Could a divorce affect your New Jersey professional practice?
Many fields require many years of post-secondary education. Passing boards or a professional exam is also often required. For example, one spouse may work full-time to pay living expenses while the other completes medical school. If the relationship breaks down in the future, however, there could be a claim for reimbursement alimony in a New Jersey divorce.
Physicians, therapists and psychiatrists who have their own practices or a partnership must consider the effects of a divorce. Other professionals with advanced degrees who have consulting businesses also need to consider what could happen.
Property classification and division
A medical practice or consulting business started before the marriage is usually considered a nonmarital asset. On the other hand, if a doctor opened a practice while already married then the classification would be marital.
In New Jersey, the court equitably divides marital property depending on some of the following factors:
- Length of the marriage or civil union;
- Standard of living established during the marriage or civil union;
- Contribution by each spouse to the education or training of the other;
- Income and earning capacity of each spouse; and
- Any written agreement prior to the marriage or civil union detailing property distribution.
A division of marital property requires a judge to determine the value of the asset.
Valuing a practice – tangible and intangible assets
In any divorce that involves a marital business, it is important to get an accurate appraisal. For a medical practice, the appraisal should take into account accounts receivable, the physical assets and intangibles – goodwill and the location of the office.
Income of the practice over the past three to five years and perks paid are also considered. If there is any indication that one spouse has attempted to hide assets, it may be necessary for each spouse to retain their own experts. With conflicting expert valuations, the court will often be required to decide which is closer to the actual value.
An equitable division does not mean that each spouse will receive exactly half of the value of the practice. Often it becomes a buyout-type situation. This could be in the form of a one-time payment or a larger share of the equity in a home or vacation property.
Property division also ties in closely with a determination of whether permanent, rehabilitative or reimbursement alimony is necessary. Alimony is one way that a court can reduce the disparity in incomes and ensure each spouse continues to enjoy a similar standard of living.
After deciding divorce is the only way forward, contact an experienced family law attorney. A low-ball valuation of a business or practice could mean an unfair property settlement. A lawyer can protect your interests and make sure you receive a fair property award.