OCLAT), can save physicians up to 30% of taxes from selling their medical practice while preserving and protecting wealth, continuing their legacy, and funding charitable causes.

Senior Estate & Tax Planning Attorney Jonathon Morrison, JD, who has guided over 150 of these transactions and been involved in 500 CLAT deals, says the OCLAT is the “ideal strategy for physicians looking to sell their medical practice. OCLATs generate a massive tax deduction on the sale of their practice, allow for donations to their favorite medical foundations, grow their assets 2-5 times the amount of the initial contribution, and allow the money to be passed to their heirs without income or estate taxes. Time and again, I work with doctors who have those goals in mind for the sale of their practice: the OCLAT has been tailor-made to truly optimize the transaction.”

This strategy provides a tax-efficient way for physicians to build a meaningful and philanthropic legacy, maintain a nest egg, and ensure their family’s financial security over the longer term. OCLATs perform so well that some physicians opt to execute them even without selling their practice. Physicians looking for additional income tax options can consider OCLATs to divert tax dollars to medical foundations and health nonprofits.

As the 2022 tax deadline passes, many individuals and partners selling their practice in 2023 are making the type of far-ranging decisions that will impact not only the remainder of their lives but also the next generation of their family. The right guidance and support must be sourced so that the right path can be taken.

Kimberly Foss, CFP, CPWA CEO of Empyrion Wealth Management, sums it up: “It’s important to explore all types of structures in connection to selling your business; whether it be in the traditional manner, an installment sale, or converting your service corporation to a C Corp. and donating those shares to a charitable remainder unitrust (CRUT), to avoid long-term capital gains. Irrespective of the structure, it’s critical that your financial team does an in-depth analysis to maximize return and minimize taxes for the transition of your practice.”