Divorcing a Physician Who Owns a Private Practice
A fairly common question we receive is, what are the effects on my assets if I own a medical practice and decide to get a divorce?
Many doctors and other medical professionals going through the California divorce process have grave concerns about how their divorce can impact their medical practice and retirement, which is why many physicians decide to obtain a prenuptial or postnuptial agreement.
Getting divorced is usually difficult for most families, but physicians are under additional stress when they own their high-asset professional practice.
When kids are involved, most divorcing parents are primarily concerned with what is in the best interest of their children and how they can maintain their current lifestyle and standard of living.
Any doctors who own a medical practice must make wise and informed decisions to ensure their families and practices are protected. Some of the primary considerations for doctors who own a medical practice are:
- Their spouse's legal entitlement to the assets from their practice,
- How it can be paid without impacting the profitability of their business, and
- The specific level of support owed to any partners in the medical practice.
The spouse could have a legal claim to a share of the assets depending on when the medical practice was created.
However, medical practices are not typically easily converted into cash value, which presents challenges during a divorce as different methods are used in a business valuation. Our California divorce and family law lawyers will thoroughly examine this topic below.
What is “Equitable Distribution” in a Divorce?
A primary factor in the California divorce process involves property. During a divorce, the spouse and the family law court will usually identify and divide the property acquired during the marriage.
In this “equitable distribution,” the court will first characterize all the property owned by the spouses as either marital or non-marital, called community or separate property. Next, the court will determine the property's value and decide how to divide the property.
All this information applies to a medical practice because the business could be subjected to this property division or a primary factor in determining alimony.
However, these issues often involve a complex valuation that may require hiring an expert to value the business. Since the medical practice is not to be split equally, these cases usually entail developing creative solutions to compensate a spouse fairly.
What Are Unique Factors in Divorcing a Doctor?
If you are divorcing a physician with a private practice, then property division and other issues are often more complex as they usually deal with high-value matters, such as:
- Placing a value on the medical practice,
- Division of the martial home,
- Negotiating spousal and child support,
You will also need to create a child custody and visitation schedule when kids are involved. You will need seasoned legal representation to help protect your interest and professional career.
One of the primary issues in a divorce involving a doctor is the division of high-value marital assets. California is a community property state which means all assets and debts acquired during the marriage belong equally to both spouses; for example:
- If you started your medical practice after getting married, then its value can be split 50/50 in your divorce;
- If your practice was already up and running before getting married, any increase in business value occurring while married could be split 50/50 in your divorce.
The California community property laws consider whether your spouse gave up their career to support your career goals or stay at home and raise the kids.
In most cases, however, negotiating with your spouse over how to divide the marital assets is more common and generally a better option for both spouses.
Perhaps the spouses cannot agree on the division of assets? In that case, you will need a high-asset divorce attorney to negotiate on your behalf or litigate the matter in a family law courtroom.
How to Deal with a Private Practice Divorce?
Medical practice is often a complex asset to deal with when dividing property because California medical corporations usually have one doctor as the owner, and other licensed medical professionals hold the majority of shares, such as doctors, nurses, psychologists, and others
This complicates an award from medical practice ownership in a divorce when a spouse seeks a percentage of the value of the practice while married. When a settlement can't be reached, then the family law court will be forced to make the decision, which will generally consider the following factors:
- Whether medical practice was started before or during the marriage,
- If business was started before the marriage, then how many years?
- Contributions made by a spouse to make the practice successful,
- Actual work in the medical practice that helped it grow,
- Spouse's goodwill value to the medical practice.
A California divorce attorney will frequently hire a neutral business appraiser who will gather the necessary information to estimate the value of the medical practice,
The doctor owner can use this estimated medical practice value to offer their spouse some marital or other property equal to the value of their financial interest during negotiations.
What About Alimony?
Another primary consideration is that of spousal support, known as alimony. The duration of maintenance will always depend on a wide range of factors. High-net-worth spousal support is based on different factors.
In many marriages to doctors, they usually have a higher income. Also, the lesser-earning spouse may have passed up work opportunities to support the doctor's career. Many spouses in this situation face a legitimate concern over maintaining their living standards after divorce.
If you are the owner of medical practice, then you have to consider whether the court will review the history of past earnings or instead use future earnings. Courts will generally award alimony where divorce leaves the lesser-earning spouse financially disadvantaged.
A spouse who receives value from alimony and medical practice assets is essentially being compensated twice. This means you need a family law attorney with experience helping practitioners resolve complex issues. In other words, any divorcing physician who owns their medical practice needs advice and legal representation from legal professionals.
What About Child Custody in a Doctor Divorce?
It's not a secret that doctors must work and study long hours to acquire their medical license. Their work schedules are usually more demanding than other professions. They are also highly unpredictable as they are often on-call for any emergencies.
This usually means they cannot spend as must time with their children as their spouse, who is often dedicated to raising the kids at home, a full-time and demanding job by itself.
This means child custody and visitation issues are also more complex. The best option is for you and your spouse to negotiate child custody and visitation that fits the schedule of both spouses.
Like the division of marital assets discussed above, if you can't reach an agreement, you are forcing a family court judge to decide for you, who is a stranger and knows very little about your family dynamics.
In other words, find a way to reach an agreement with your spouse that puts the kid's best interest first. The court will always base their decisions on the primary factor – what is in the children's best interest? The court will look at factors like which parent will spend as much time with the kids, along with the following:
- What are the ages of each child?
- What is the condition of their health?
- Which parent was the primary caregiver for the kids?
- What are the work schedules of each parent?
- Are there valid accusations of domestic violence?
- Are there valid allegations of drug or alcohol abuse?
Your divorce lawyer can help you through this process while seeking the best possible result.
What About Mediation in a Physician Divorce?
Suppose you and your spouse can't seem to find common ground and reach an agreement on divorce issues? In that case, you should consider mediation, a non-binding dispute resolution process allowing both spouses to discuss their goals.
You work with a neutral mediator to reach an agreement. Before and after mediation, you will have the chance to discuss the terms of the marital settlement agreement if one is reached.
If you are considering a California divorce or have already filed a petition for dissolution of marriage, you should seek legal representation.
If you are a physician who owns and operates a medical practice, or the spouse of a medical professional, numerous crucial issues will need to be considered.
In high-net-worth divorces, professional guidance is necessary to ensure your financial stability post-divorce. An experienced family law attorney is crucial in assisting with these decisions and crafting favorable solutions.
Furman and Zavatsky are California divorce and family law lawyers based in Los Angeles County. We provide a free legal consultation by phone, or you can use the contact form.