New Jersey doctors going through a divorce may have particular concerns about how the end of the marriage will affect the future of their medical practice, especially as any private practice is typically a closely held business. Much like other business owners, physicians may worry that the divorce could force an end to their medical practice or undermine their economic future. A New Jersey family law attorney can provide detailed guidance and representation to help physicians plan for the divorce and develop a strategy for reaching a settlement.
Divorce is a serious personal and emotional issue, especially after a lengthy marriage or when children are involved. However, it is also a serious financial issue that could have lasting repercussions for years to come. Even when the two spouses have a relatively amicable relationship, divorce can be a stressful time. For physicians who may need to dedicate many hours to their work or whose work requires high levels of detail, the divorce itself can be disruptive to the continued growth of the medical practice.
These problems are amplified if the two spouses have a higher level of conflict between them, including financial ones over how property division can be handled. Financial matters can be some of the most emotionally and practically draining aspects of a divorce, aside from child custody issues.
Your divorce attorney can provide strong representation throughout the process in order to mitigate the effects of the divorce and help protect your assets. When one spouse is a physician who has built up a successful practice through their study, years of practice and tireless work, they may especially want to protect that practice. At the same time, spouses who have supported physician partners through medical school or residency may take a different view of their contribution to the practice.
New Jersey is an equitable distribution state. As such, assets that were obtained during the marriage are divided in a manner that is fair and equitable to both parties. They do not need to be divided exactly in half. The parties have space to negotiate different types of settlement agreements that can produce different results.
Some divorces are handled through litigation, and a judge in a New Jersey family court makes the decision about how property, including a medical practice, will be divided. In most cases, however, both spouses and their respective family lawyers work with one another to reach a marital settlement agreement whether they negotiate directly or go through mediation. While this process can also be challenging, many people find that they and their respective divorce lawyers are able to come to an accord that best protects both parties’ interests and may conclude the proceedings more quickly.
A physician going through a divorce may have a lucrative medical practice. There are a number of factors to consider when determining the value of the practice and whether, or how much of, that value may be considered a marital asset. These include the type of corporate structure, when the practice was established, whether the owners hold stock and—if it isn’t a sole practice—whether there are agreements in place among the owners to protect the practice as a business entity.
You and your New Jersey divorce lawyer may opt to hire a specialist, such as a forensic accountant with medical practice experience, to assess the value of the practice. You may also expect that your spouse will also make use of financial experts to determine their own valuation of the practice and what their share should be. The valuation of the practice can include intangible assets like its reputation and goodwill as well as its accounts receivable, office equipment, real estate and other property. Any valuation must also take into account liabilities, such as malpractice insurance, loans and other debts owed.
These types of reports can be an important part of the divorce process for any business owner, especially if the business is profitable and growing. Accountants for both parties, along with each spouse’s family lawyer, may scrutinize the flow of funds inside and outside the business and look for potentially hidden assets or arbitrarily reduced income related to the divorce. If there is a higher level of conflict between the spouses, each having their own financial expert assessment may be particularly important.
Of course, medical practices also have attributes that make them different from other types of businesses. Non-physicians may not own medical practices, so the division of property associated with a medical practice may not be handled by giving a stake in the practice itself to the non-physician spouse. This does not mean that the practice is excluded from the financial settlement; on the contrary, its value may form the largest single asset addressed in the divorce, especially for large and successful ones.
Physicians and their family law attorneys may look for workable solutions. The first step is agreeing on a valuation for the practice, which can include wrangling over which accountant’s expert report is more accurate. In some cases, both parties may provide roughly equal estimates while in other cases, a challenge may be necessary to avoid overvaluation or undervaluation. It is important to appropriately scrutinize financial statements provided by the other side as significant amounts of money may be at stake.
Because a medical practice typically cannot be divided like other companies and, perhaps, either the physician would refuse to sell the practice or the value of the practice is linked to that physician’s participation and role, the process for reaching a settlement is also different.
In many cases, a portion of the value of the practice may be assigned to the non-physician spouse. However, rather than providing that spouse with stock in the practice or an interest in the practice itself, which cannot be done, they may be awarded all or a larger portion of another marital asset, such as the home or other real estate, an investment portfolio or a retirement fund.
In other cases, the spouses and their divorce attorneys may negotiate a series of payments over time. Rather than receiving a lump sum at the time of the divorce, the non-physician spouse may receive a gradual payout of the value of their share of the practice over the years to come. This may be combined with or substituted for alimony, and the physician may need to secure a life insurance policy to cover these payouts for the coming years.
Of course, the amounts involved can vary, depending on when the practice was established, the involvement of both spouses in its success, the length of the marriage and other unique issues.
You and your family lawyer can develop a strategy to protect your medical practice during your divorce. Contact the experienced New Jersey divorce attorneys at Lawrence Law by calling (908) 645-1000 or by submitting our online form for a consultation about divorce as a physician at our offices in Red Bank or Watchung.