Dividing a Medical Practice in Divorce

At the conclusion of a divorce, a judge will make an equitable division of the spouse’s marital property and marital debt. Equitable does not always mean equal, but it often does. Assets acquired during the marriage are almost always marital assets, meaning that each party will receive his or her equitable share. This is true even in the case where on parent did not directly contribute to that asset, such as when a court divides a spouse’s pension or 401(k). This will also hold true in dividing family businesses, such as a small medical practice. Dividing businesses can be difficult, and there are specific issues to be aware of when attempting to divide a small medical practice during a divorce.

The first step in trying to reach an equitable distribution of the value of a medical practice is to obtain an expert opinion on the practice’s value. Unlike a car or an investment account, a medical practice is difficult to place an exact dollar amount on. The reason for this is that medical practices often have complicated equipment on a payment plan or on a lease. Moreover, a large part of what makes up a medical practices value is “good will” in the community. This refers to the value of the practice’s brand recognition, good relations in the community, and name recognition, for example. These are not assets that can be bought or sold, but they are nevertheless invaluable. That goodwill is often attached not to the brick and mortar part of the practice, but rather to the physician. The expert will also examine the practice’s assets (both hard and liquid), debts, and accounts receivable when making a valuation. All of these components together will result in the appropriate valuation.

Once a proper value had been set, it usually makes the most sense for the physician to retain the practice and pay the other spouse his or her equitable share of the asset. The reason this makes the most sense is that awarding a practice to a non-physician spouse would make little to no sense, and forcing the sale could result in a loss of future income for no good reason. The physician could retain the practice and the intangible good will that has been built in the community while still providing the other spouse with his or her fair share.

Division of marital assets requires a skilled attorney, especially with large assets such as a medical practice. many clients with these types of issues. Call us today at (732) 529-6937 to talk about your marital assets.