According to California Family Law, all real estate, property, and assets acquired by a couple during their marriage or bought using marital funds are classified as “community property.” In most high-net-worth divorces, community property will include precious metals, real estate, bonds, stock options, retirement accounts, business interests, pensions, trusts, family businesses,  and other marital assets.  However, a medical doctor who is going through a divorce may also own or have an interest in medical practice.  In many circumstances, part or all of the financial interests involving a medical practice could be considered community property.

California Family Law states that community property belongs to each spouse equally and will be divided equitably during a divorce.  If a medical practice is determined to be part of the divorcing couple’s community property, a complete financial analysis and practice appraisal must be performed prior to division in the divorce.

In addition, the courts will consider the doctor’s professional education and license as valuable assets.  However, a medical degree or professional license cannot be divided up as community property.  To address this, California has laws in place to grant the non-physician spouse reimbursement for “community property contributions.”  This makes the financial situation fairer since the earning capacity of the doctor has increased.  The “community property contributions” reimbursement law also compensates the non-doctor spouse if the practice was started using marital funds or in cases where the non-doctor spouse contributed to the medical practice or helped the practice grow.  A spouse who is not a doctor may not lawfully own medical practice in the state of California or own a share of a medical practice.  Therefore, during a divorce settlement, the medical practice’s value is determined and is compensated through a one-time financial settlement.

Division of Property & Reimbursements (California Family Code § 2641)

If you are a dentist, doctor, or other medical professional facing a divorce in California, you are probably concerned about how your divorce will impact your medical practice and other practice-related assets.  Under California Family Code § 2641, the non-doctor spouse can seek reimbursement for “community contributions” for marital funds used to pay for special career training or education.  In divorce or legal separation cases such as these, the doctor spouse must reimburse the community for all “community contributions” for a spouse’s training or education that significantly increases that spouse’s earning capacity.  The amount of money to be reimbursed is the total amount paid plus interest accumulating from the end of the calendar year the financial contributions were made.  The “legal rate” of interest rate is often negotiated or set by the court if no interest rate can be agreed upon.

California Family Code § 2641 also states that any loans contracted during the marriage concerning education or training of one party may not be combined with the community’s liabilities for equal division.  The loans under this circumstance become the financial responsibility of the doctor-spouse.  Also, the non-doctor spouse may be entitled to receive complete reimbursement for all marital funds used to pay for the doctor’s education, with some exceptions.  These exceptions could include these circumstances:

  • The community has significantly benefited from the spouse’s training, education, training, or loan contracted to pay for the spouse’s medical training or education.
  • The non-doctor spouse received similar training or education in which community contributions were made.
  • The training or education permits the party holding the training or education to remain gainfully employed, and the income derived considerably decreases the need of the party to receive financial support that would otherwise be needed.

Medical Practice Valuation in a California Divorce

If the divorce court determines that a medical practice is community property, the medical practice will likely be subject to “marital property division” in your divorce case.  Marital property division is a standard part of every divorce case, especially high-asset divorce cases.  As come marital assets, such as real estate, stock, and bonds are relatively simple to divide, determining a medical or dental practice’s value is much more complicated.  In many circumstances, appraising the value of your medical practice may only require calculating the practice’s fair market value.  This appraisal would include real estate, furnishings, equipment, supplies, accounts receivable value, and valuing the medical practice’s intangible qualities.  After the medical practice has been accurately appraised, your spouse will be given their equal share of whatever the practice’s appraisal value has been ascertained minus tax consequences and other court-approved deductions.

Contact Our San Jose Divorce Lawyer at 408-292-6289

Call Gemma V. Reyes, Attorney at Law, in Santa Clara at 408-292-6289 or contact us by e-mail now to schedule an appointment. You will discuss your case with a divorce attorney who can offer you the personalized solutions you need.