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When medical practices get in the way of divorce

| Aug 26, 2020 | Firm News

As an equitable distribution jurisdiction, New Jersey is a state where couples who go through divorce proceedings should not expect a court order telling them to split all their assets in a 50/50 fashion. The rules call for a fair division of marital property; however, when a divorce involves an established medical practice, things can get a bit complicated.

Understanding medical practice valuation

For example, think about a Camden couple going through a divorce where the husband is an emergency room physician on the payroll of a regional hospital, and the wife is in a dermatology partnership that operates two busy clinics. Ascertaining the value of the practice is not as easy as ordering an appraisal of the couple’s home. In this example above, a family law firm will have to consider the following factors in order to figure out the value of the wife’s interest in the dermatology practice:

• Was the partnership established after the marriage?
• Is it a limited partnership or a stock corporation?
• Will the husband be able to make a claim on future vesting of the practice under its operating agreement?
• Can the partnership be liquidated or transferred from one partner to another?

In some cases, medical practices may need to be evaluated by forensic accountants should there be a suspicion that the organization is not being forthcoming with financial information. As can be imagined, the dermatologist in this example is ethically bound to inform her business partners that she is going through a divorce.

Taking over a medical practice

In the example of spouses who are both doctors, the husband could actually become a financial partner in the dermatology practice, but that would be up to the other physicians. In most jurisdictions, medical practice partnerships will not allow non-physicians to be partners.

Whenever a medical practice is a factor in a divorce, retaining proper legal counsel may be crucial. There is always a potential that the accountant retained by the other spouse may not provide a clear picture of medical practice valuation, and this will need to be challenged.

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