I'm Steve Kaplan, a New Jersey divorce lawyer with decades of experience handling complex divorce cases involving professionals and business owners.
If you're a dentist getting divorced, you probably expected to divide your house, retirement accounts, and other assets. What you may not have expected was a fight over the value of your dental practice.
And that number can have a major impact on your divorce settlement.
How Is a Dental Practice Valued in a NJ Divorce?
Valuing a dental practice isn't as simple as looking at last year's revenue.
Depending on the circumstances, a valuation may consider the practice's assets and liabilities, historical earnings, compensation, patient base, accounts receivable, equipment, and other financial factors.
Then there's one particularly complicated issue: Goodwill.
A dental practice may have value beyond its equipment and bank accounts. But determining what that value actually is requires careful analysis.
Your Practice's Value Isn't the Same as Your Income
This distinction is important.
The value of your ownership interest in a dental practice and the income you earn from working as a dentist are not necessarily the same thing.
During a divorce, however, both may become relevant for different reasons.
Practice value may affect equitable distribution. Your income may affect issues such as alimony and child support.
When you're dealing with a valuable professional practice and substantial income, those issues need to be analyzed carefully rather than lumped together.
Be Careful With Assumptions About Future Income
A valuation involves professional judgment as well as numbers.
Assumptions about future revenue, expenses, compensation, growth, and other financial factors can significantly affect the final valuation.
That's why you need to understand what's behind the number.
If an expert says your dental practice is worth $1 million, the important question isn't simply whether you like that number.
It's: "How did the expert get there?"
What assumptions were made? What financial information was used? Were the practice's debts and expenses properly considered? Are the projections reasonable?
A valuation should be supported by the actual facts of the practice.
What If You Owned the Dental Practice Before Marriage?
This can make the analysis more complicated.
If you owned the practice before getting married, don't automatically assume that its entire current value is marital property.
The timing of the acquisition, changes in the practice's value during the marriage, and the particular facts of your case may all become important.
This is another reason professional practices need to be evaluated differently from something straightforward like a joint checking account.
The Right Financial Expert Can Make a Difference
When a dental practice is a significant asset in a divorce, a qualified valuation or forensic accounting professional may be necessary.
I work with financial experts when appropriate to examine the practice's records, evaluate the assumptions being made, and help determine whether a proposed value is supportable.
If the other side's valuation doesn't make sense, we need to understand why it doesn't make sense and have the financial evidence to support our position.
Don't Agree to a Number You Don't Understand
If your dental practice is being valued as part of your NJ divorce, don't focus only on the final number. Understand how that number was calculated.
Your practice may represent years of work and a significant part of your financial future. Its valuation can affect the rest of your property settlement and potentially the overall economics of your divorce.
Get the information you need before agreeing to anything.
I created my free Divorce Smarter Course to help you understand property division, alimony, negotiation, and other major issues you'll encounter in a New Jersey divorce.
Until next time,
Steve