Are You A Doctor Facing Divorce? Cover Your Assets Now!
Monday, March 16, 2020
By George F. Indest III, J.D., M.P.A., LL.M., Board Certified by The Florida Bar in Health Law
If you are a doctor in Florida who is thinking about a divorce, has filed for a divorce, or has had a divorce thrust upon you by a spouse, there are several important issues to consider which are related to the medical profession. One is the valuation of your professional practice. Another is actually a variety of issues associated with being a high net worth individual.
You may be a physician who is the owner or part-owner of a thriving medical practice or you may be the spouse of one. Either way, there are likely going to be questions regarding whether or not the spouse who is not a doctor may be entitled to a portion of the practice as part of the divorce.
Part of the Medical Practice May Be Considered to Be Marital Assets.
In Florida, a medical license or other professional license is not considered marital property. It cannot be divided or taken by the other spouse during the divorce. However, the medical practice itself, or a business entity, is a different matter.
One determining factor in whether a spouse is entitled a part of the medical practice is whether the value of that practice significantly increased during the marriage. Another factor is whether the other spouse contributed to getting the practice up and running (efforts or income).
Any increase would, under Florida divorce laws, be considered a marital asset. If the physician spouse added the other spouse’s name to the practice, or if marital funds are commingled with the assets of the medical practice, it could be considered marital property, therefore subject to division.
However, there are few judges who would divide a medical practice between spouses, thereby effectively removing the livelihood of the physician-spouse. It is much more likely a Florida judge—in the event, the two spouses were unable to come to a mutual agreement—would allow the physician to keep his or her medical practice, offsetting the business by awarding assets of approximately the same value to the non-physician spouse. The physician spouse might also be required to “buy out” the other spouse’s interests in the medical practice with cash. In such situations, the medical practice will likely be valuated, through income tax returns, financial statements, liabilities reports, balance sheets, and accounts payable and receivable reports.
Goodwill and the Tangible Assets of a Practice.
The valuation may include what is known as “goodwill,” along with tangible assets. Goodwill is considered an intangible asset—the expectation of continued patronage, or whether the physician will continue to maintain and increase the number of patients. Goodwill does not necessarily exist in every business, and determining a physician’s goodwill takes into account the physician’s age, health, skills, knowledge, reputation and earning power. During a valuation of a medical practice, the length of time the practice has been open, the location of the practice, and the existing patients will all be taken into consideration.
Unfortunately, the valuation of a medical practice—or any business, for that matter—can often boil down to a battle of high-priced experts. It could be that you will end up weighing the cost of extended litigation against the division of the medical practice, determining if the fight is worth the end result. Because physicians typically make a significant yearly income, when a doctor divorces, that divorce may be considered a high net worth divorce, which comes with its own set of complications.
Factors in High Net Worth Divorces.
In a high net worth divorce in Florida, the spouses may share bank accounts, multiple high-worth properties, investments, and business assets. These assets must all be carefully separated after it is determined which of the assets are marital assets, and which are non-marital assets.
Some of the more common issues associated with a high net worth divorce include the following:
1. The future earning capacity of both spouses, taking a medical degree, medical license and medical practice into account. Florida is one of the states which will almost always award some type of spousal support, and the physician’s future earning capacity may dictate spousal support to the non-physician spouse.
2. Physicians are more likely than the average blue-collar working person to have corporate benefits such as stock options, deferred compensations, retirement funds, 401(k) accounts, IRA’s and good pensions. All these must be assessed, then fairly divided.
3. The valuation of the medical practice will come into play in a high net worth Florida divorce. If it is determined that the practice will continue to grow and thrive, the non-physician spouse may be awarded a portion of that expected growth.
4. There may be extremely complex tax issues associated with a high net worth divorce, as well as one where a medical practice is involved. These tax issues must be addressed prior to the completion of the divorce.
5. Any asset held in trust for either spouse will be valued and divided, as will all real estate, stocks, and bonds.
6. Art collections, country club or other club memberships, timeshares, vacation properties, expensive jewelry and furnishing and any other type of high net worth collection must be valuated and fairly divided during the Florida divorce.These are just a few examples of the issues you must be concerned about if a divorce is in your future and you are a physician. Estate planning and asset protection should be started early by every physician. Every physician should consult with and know a good asset protection attorney who can advise them early in their career. At the first sign of a potential marital separation or divorce, start consulting with divorce lawyers. It is better to be too early than too late in this regard. It's like planning for death or war: "Plan for the worst and hope for the best!"
7. If there were postnuptial or prenuptial agreements, these agreements will be evaluated, and legally adhered to.
Contact Health Law Attorneys Experienced in Representing Health Care Professionals and Providers.
At the Health Law Firm, we provide legal services for all health care providers and professionals. This includes physicians, nurses, dentists, psychologists, psychiatrists, mental health counselors, Durable Medical Equipment suppliers, medical students and interns, hospitals, ambulatory surgical centers, pain management clinics, nursing homes, and any other healthcare provider. It also includes medical students, resident physicians, and fellows, as well as medical student professors and clinical staff. We represent facilities, individuals, groups and institutions in contracts, sales, mergers, and acquisitions. The lawyers of The Health Law Firm are experienced in complex litigation and both formal and informal administrative hearings. We also represent physicians accused of wrongdoing, in patient complaints and in Department of Health investigations.
To contact The Health Law Firm, please call (407) 331-6620 and visit our website at www.ThehealthLawFirm.com.
About the Author: George F. Indest III, J.D., M.P.A., LL.M., is Board Certified by The Florida Bar in Health Law. He is the President and Managing Partner of The Health Law Firm, which has a national practice. Its main office is in Orlando, Florida, area. www.TheHealthLawFirm.com The Health Law Firm, 1101 Douglas Ave. Suite 1000, Altamonte Springs, FL 32714, Phone: (407) 331-6620.
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