You work hard in high school, graduate top of your class in college, go on to graduate medical school, spend the longs hours and dedication needed to finish your residency, and finally after thousands of hours of studying, hundreds of tests and years of hard work – you are a doctor. You start your own practice. You made it professionally. Personally, things are a bit different. You are facing a divorce. What does that mean for the medical practice you’ve worked so hard to establish?
Doctors may face unique issues during a divorce. Long term marriages may have seen years of what is considered relatively ‘average’ income (medical school and residency), followed by a dramatic or steady increase in salary (or a combination of both). It is no secret that self-employed doctors are usually not a typical W-2 employee. So what does this mean in the context of a divorce? What happens to the medical practice when the couple divorces?
Equitable distribution in New Jersey does not automatically mean half or 50% of a marital asset. Equitable distribution is not a simple mechanical division of assets accumulated and/or created during a marriage. The word ‘equitable’ itself implies the weighing of many considerations and circumstances that are presented in and unique to each case. A judge would not be fulfilling his/her judicial obligation if he/she routinely or mechanically divided assets from a marriage equally.
While there are many similarities between the states when it comes to family law, there are also many differences. That fact was recently highlighted in the context of business valuation, specifically, what things should be considered to arrive at a value for equitable distribution, in a post recently seen on our firm’s Pennsylvania Family Law Blog. Specifically,Aaron Weems is an attorney in our Warrington (Bucks County), Pennsylvania office and editor of the Pennsylvania Family Law Blog wrote an interesting post entitled "Superior Court Changes How Businesses are Valued."
In the Balicki case that Aaron discussed, at issue was the valuation of an insurance agency. It was understood that the business would not be sold, therefore, in deciding the value of the business, the Master excluded expenses of sale, transfer, or liquidation which could include broker commissions, finders fees, attorney fees and accountant fees. The appellate court reversed finding that this was improper. Moreover, the appellate court found error in the fact that the Master failed to take into consideration any taxes that may be associated with the sale or liquidation of a business.
Aaron noted that the appellate court held that Pennsylvania statutes 23 PACSA § 3502(a)(10.1) and (10.2) required that for the purposes of equitable distribution of marital property, the Court must consider the Federal, state and local tax ramifications even if they are not “immediate and certain”, and similarly, the sale, transfer, or liquidation of an asset need also not be “immediate and certain,” either.
The practical effect of this reducing these hypothetical expenses is that it reduces the marital estate, and therefore, the other spouses overall equitable distribution award. Would the same result be reached in New Jersey?