Physicians routinely describe their profession as immensely rewarding. The rewarding nature of this profession is, in large part, due to its challenging work combined with a measurable impact on patient lives. However, most medical careers also come with unique challenges, including the complex considerations that medical professionals face when confronting divorce. In fact, when physicians get divorced, they oftentimes need to consider certain issues that others may not need to think about. This is why contacting an experienced divorce lawyer is essential. Below are two potentially relevant special considerations for when physicians and their spouses get divorced.
Many physicians note the benefits that a successful medical practice can bring, including financial security, job satisfaction, and prominent social status. These reasons, among many others, highlight the importance of protecting what the physician has built. During divorce proceedings, the medical practice will undergo what is called a valuation process. This process can be an intricate one and is usually completed by a qualified accountant or a business valuation expert selected by the attorneys. In the course of this process, the accountant or business valuation expert will evaluate the medical practice’s tangible assets (i.e. medical equipment, real estate, etc.) as well as its intangible assets (i.e., any relevant trademarks, debts, etc.). One important factor that the accountant or business valuation expert will consider is what is called goodwill. Goodwill is comprised, in part, of a medical practice’s reputation and is highly variable from practice to practice. For instance, a dermatologic practice with six hundred 5-star reviews on Yelp is likely to have a higher goodwill value than one with thirty 2-star reviews. Despite this simple example, determining goodwill is often a highly intricate process that requires the involvement of experts. After evaluating all relevant information, the accountant or business valuation expert provides an estimate of the business’s value for purposes of the divorce. As with all business owners facing divorce, the valuation of the medical practice for physicians and their spouses is one of the most critical steps in dividing property. In addition to the medical practice’s valuation, other factors that the family law attorneys will need to take into consideration regarding the medical practice include: (1) the practice’s legal form (such as a PLLC, sole proprietorship, etc.); and (2) when the practice was started (i.e., was the practice started years before two spouses had met, or after their marriage?). When the practice was started can be critical in determining whether it is separate or community property. Take Note – the Corporate Practice of Medicine doctrine. In Texas, the Corporate Practice of Medicine doctrine prevents anyone who does not have a medical license from practicing medicine. In divorce, this means that a spouse without a medical license cannot receive shares of any medical practice and cannot have joint-ownership of the practice. Therefore, it is especially important for the valuation process to be done correctly because, where relevant, a non-physician spouse will only receive a financial payout vis a vis the practice.
There are several financial issues unique to physicians which need to be carefully and thoroughly considered when confronting divorce. Specifically, years of study and hard work often result in high financial compensation for many physicians. When working towards a property division in divorce, it is critical that the attorneys fully consider and account for physicians’ high net worth estates, as well as any diversified investment portfolios, financial holdings, trusts, or other costly assets (i.e., classic cars, artwork, multiple properties, etc.). The complex, high net worth estates that many physicians have require meticulous and careful analysis for purposes of property characterization (i.e. characterizing assets as community or separate property). It is also critical that these estates are handled by knowledgeable and skilled attorneys who can appropriately navigate the negotiation or litigation process. In many instances, the more complicated the estate is, the more complicated the property division is likely to be. Physicians and their spouses should be careful to select experienced attorneys who have handled high net worth estates before. If you have questions regarding special considerations when divorcing as a physician or divorcing as a physician’s spouse in Texas, contact Kirker│Davis LLP to schedule a meeting with one of our lawyers today.