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Evaluating the medical practice during a divorce

On Behalf of | Jun 12, 2022 | Family Law |

There are many financial issues when getting a divorce, but physicians have an extra major asset. The value of their practice as a financial asset is an important issue in Texas. Many doctors belong to a group or partnership practice, but there are specific questions that can start an evaluation.

Key questions for an evaluation

There are key questions an expert would ask to start the evaluation of a physician’s practice:

  • What type of entity is the practice?
  • Was the practice established before or after marriage?
  • How was the practice funded?
  • Do the participants have stocks with options to buy or sell?
  • Is there future vesting of ownership or stocks after a finalized divorce?

A high-asset divorce is stressful, but divorce with a physician’s practice is more complex. The evaluated assets around the practice greatly affect its value. Tangible and financial assets include office equipment, accounts receivable, furniture and the office lease. Liabilities include taxes due, insurance costs, loans and retirement plan contributions. Experts consider intangible assets or goodwill.

How a physician divides assets during divorce

An accountant should make sure that the divorcing partner gets their fair share of the practice’s income. The income is usually split evenly between the divorcing couple. Misrepresenting the income of the practice can be considered fraud. The physician needs to notify their partners of the upcoming divorce. Many jurisdictions don’t allow a non-physician to own a medical practice or employ a physician. A spouse that isn’t a physician can’t take over a share of the medical practice after a divorce. Both parties should come to a settlement based on the value of the practice.

Many times evaluating a medical practice comes down to a war between experts. The experts of both parties will evaluate the medical practice differently. Everyone should understand the experience or credentials of forensic accountants who accurately value the practice. Properly evaluating a physician’s medical practice is the most significant financial event during a divorce.