One of the most unique parts of being a medical professional is the opportunity to both practice medicine and 2 take ownership of the practice in which you engage. Many doctors and dentists who are a few years into their practice encounter opportunities to buy into a small clinic, office, or another arrangement that they are a part of. While this can represent a tremendous opportunity from a financial perspective there are certainly risks both at the time of purchase and in the future when it comes to buying into medical practice. Not the least of which is the risk that you're getting divorced could have an impact on your medical practice.
When it comes to divorcing a doctor or dentist in Texas, you need to be aware of the implications of you or your spouse owning a part of your practice. Whether you are a doctor or dentist or married to him or her there is a range of outcomes that can be the result of a divorce when it comes to Community property. While it is the doctor or dentist who practices day in and day out why learning a substantial salary, there are Community property laws in Texas that protect spouses from being left out of the income and asset split portion of a divorce.
For many people going through a divorce in Texas, this can come as a surprise. I believe that most people assume that the marital property laws in Texas are like those in most of the other states in our country. Namely, that the spouse who has earned more throughout the marriage stands to receive more when that property is divided. However, the Community property laws in Texas do not treat marital property in this way. rather, any property acquired or income earned during a marriage is on the whole treated as being earned by both spouses equally. There is no your or mine property in a divorce, At least when it comes to property acquired during the marriage.
So, if you are reading this blog post and are a spouse of a physician or dentist this should be welcome news to you. I have worked with spouses of high-earning professionals who have been extremely pessimistic about there being any chance at receiving a fair shot in the marital property aspects have a divorce. As such, many spouses in your position hope to at least be able to have enough to subsist on after the divorce comes to an end. They assume that it is their spouse who stands to retain the vast majority of the wealth in a property earned during the marriage.
As we just covered, this is not the case in Texas. Additionally, it overlooks the significant role that spouses play in contributing to the household, income building, and asset creation seen in successful marriages. For instance, if you are the spouse of a doctor or dentist, even if you did not go out and earn a great deal of money during your marriage as your spouse it is undoubtedly true that you made contributions in other ways. Not necessary for a spouse to only make financial contributions to be highly valued in a divorce context.
With that said, I would like to spend the remainder of today's blog post discussing just how a divorce can impact your or your spouse's medical practice. Whether you are a practicing physician or dentist or are married to 1, you need to be aware of the ins and outs of this area of the law especially as it pertains to divorce cases Ann Community property division. You could have worked tirelessly to build wealth for your family and would not want to see it evaporate needlessly or unnecessarily. Understanding the law and how it could treat your family in these circumstances is a key part of that discussion.
The impacts of divorce on a medical or dental practice
We all know that divorce is not something that anyone likes to discuss or even think about in conjunction with a marriage. Divorce is to a marriage what death is to a person's life. While we all understand that it is a possibility for any marriage to end in divorce the reality of the situation is that it is uncomfortable to even discuss it in terms of what may be headed for you and your family. Even the best-case scenario can result in there being marks left on your family that are not easily erased or forgotten. In your circumstances, a medical practice, children, relatives, friends, and even employees of your practice can all be profoundly affected by your divorce. Truly, when a medical professional gets divorced the impacts can be felt far and wide.
Undoubtedly, many factors are important in a Texas divorce case. By emphasizing the importance of understanding the impacts of divorce on your medical practice I do not mean to push to the side the importance of your family, children, retirement savings, or other forms of wealth. Any person who goes through a divorce with children under the age of 18 wants to do whatever they can to ensure that their relationship with their children is protected. Years after a divorce it is usually the impacts of the case on your children that is most acutely felt.
With all of that said, I'm interested in this particular topic today because owning a medical practice becomes a part of a doctor just as owning a dental practice becomes part of a dentist. On top of that, your ability to earn an income, provide for your family, plan for your future, and plan for your children's college or after high school activities are all impacted by the success and wherewithal of your practice. We as family law attorneys take on the goals and aspirations of our clients. It may have been your goal, or that of your spouse, tune your practice and two loose sights of the significance of this during a divorce would be a big mistake.
As we have already discussed, Texas is a Community property state. Generally speaking, Community property laws function with the property that is acquired during your marriage being eligible for division. There are some exceptions to this general rule but for today's blog post let's assume that you opened up your medical practice during your marriage and it has been ongoing for years. You have put in many hours into building the practice and now he both earned a salary from that practice as well as receiving bonuses and other sums of money as a result of your having an ownership stake.
This reality for your family has been a tremendous boon from a financial standpoint. Now that you are going through a divorce it has also been a source of consternation and worry. You have heard horror stories from friends and colleagues about how their divorce Harmed their practice a great deal and their family even more. You have tried with all your might to manage your practice in a way that would benefit your family for generations to come. Does your divorce have the potential to ruin your plans and destroy the business that you worked so hard to create? Likewise, what if you are the spouse of a hard-working doctor or dentist? Would you feel comfortable with the idea of not being able to take part in the success of your spouse as you head towards a divorce?
On the other hand, if you already had a medical practice before your marriage but you simply continued once you tie the knot then you have a more interesting situation on your hands. We can think of it as what would happen if you owned a rental property before your marriage and continued to own a rental property after you got married. In a situation like that, the home would likely remain your separate property no matter what else happened in your divorce. However, we would need to look to any money utilized to enhance the business or otherwise that went into the practice.
In that case, almost certainly true that your spouse will be due for some sort of reimbursement out of the business. The reason for this is that community income was utilized to benefit the separate property asset. Calculating that would be tricky and could require the assistance of an accountant or expert to be able to help you and your attorney do so. Do not underestimate how complex this aspect of your divorce can become. Should work with your attorney closely to make sure that every detail is accounted for when it comes to the determination of a value for your business. This is true whether or not the business is ultimately classified as separate property or Community property.
Given that Texas is a Community property state the likelihood is high that your Community property in this marital property may be divided essentially down the middle. This is true for you whether or not you own a medical practice period however, with a large asset like a medical practice in play you need to be aware of how much value your business is gained throughout your marriage and where it currently stands. Again, obtaining the perspective of multiple experts in this field can be especially helpful for you and your family. Ultimately what may happen is both you and your spouse will get to a point where assessments from your experts will go before a judge if you all cannot settle your case on issues related to the valuation of the business.
The length of your marriage, as well as the stage of your marriage where they practice, was started are all going to be important factors when it comes to dividing up assets and well the sociative with your business and your divorce case. If you have been married for 30 years and began your medical practice two years into your marriage then you are looking at a substantial percentage of your world being tied up in this business. While you would never wish for your business not to be successful the reality is that the success of your business will be directly tied to how much Community property you own. Therefore, your spouse is likely in line to receive a substantial portion of that well no matter if he or she ever worked a day in their life in your business.
Meanwhile, the argument of your spouse is attorney then a trial scenario could hinge on what opportunities he or she gave up to assist you with building your practice. Working late hours at a restaurant, forgoing the opportunity to attend college himself, or simply helping to raise a family when I clear be arguments you hear from the other side when it comes to why a substantial share of the business should be divided in favor of your spouse. While all of these arguments have merit in many circumstances, they may sound a bit hollow coming from your spouse. This is especially true if you know that he or she took advantage of your wealth and success and perhaps even filed for divorce without telling you first period
What about alimony?
In Texas, there are two types of what is commonly referred to as alimony. The first is contractual alimony and the second is spousal maintenance. Contractual alimony comes about as a result of negotiations between you and your spouse. Contractual alimony allows the two of you to agree to a certain sum of money being paid for a certain length of time to help your spouse meet their minimum basic needs. Essentially, your obligation to pay alimony comes about as a part of a contract between you and your spouse.
On the other hand, spousal maintenance is another form of spousal support paid after divorce but will come about as an order by a judge after a trial. the judge would need to determine, however, that your spouse lacked sufficient wherewithal to earn an income after the marriage, separate property or Community property to order special maintenance. In a case where you own medical practice that your spouse is entitled to a portion of as a result of the practice being part of the community is date then the likelihood is fossil maintenance also being ordered is rather low. The reason being is that you can point to the income then property from the divorce settlement being sufficient to sustain him or her even if no alimony were ordered. This stands in stark contrast to a situation where your spouse would not have the ability to earn an income after your marriage or where insufficient Community property or separate property existed to sustain him or her.
What happens to your actual office?
Bear in mind that most of the discussions surrounding your business in a divorce centers around the monetary value of the practice. His spouse likely will not be concerned with the physical office location or the persons that work in your office. It is not as if a near spouse could immediately take on a role as a doctor or dentist within your practice. What your spouse is looking for is the ability to receive a buyout from you as a result of having been married to you and contributed in many other ways that we have discussed previously.
If you do own the office space where you practiced then a real estate appraiser but needs to weigh in to determine the value of the property. On top of that, what if you owned an office park where a new practice? If you charged other businesses red from owning the building then that is another source of income that needs to be accounted for within your divorce. It is reasonable to not want to have to relocate your practice as a result of your divorce. Muller court will expect you to compensate your spouse for their portion of the building or complex, it is not necessarily true that you will have to move your practice. I have seen doctors and dentists sell their portions of a building or complex to their medical or dental partners and then rent a chair or office space back from those partners. Additionally, you could take the money earned from selling your portion of the building and pay it to your spouse in the divorce.
Questions about the material contained in today's blog post? Contact the Law Office of Bryan Fagan
if you have any questions about the material contained in today's blog post please do not hesitate to contact the Law Office of Bryan Fagan. Our licensed family law attorneys offer free of charge consultations six days a week in person, over the phone, and via video. These consultations are a great way for you to learn more about the world of Texas family law as well as about how your family circumstances may be impacted by the filing of a divorce or child custody case. Thank you for your interest in our law practice and we hope that you will join us again tomorrow as we continue to share more information about the world of Texas family law.
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