Estate planning for dentists is fundamentally different from estate planning for other business owners because the dental practice — typically the single largest asset representing 40% to 60% of total net worth — cannot be inherited by a non-dentist family member. Unlike a retail business or investment portfolio that can pass directly to heirs, a dental practice requires a licensed dentist to operate it. Without a comprehensive estate plan, the practice enters a rapid deterioration cycle: patients leave, staff resign, equipment depreciates, and the goodwill that took decades to build evaporates within weeks. The result is a forced sale at 30% to 50% below fair market value, combined with maximum tax on the deemed disposition at death.
The financial consequences of inadequate estate planning for a dentist are severe. At death, the Canada Revenue Agency treats all assets as disposed of at fair market value. For a dentist with a DPC worth $2.5 million, this triggers a deemed capital gain of approximately $2 million (after adjusted cost base), resulting in a tax liability of approximately $500,000 to $700,000 — due within six months of death. Without liquidity planning (corporate-owned life insurance, for example), the estate may need to sell the practice at a discount to fund this tax bill, compounding the loss. A properly structured estate plan eliminates this scenario entirely.
At SG Wealth Management, we build estate plans for dentists that integrate corporate structure, life insurance, buy-sell agreements, and tax planning into a unified strategy that protects your family, preserves your practice value, and minimizes the tax burden on transition — whether that transition happens at retirement, disability, or death.
The estate freeze is the cornerstone strategy for dentists with growing practice values. The mechanism is straightforward: you exchange your existing common shares (which have appreciated in value) for fixed-value preferred shares, and new common shares are issued to the next generation or a family trust at nominal value. All future growth in the corporation accrues to the new common shares — meaning your estate's tax liability is frozen at today's value regardless of how much the practice grows before your death or retirement.
Consider a dentist whose DPC is currently worth $2 million. Without an estate freeze, if the practice grows to $4 million by the time of death (through retained earnings, goodwill appreciation, and corporate investments), the deemed disposition at death triggers tax on $4 million of value. With an estate freeze implemented today, the dentist's preferred shares are locked at $2 million, and the $2 million of future growth accrues to shares held by a family trust or adult children. The tax saving on the redirected growth — at a combined federal and provincial capital gains rate of approximately 27% — is $540,000. If the Lifetime Capital Gains Exemption ($1,016,836 in 2024) can be applied to the frozen shares, the total tax saving approaches $800,000 to $1 million.
The timing of an estate freeze is critical. Implementing it too early (when the practice is still growing rapidly and the dentist needs flexibility) can create complications. Implementing it too late (when the value has already peaked) misses the opportunity to redirect growth. The optimal window is typically mid-career — when the practice is established, the value is significant but still growing, and the dentist has 10 to 20 years before planned retirement. Your financial advisor should model the freeze timing against your retirement timeline and projected practice growth to identify the optimal implementation year.
In Ontario, British Columbia, and several other provinces, dentists should maintain two separate wills: a Primary Will covering assets that require probate (real estate, bank accounts, registered investments such as RRSPs and TFSAs), and a Secondary Will covering DPC shares and other corporate assets that do not require probate for transfer. The Secondary Will bypasses the probate process entirely for corporate shares, saving the Estate Administration Tax (1.5% in Ontario) on the full value of the DPC.
For a dentist whose DPC is worth $3 million, the probate savings from a Secondary Will are $45,000 — a significant amount saved by a relatively simple legal structure. The Secondary Will also appoints a separate estate trustee who can act immediately upon death to manage the corporate assets, authorize practice operations to continue under a locum dentist, and begin the orderly transition process without waiting for the Primary Will to clear probate (which can take 6 to 18 months in Ontario).
The Secondary Will must be carefully drafted to avoid inadvertently revoking the Primary Will, and the two documents must work together seamlessly. The corporate articles of the DPC should include provisions allowing share transfer without requiring probate — a detail that many standard incorporation documents omit. This is why estate planning for dentists requires coordination between your estate lawyer, corporate lawyer, accountant, and financial advisor — each professional handles a different piece of the same integrated strategy.
Corporate-owned life insurance is the liquidity engine that makes the entire estate plan function. When the DPC owns a permanent life insurance policy on the dentist, the death benefit is received tax-free by the corporation. The amount of the death benefit exceeding the policy's adjusted cost basis creates a credit to the Capital Dividend Account (CDA) — a notional account that tracks amounts the corporation can distribute to shareholders as tax-free capital dividends. This mechanism allows the estate to extract potentially millions of dollars from the corporation without triggering any personal income tax.
The practical application is powerful: a dentist purchases a $3 million permanent life insurance policy owned by the DPC. The annual premium of approximately $25,000 to $40,000 is paid with corporate after-tax dollars (taxed at approximately 12%, meaning the pre-tax cost is approximately $28,000 to $45,000). At death, the $3 million death benefit flows to the corporation tax-free, creating approximately $2.7 million in CDA room (death benefit minus adjusted cost basis). This $2.7 million can be distributed to the estate as a tax-free capital dividend — providing immediate liquidity to fund the tax liability on the deemed disposition of DPC shares, equalize the estate among beneficiaries, or fund a buy-sell agreement with a purchasing dentist.
The alternative — purchasing life insurance personally — requires after-tax personal dollars (taxed at approximately 50%), meaning the same $25,000 premium costs approximately $50,000 in pre-tax income. Over a 25-year premium-paying period, the corporate ownership structure saves approximately $300,000 to $500,000 in the cost of funding the insurance. Additionally, the death benefit received personally does not create CDA room and cannot be used to extract other corporate value tax-free. For dentists with significant corporate retained earnings, the CDA mechanism is often the most tax-efficient way to transfer wealth to the next generation. This integrates directly with your life insurance strategy and overall tax planning.
Estate planning is not only about death — incapacity planning is equally critical for dentists. A sudden stroke, accident, or cognitive decline can leave the practice without a decision-maker, staff without direction, and patients without care. Two Powers of Attorney are essential: a Power of Attorney for Property (authorizing someone to manage financial and business decisions) and a Power of Attorney for Personal Care (authorizing someone to make health and personal decisions). For dentists, the Property POA must specifically address corporate authority — the ability to manage DPC operations, sign cheques, authorize locum arrangements, and make decisions about practice continuity.
The practice continuity plan should be a written document (separate from the will and POA) that provides immediate operational guidance: which locum dentist or associate has agreed to cover patient care; how staff should be informed and retained; which accounts payable must be maintained to keep the practice operational; how to access banking, insurance, and supplier accounts; and the timeline for deciding whether to seek a permanent replacement or sell the practice. This document should be reviewed annually and shared with the designated attorney, practice manager, and financial advisor.
The provincial dental regulatory body must also be notified of incapacity — and each province has different rules about how long a practice can operate under a locum arrangement before requiring a permanent licensed dentist. In Ontario, the RCDSO requires notification within a reasonable time and may impose conditions on continued operation. Planning for this regulatory requirement in advance — including pre-identifying a locum dentist and having a signed agreement in place — prevents the regulatory body from forcing practice closure during the most vulnerable period.
The Lifetime Capital Gains Exemption (LCGE) — $1,016,836 in 2024 and indexed annually to inflation — is available on the disposition of Qualified Small Business Corporation (QSBC) shares. For dentists selling their practice through a share sale (rather than an asset sale), the LCGE can shelter up to $508,000 of capital gains from tax entirely (50% inclusion rate applied to the exemption amount). At a combined marginal rate of approximately 27% on taxable capital gains, this represents a tax saving of approximately $137,000 per individual — and if both spouses hold shares (through proper planning), the combined saving doubles to approximately $274,000.
However, qualifying for the LCGE requires meeting strict conditions: the shares must be of a Canadian-Controlled Private Corporation (CCPC); at least 90% of the corporation's assets must be used in active business at the time of sale; throughout the 24 months preceding the sale, more than 50% of assets must have been used in active business; and the shares must have been held by the seller (or a related person) throughout the 24 months preceding the sale. The 90% active business asset test is where many dentists fail — because corporate investment portfolios (retained earnings invested in stocks, bonds, or GICs) are passive assets that count against the 90% threshold.
This creates a planning tension: retaining earnings inside the DPC for tax deferral (the primary benefit of incorporation) builds passive investment assets that can disqualify the shares from LCGE eligibility. The solution is a "purification" strategy implemented 24 months before the planned sale: passive investments are either distributed as dividends (triggering personal tax), transferred to a holding company, or used to pay down debt or purchase active business assets. This purification must be planned well in advance of the sale — ideally as part of the overall retirement planning timeline. Your advisor should model the LCGE qualification annually to ensure you maintain eligibility throughout the transition period.
Corporate-owned life insurance strategies that fund buy-sell agreements, create CDA room, and provide estate liquidity at the lowest after-tax cost.
Explore Life InsuranceLegally binding agreements that ensure your practice transfers at fair value with pre-arranged funding — protecting both your family and your partners.
Explore Buy-Sell AgreementsDPC structure design with estate planning integration — share classes, family trusts, and corporate articles that support long-term succession.
Explore IncorporationMinimizing the tax burden on estate transition through LCGE qualification, CDA utilization, and strategic asset purification before practice sale.
Explore Tax PlanningDentists face unique challenges because their primary asset — the dental practice — is illiquid, requires professional licensing to operate, and cannot be inherited by a non-dentist family member. The practice value depends on active patient relationships and professional goodwill that deteriorates rapidly without a licensed dentist in place. The DPC structure adds corporate succession complexity that does not apply to other business owners.
An estate freeze locks the current value of your DPC shares and redirects all future growth to new shares held by the next generation or a family trust. The optimal window is mid-career when the practice is established and still growing. For a DPC worth $2 million today that grows to $4 million, the freeze saves tax on $2 million of growth — approximately $540,000 in capital gains tax.
Yes. A Primary Will covers assets requiring probate (real estate, bank accounts) and a Secondary Will covers DPC shares that do not require probate. For a DPC worth $3 million in Ontario, this saves $45,000 in Estate Administration Tax and allows the corporate estate trustee to act immediately without waiting for probate.
The death benefit is received tax-free by the DPC and creates Capital Dividend Account room, allowing tax-free extraction of corporate value. A $3 million policy creates approximately $2.7 million in CDA room — providing immediate liquidity to fund tax liabilities, equalize the estate, or fund buy-sell agreements, all without triggering personal income tax.
The practice enters rapid deterioration: patients leave, staff resign, and goodwill evaporates within weeks. The estate faces a deemed disposition at maximum tax rates with no planning to mitigate it. The practice typically sells at 30% to 50% below fair market value due to forced timing, and the family has no control over the process.
Your dental practice represents decades of dedication. A comprehensive estate plan ensures that value transfers to your family — not to the CRA. Let us design the strategy that protects your legacy, provides for your loved ones, and preserves the practice you built.
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