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Properly valuing your medical practice in a divorce

On Behalf of | Jul 10, 2023 | Divorce

In Florida, unique challenges can arise when a physician goes through a divorce. One of the most critical aspects of the asset division process is an evaluation of the physician’s medical practice.

The value assigned to the practice can have far-reaching implications for both spouses. The following key points can shed light on factors to consider when navigating this intersection of divorce and your medical practice.

Assessing the value of the practice

The value of your medical practice is a critical factor that directly impacts the financial outcome of your divorce settlement. Engaging a qualified and experienced professional to guide you through establishing the practice’s economic value is vital. The process will involve examining factors such as the practice’s date of establishment, entity type and funding.

Other important considerations include existing buy/sell agreements, stock issuance and ownership or stock vesting schedules. This information helps accurately estimate the medical practice’s value as a marital asset.

A forensic accounting review

A forensic accountant is indispensable to ensure the accuracy of the medical practice’s value assessment. Forensic accountants review all the accounting data and look for signs of financial reporting misconduct. An experienced forensic accountant will perform a comprehensive review to assess the following:

  • Accounts receivable
  • Office equipment
  • Furniture
  • Lease agreements
  • Other financial assets
  • Goodwill and other intangible assets
  • Insurance costs
  • Taxes
  • Retirement plan contributions
  • Loans

Reviewing the practice’s assets, liabilities, income and expenses ensures the validity of the financial data supporting the entity’s value.

Verifying income distribution

Verifying that the divorcing physician has been receiving their fair share of income from the medical practice is essential in a divorce. Any discrepancies between current income and historical payments could be considered fraud and an attempt to manipulate the divorce settlement.

Addressing any concerns and ensuring the income distribution aligns with the amounts earned by the other partners in the medical practice is critical. The divorcing physician may also have an obligation to inform their partners of the impending divorce because it may have legal implications for the overall practice that affects the other partners.

The importance of expert testimony

An established practice value may come into question during a divorce, and it is not uncommon for each side to dispute the medical practice’s value. Each spouse may have their own expert witness to present their view of the value of the practice. An experienced professional will never accept the opposing side’s expert report at face value.

In court, each side often challenges the other side’s valuation methodologies intending to disqualify them if needed. Working with highly qualified experts to provide testimony can aid in scrutinizing the opposing expert’s credentials, valuation experience and deviations from standard value assessments. This step can ensure that the business evaluation remains fair and accurate.

Evaluating a medical practice due to divorce is a critical yet complex undertaking. Working with highly qualified experts and approaching the evaluation with meticulous attention to detail can ensure a fair and equitable outcome for all parties involved.