How doctors can build generational wealth—and why it makes sense

By Naveed Saleh, MD, MS | Fact-checked by Barbara Bekiesz
Published September 9, 2022

Key Takeaways

  • Physicians typically can’t leave children their medical practices, but there are other assets they can bequeath that can generate generational wealth.

  • Building generational wealth begins with financial literacy.

  • Additional tips to creating generational wealth include setting up trusts, investing in stock, and saving for college.

While other business owners can leave their family business to their children, physicians have a hard time doing so due to logistical considerations such as licensing or being in a group practice. It’s better to sell the practice and add the proceeds to your estate, according to experts.[]

There are, however, other ways that physicians can build generational wealth (defined as wealth passed down to children or grandchildren).

Here are some useful tips for physicians intent on leaving something for their loved ones.

Financial literacy

Educate yourself about financial matters. You should be aware of how you’ve invested your money. Without a proper understanding of investment vehicles, wealth won’t sustain from one generation to the next.[] It’s also important to educate your kids regarding financial literacy so they will understand how to invest from an early age.[]

Buy real estate

Real estate is an excellent way to build generational wealth, as it usually appreciates over time. It can also provide an opportunity to generate cash flow while you own it through rentals.


Before investing in the stock market, ascertain your net worth, which equals assets minus liabilities. Once you know the amount of money you have to work with, you can start investing in low-cost index funds to begin with and diversify from there, according to the experts. Of course, maximizing your 401(k) retirement account is a great way to leverage the market’s potential.

The stock market should be viewed as a long-term, passive investment that helps protect you and your family against inflation, because its volatility and unpredictability can present immediate risks.

A financial planner can help professionals like yourself make sound investment decisions.

Purchase life insurance

Life insurance is a necessity when passing down wealth. It also relieves the financial stress that can occur in the wake of death. It’s hard enough for children and other family members to deal with the grief that comes with death, never mind financial concerns. Life insurance can make this transition easier for your loved ones.

Invest in your child’s education

Investing in your child’s education will enable them to earn a living and support themselves after your death.

A 529 Savings Plan is the best way to save for your child’s education. These plans are funded with after-tax contributions, and aren’t taxed on asset appreciation if their funds are used for education. Although these assets aren’t formally considered part of your financial holdings, you will still retain control of them when planning your estate.[]

Set up a trust

Trusts reduce the tax burden for your heirs and allow for assets to be sheltered from creditors in addition to tort-reform protections.

Family-limited partnerships are popular among physicians and serve as an alternative to trusts.

These partnerships allow for a discounted valuation of assets contributed, which can help with gifting additional funds to a beneficiary without need to file a gift tax return.

It’s important to specify account beneficiaries for each account. This step may save your heirs a lot of effort. Estate attorneys can help with establishing trusts, naming beneficiaries, and so forth.

What this means for you

Building generational wealth for your loved ones requires planning and foresight. As with any investment, time is of the essence. When planning out your finances, it may be a good idea to use a financial planner and estate attorney.

Read Next: 5 improvements doctors can make to their financial portfolios
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