Valuation and Division of Medical Practices in Divorce

Medical practices are typically lucrative businesses. In many instances, the success of a practice is, in part, due to years of building goodwill and garnering a reputation for providing competent care. When a person who owns a medical practice decides to end their marriage, questions often arise regarding ownership rights in the practice, as well as its value. If you or your spouse have ownership interests in a medical practice and either of you is contemplating ending your marriage, it is wise to meet with an attorney to assess your options. At McClure Law Group, our experienced Dallas divorce attorneys understand the challenges that can arise during the valuation and division of medical practices in divorce, and if we represent you, we will fight to help you seek your desired outcome.

A key question when dividing a medical practice during divorce is what portion of the practice constitutes community and separate property. In Texas, any portion of the practice established or that increased in value before the marriage is considered separate property and will remain separate after the divorce. Any practice established or that increases in value during the marriage may be community property, though, subject to a division that is just and right rather than equal. This division may account for factors such as each spouse’s earning capacity, contributions to the marriage, and future financial needs.

The valuation of medical practices in divorce presents unique challenges beyond those of most other businesses. The practice’s value often depends on intangible, non-transferable assets like personal goodwill or patient loyalty. It is important to note that there is a distinction between personal goodwill, which Texas law excludes from community property, and enterprise goodwill, which may be divided as a community asset. Personal goodwill, tied to the practitioner’s personal reputation and skill, is not transferable and thus not divisible, whereas enterprise goodwill, related to the practice itself, may be included in the valuation of community property.

Additionally, Texas law restricts non-physicians from owning medical practices, impacting options for dividing ownership interests. Medical practices also face strict regulatory requirements, including HIPAA, that limit the transfer of patient records or practice assets to a non-physician spouse. Consequently, a fair division often requires offsetting the medical practice’s value with other community assets to achieve a fair distribution while respecting legal and professional regulations.

Valuing a medical practice requires a comprehensive assessment of both tangible and intangible assets. Beyond physical assets like medical equipment, intangible assets such as patient lists, reputation, and contracts with insurance providers or hospitals often constitute significant value. The valuation process generally uses one of three common approaches: the asset-based approach, which evaluates the combined worth of all assets minus liabilities; the income approach, which estimates future earning potential based on expected revenue, patient base, and profitability; and the market approach, which considers recent sales of comparable practices.

Given the complexities of medical practice valuation, financial experts, such as certified valuation analysts or forensic accountants, play an essential role. These professionals can analyze revenue streams, assets, liabilities, patient contracts, and projected growth and help distinguish personal from enterprise goodwill while projecting the practice’s future income potential.

The valuation and division of medical practices in divorces require specialized knowledge both of Texas family law and the intricacies of business valuation. As such, if you are a medical professional or are divorcing a spouse who owns a medical practice, it is essential to consult with an attorney about your rights as early as possible. The dedicated Dallas divorce attorneys of McClure Law Group possess the knowledge and experience needed to guide you through the process and help you protect your financial future. Our main office is located in Dallas. We have a Collin-County office in Plano as well, where we are available to meet with clients by appointment. We regularly represent people in divorce cases in Dallas, Fort Worth, Rockwall, Frisco, McKinney, Irving, Richardson, and Garland. We also assist people with family law disputes in cities in Dallas, Denton, Collin, Rockwall, Tarrant, and Grayson Counties. You can reach us by using our online form or calling 214.692.8200 to arrange a confidential consultation.