What you should know if your divorce involves a medical practice

When doctors who are in private practice divorce, that practice usually has to be handled differently than many other types of businesses would be. A person who isn't a doctor usually can't own a medical practice. Therefore, if the physician's spouse isn't also a doctor, he or she can't get part ownership of the practice in the divorce.

If the nonphysician spouse is getting a share of the practice, therefore, it has to be a financial settlement only. That means the value of the medical practice has to be determined, just as the value of any other asset would be.

Your family law attorney will likely recommend that a forensic accountant with experience in this area be brought in to determine the practice's value. That accountant will look at both tangible assets (like furniture and equipment) and intangible ones, such as goodwill. They will also look at liabilities.

Each spouse should have his or her own accountant, who may end up with different findings. This could lead to a court battle.

The division of a spouse's ownership in a medical practice requires consideration of a number of factors, including:

  1. Whether it was established before or after the couple wed
  2. How the purchase of the practice was funded
  3. Whether the spouse who is an owner has a buy/sell agreement
  4. How much income the doctor has been receiving from the practice (and whether the doctor was getting the appropriate amount as opposed to minimize his or her income in anticipation of divorce)

Most doctors own their practices in partnership with at least one other physician. When that is the case, the partners may have an agreement that they are required to forfeit their share of the practice if they divorce. They may also be required to notify their partners if they believe that a divorce is in their future.

Whether you are a physician with a practice or your spouse is, and if you are considering divorce, it's essential to seek legal and financial advice from people experienced in handling divorces involving a medical practice. The right guidance can help you get what you deserve and avoid legal issues down the line.

Source: MD Magazine, "Most Critical Financial Step in Physician Divorce: Evaluating the Practice," Douglas R. York, Nov. 15, 2017

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