September 30, 2022

Dentist Divorces In Arizona

Dentist divorces can often be particularly complex, involving issues that do not apply to other professions. Dentists often own their own practice.  That practice is often valued at hundreds of thousands, if not millions of dollars. In many cases, the spouse may often work in the practice as well. These factors can create a complex, and potentially messy, scenario during divorce.  Having a healthcare attorney who understands the business of dentistry can be critical in minimizing the disruption of a divorce

What Will Happen To My Practice?

According to the American Dental Association, nearly three-quarters of dentists in private practice own their own practice. In dentist divorces, the question of what will happen to the practice is often one of the dentist’s main concerns.

Arizona is a community property state. This means that each spouse is generally entitled to an equitable distribution of their marital assets. If you bought your practice while married, this means that your spouse may have a claim to part of your practice.  This doesn’t necessarily mean that you’ll suddenly have to become business partners with your spouse.  Instead, the court will typically value the practice along with any other assets the couple has acquired during marriage. Then, the court will likely order that the assets be divided equitably. This usually, but not always, means that the assets will be divided equally. If your practice is worth more than your other marital assets combined, you might need to make a payment to your spouse to equalize the assets.

You and your spouse can reach a pre-trial settlement during the divorce. However, even in the context of settlement, the practice will likely need to be valued. This is necessary to see how it might stack up against the value of other marital assets.

How Will My Practice Be Valued?

A dental practice valuation often requires a review and analysis of factors like marketability, transferability, and return on investment, and can be done using one of several different methodologies, like an asset-based approach, or an income-based approach, all of which can yield different values.

The valuation process does not only look at the physical assets that are easy to value, like equipment, but also the intangible assets of the practice, like goodwill.  In fact, goodwill is often the most important, and most difficult, item to value.  Goodwill often makes up 80% or more of the value of a practice, but it is based on more subjective factors. Questions that might be asked during the valuation process include:

  • When was the practice established? The longer a practice has been around, the more reliable future projections of income may be.
  • Is the dentist spouse the sole owner of the practice or does he or she have other partners in the practice? If the practice has other members, is there a buy-sell provision that could be triggered by the divorce?  This is especially important if the dentist’s divorce triggers a mandatory sale of the dentist’s interest in the practice.
  • What are the practice’s and the dentist’s debts, and when were they acquired? In recent years, these questions have become more important, as dental school debt has increased.  The answer often depends on when the debt was incurred and when the marriage took place.

These are just some of the factors that play into valuing a practice in dentist divorces. Since the valuation is at least partly subjective, though, finding an appropriate valuation expert is critical. An experienced attorney and valuation expert can help value your practice accurately and fairly, to ensure that the practice is not overvalued.

Will I Have To Pay Alimony?

Alimony, now called spousal maintenance in Arizona, can be a contentious issue. This is especially true if the other spouse is not a dentist or other high-earner. Arizona courts look at several factors in deciding whether to award spousal maintenance. A full list of the factors can be found at A.R.S. § 25-319. However, these include:

  • Whether the spouse lacks sufficient property to provide for his or her “reasonable” needs.
  • Whether the spouse is able to obtain employment that will make him or her self-sufficient.
  • How long the marriage has lasted.
  • Whether the non-dentist spouse has made contributions to the dentist’s educational and career opportunities.

Once the court has determined that spousal maintenance is appropriate, the next question is determining how much, and for how long, it must be paid.  For this, Arizona courts look at several factors. The factors include the couple’s standard of living and the length of the marriage. Courts also look at the financial resources of the spouse and whether additional education or training could help the non-dentist spouse. In any case, given the court’s broad discretion and the vague guidelines on spousal support, this is another frequently-disputed issue between the parties and their lawyers and expert witnesses.

Conclusion

For dentists facing divorce, our goal is to preserve their practice and livelihood, as well as to minimize the disruption that the process can cause. These are just a few of the many issues that we see in dentist divorces.  If you are a dentist going through a divorce, contact an experienced healthcare attorney today.

Disclaimer

This post is for informative purposes only and should not be used as a substitute for consultation with a licensed attorney. It provides general information and a general understanding of the law.  However, this post does not provide specific legal advice. No attorney-client relationship is created by the posting of this information.  If you have specific legal questions after reading this post, you should contact a licensed attorney.