Physician divorce: Evaluating a medical practice

On Behalf of | Aug 1, 2022 | High-Asset Divorce |

When doctors in the Chicago area decide to divorce, their medical practice may become a significant issue in the settlement. The value of the medical practice as part of the doctor’s finances is often the largest single asset involved in the divorce, even though many physicians operate their practice as part of a group or partnership. In order to properly evaluate the practice and determine its effect on the divorce negotiations, it is necessary to analyze the individual circumstances of each physician.

Factors when valuing a practice

For example, if the practice was established before the marriage and grew during it, the amount of its value that is part of the marital estate is typically less than one established during the marriage. The type of corporate entity or partnership structure and the source of funding or investment are also key questions, as is whether the partners have stock, buy/sell agreements or other documents that affect the vulnerability of the practice to divorce.

Physicians will want to protect their practice as well as representing their financial interests during property division. In many cases, family law attorneys on both sides will work with specialized accountants to proffer a valuation for the practice, based on assets, liabilities, office equipment, real estate, property and goodwill, as well as ongoing expenses like insurance, taxes and salaries. They may also assess how the doctors are being paid from the practice and question anything that appears to be an attempt to suppress the income of the doctor getting a divorce.

The medical practice in asset division

In most cases, non-physicians may not own a medical practice, so dividing the interest in the practice itself is rarely a solution. Instead, by establishing a cash value, the interest in the practice is offset by granting other assets to the non-physician spouse.

Both parties may have widely disparate valuations of the practice, with the spouses and their attorneys seeking a compromise through settlement negotiations or presenting expert testimony to the family court in order for a judge to set the valuation of the practice. This is often the single most important question when managing a doctor’s divorce, and it is important that both sides present qualified and experienced experts.