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Is a medical practice community property?

On Behalf of | Jan 27, 2022 | Divorce, High-asset Divorce |

Medical doctors are under an incredible amount of stress these days, which sometimes leads to divorce. Those who have a private practice soon realize that it is treated just like any other business under Texas law, which means it will get divided up with the rest of the shared assets. Obviously, not having full ownership of a practice is a tenuous situation for the general practitioner, cardiologist, ophthalmologist, or dentist, particularly if they share the practice with business partners.

Community property

Practices are often considered community property in Texas for a few reasons.

  1. Most doctors do not leave medical school and start their own practice.
  2. Many have already married (perhaps even supported by a working spouse while in school) by the time they begin their career.

If a spouse is there from the early days, they can get a sizable percentage of the business. However, there may be instances where the couple has a binding prenuptial or postnuptial agreement in place. The wedding may have also happened later in life, which means that the doctor already had a thriving practice before getting married, which may make it separate property.

Dividing the assets

The doctor or spouse may also employ other experts to evaluate the practice’s finances by measuring assets (including equipment and real estate), establishing a fair market value, or using an income-based approach. There may be other factors to be considered like goodwill, bedside manner, experience, growth potential, type of practice, and whether there are any binding buy-sell agreements regarding the practice. The couple can then negotiate if they are not going to court. If they litigate, a judge will review the valuation and determine an amount.

While the practice may be the single most significant asset in the marital estate, there will likely be a sufficient number of other assets classified as community property. A larger portion of these can go to the spouse. If there are not enough liquid assets, the doctor may have to liquidate some assets or investments. Another option is a sensible payment structure built into the divorce agreement.

These are unique situations

Divorces involving doctors with a medical practice do happen, so it is vital that the spouses work with an experienced Texas Board-Certified Family Law expert attorney who can help handle these unique challenges.