Dentists going through divorce proceedings will face unique challenges in terms of practice valuations, but there are ways to navigate this tricky situation.
One of the most harrowing experiences for the dental professional is to be involved with a divorce proceeding. The beginning is when attorneys, valuation experts, and other financial experts play a large role in taking away the dentist from his or her practice. This “before,” is a time consuming, very expensive part of preparing for the settlement conferences, mediation, depositions, and potential trial that may come if no resolution can be reached.
Before the Proceedings
Since there are very few attorneys who have ever dealt with a dentist, the valuation expert or dental CPA is a critical part of the process for the preparation of the dentist and the dental practice to be ready to have its innards opened for a revealing look. The dental CPA should not be the dentist’s own accountant since that person is not independent and will not be credible to a court because of that impediment to impartiality. If the dentist was getting ready to sell their practice, it was being built into the best financial position it could be so the value would be at its highest, which is not a good place to be when the divorce process begins.Independence is key for any professional to be retained by the dentist for assistance in this oppressive state. The valuation expert must also be experienced. The dentist interested in achieving income and growth for the practice is in a bad situation financially as well as the dentist readying their practice for a transition since that dentist is working to build the practice to its best.
During the divorce proceedings:
Because this is all about money, during the divorce proceedings the dentist must keep their head up and continue working while also spending time responding to the professionals who are assisting them. This means not having the attitude of the staff change, the format of the procedures when new and existing patients are introduced and above all, keeping the same profile that kept the practice busy before the divorce process began. It will seem like every call, email, and meeting with the professional experts and attorney will mean more money out of pocket.
Earning enough to pay the experts is a must since they will do their best to keep as much of the practice as possible intact when the divorce is completed. Telling the truth is critical but so is making sure that the experts hear the entire story. If one side knows everything about the practice and the other does not, there is a real possibility that there will be surprises during mediation or worse, at a trial.Keeping the practice in good standing is the issue before, during, and after the divorce.The dentist is making a mistake if they think they can hide something. The experts who were retained will have a tremendous amount of experience in finding things that were supposedly hidden.
If the retained experts have the experience, the dentist is hurting the chance of success if hiding assets or income. These people are trained in their fields to understand where to look and at what the various expense items should approximate in terms of percentage of gross revenue and amounts.
Where is the Dental Practice’s Financial Health After the Divorce?
The practice is leveraged to get those funds that are needed to pay for the divorce settlement or judicial adjudication which means that a new monthly payment begins for the dentist. If this occurs, the dentist must look at how the practice and personal life- style got them to this point. The value of the practice and the financial outcome of the divorce probably means that the dental practice is worth some money. The years of work to get it to that point must be viewed in a positive light so that the dentist’s new life can begin without the tension of the divorce proceedings. The income earned in the past can be earned again. The value is still within the practice, and it should be cultivated as the patients and staff still view the dentist and the practice positively no matter the financial outcome of the divorce.
Continuing to strive for the best outcome of the practice is important for the rest of the newly single dentist’s life. If the dentist is displeased with the outcome of the divorce and wants to get out of the practice, it can be put up for sale. The problem is that the value minus the newly created debt used to settle the divorce will mean less money for the dentist. A productive approach would be to continue to work at the practice for a few more years to be able to pay down the debt, continue to show profits, and to have a good value with much less debt. It may also be possible to use creative ideas for the solution of the net proceeds after tax upon the sale of the dental practice. The concept of using an unconventional but appropriate legal method to defer the tax, if possible, may be something the dentist should consider if they desire an immediate solution. This non-conventional approach can be learned from a dental CPA or a CVA who has worked with dentists and is familiar with deferred compensation plans.It is worth the effort to find someone who understands the concept of deferring income so that the money received from the transition is at its highest level regardless of the divorce and debt in the dental practice.