Dental practice valuations are essential documents in divorce proceedings because they provide independent, objective appraisals of practice value that help both parties settle disputes fairly, avoid costly litigation, and prevent one spouse from making unrealistic demands based on guesswork rather than facts.
- Independent valuations prevent disputes: Both dentists and spouses should retain experts to prepare objective appraisals rather than relying on personal estimates or attorney opinions.
- Protects against unrealistic demands: Unscrupulous advisers may encourage spouses to demand inflated amounts; a professional valuation provides factual support to counter these claims.
- Strengthens court cases: Judges view parties with expert third-party documentation as more credible than those arguing from guesswork or unsupported positions.
- Saves time and money: Professional valuations often enable settlement during mediation, avoiding expensive trial preparation and litigation costs.
- Evaluator credentials matter: Judges consider the valuator's experience with dental practices specifically, not just general business valuations, when determining fair practice distribution.
As a divorce enters its difficult and dramatic moments, the parties and their representatives often battle over the money that may be available for distribution from the dental practice. If the dentist is wise, he or she will immediately retain an expert to prepare a dental practice valuation of the office or offices.
A dentist's spouse typically does not fully understand the value of the practice, since the spouse is rarely involved in daily operations and cash flow. An unscrupulous attorney or other adviser may urge the spouse to demand a high dollar amount at the outset, intimidating the dentist into believing that no compromise is possible.
Bruce Bryen, CPA, CVA.
With a valuation in hand, the dentist will at least have an independent appraisal of the practice's value rather than a personal, biased estimate. If the spouse is prudent, or has prudent advisers, an independent valuation should be ordered to substantiate the demands being made of the dentist.
Everyone involved should remember that attorneys are advocates for their clients and will argue their position regardless of personal belief. That approach works well in the courtroom but not so well when a party's own valuation expert presents a different opinion than that of the attorney, or when the spouse's attorney ignores the facts of the valuation's outcome.
Time and money should be the watchwords for the dentist. How quickly will the proceedings wind down, and how much will they cost? Those are the real areas of concern. For the dentist's spouse, the same factors should be paramount but often are not. Sometimes vengeance overcomes reality.
Once the spouse receives the practice valuation, what comes next?
Ideally, the spouse will retain an expert to prepare a dental practice valuation for a clearer understanding of its approximate value. Without that valuation, the spouse will be guessing at the value, wasting time and money on legal fees and advisers' opinions.
Arguing from guesswork will not help resolve the issue of value. Attorneys also rarely understand how a dental practice operates. Remembering that an attorney is an advocate for the client, not a finder of fact, will help the attorney, but not necessarily the client, in settling the case.
The dental practice valuation will at least give the dentist's spouse a good approximation of the practice's value. This gives the spouse's attorney something to fall back on: an unbiased opinion of the practice's approximate value, allowing the attorney to advocate based on an expert's opinion rather than a guess.
If the spouse's attorney appears before a judge without supporting documentation while the other party has expert evidence, the spouse's case will appear much weaker than the dentist's. No matter how strong or weak either party's case may be, the less support offered to the court, the weaker that case will appear to the judge, especially when the opposing party has sufficient independent third-party support to present.
In most jurisdictions, a judge will order mediation before any trial occurs. This typically gives the parties one more chance to settle the case before spending significant time and money preparing for and conducting a trial. If mediation does not resolve the case, a trial will follow.
What happens during trial preparation and the trial itself?
Trial preparation typically occurs beforehand, and sometimes it continues during the trial itself. It is a time-consuming and expensive process in which the attorneys and other advisers review the valuations, as well as the backgrounds of the people involved in the case.
If no valuations exist, or if they are not independent, a different approach is required. This is where the history of those involved in the case becomes a critical part of the judge's scrutiny.
What credentials do the advisers and attorneys have? How many dental practice valuations has each valuation expert prepared? Is the evaluator more experienced with general business valuations than dental practice valuations? Does the attorney have knowledge of dental practices and how they operate? These are some of the questions a judge considers when determining the outcome of any distribution from the dental practice.
Advisers should tell litigants that if the judge's opinion is especially unfavorable, it can be appealed, though that would mean even more time, money, and aggravation. From a practical standpoint, the judge's decision may not satisfy the losing party, but it should not be outlandish. Appeals of final divorce rulings are rare. Litigants are usually just glad it is over.
Bruce Bryen is a certified public accountant and certified valuation analyst with more than 45 years of experience. He specializes in providing litigation support services to dentists, with valuation and expert witness testimony in matrimonial and partnership dispute cases. Bryen assists dentists with financial decisions about their practice, practice sales, evaluating whether to join a dental service organization, practice valuation during divorce proceedings, and questions about the future or financial health of dental practices. He is part of Baratz & Associates PA in Marlton, NJ, and can be reached at [email protected].
The comments and observations expressed herein do not necessarily reflect the opinions of DrBicuspid.com, nor should they be construed as an endorsement or admonishment of any particular idea, vendor, or organization.
