One dental CPA shares his thoughts on whether a critique of an adversarial dental practice valuation will suffice instead of the dentist’s own practice valuation as evidence in presentation to a court during divorce proceedings.
By Bruce Bryen, CPA, CVA
During divorce proceedings, the dentist and the spouse typically have expert dental practice evaluators prepare evaluations of the dental practice. Even though the evaluator is supposed to prepare a valuation objectively, there is almost always some bias in the preparation of the valuation based upon whom the payor to the evaluator
is in favor of either the dentist or the spouse. This is because whomever the spouse of the dentist or the dentist has paid the dental practice evaluator, that person will certainly feel an obligation to lean more towards his or her payor when there may be an area of ambiguity.
This may mean quite a bit to whomever is preparing the valuation and may mean the difference between a larger or smaller value and distribution for the judge to consider when delivering the opinion of the worth of the practice. Between the legal fees that each party is paying to their individual attorney, the expert valuation fees paid and the time the dentist must expend gathering information, much revenue is lost and paid to advisors. The time taken away from his or her clinical time at the chair in the production of revenue for the practice is typically significant, but the data needed for a full dental practice valuation or for the critique needed by the experts is of the utmost importance. The time to drastically reduce costs is always imminently at hand. What are some expenses that may be reduced, and gross revenue stabilized while the preparation for the divorce continues?
Do both parties to the issue need a dental practice valuation? Can one of the participants use a critique of the other’s valuation and pay much less than requesting a dental practice valuation?
One of the first thoughts when considering costs is to attack those that are the highest and see if any of those can be lessened. The quality of the presentation should not be undercut by any minimalization of the papers being offered to the court. Since the dental practice evaluator’s opinion is supposed to be independent, any biased writings can be pointed out in the adversarial critique. The negatives can be subtracted from that valuation with a new conclusion written based on the critique. This would present a new worth to the dental practice and may suffice in many courts without the need for a separate dental practice valuation and the costs associated with it, compared to the critique and its cost. It is really based on a discussion between the evaluator, attorney and the dentist regarding the best offering for the judge at the most reasonable cost to the dentist.
As previously presented in this column, there is no way that the quality of the presentation should be compromised. Another approach for the parties involved with the divorce, if they are still on speaking terms is to share in the cost of the dental practice evaluator and agree to have one valuation. This is an acceptable and ethical approach by the evaluator since his or her valuation is supposed to be independent and not subject to any change that the parties may want to see in the valuation. It is important to remember that the attorney for each participant in the divorce is not independent but is an advocate from whomever the evaluator has received payment. The attorneys are ethically allowed to only represent one party in the case because the lawyer is supposed to be an advocate for that client where the dental practice evaluator is an independent presenter of fact.
Who should gather the information for the advisors to the dentist when knowing that the time spent by the dentist equates to a loss in gross revenue?
Because of the amount of the dentist’s time spent gathering data for his or her experts to present to the judge, countless hours and excessive gross revenue is being lost at the practice. It becomes obvious to those employees working at the dental practice and to many of the patients as well, that the dentist is under a lot of stress related to the divorce. The dentist may have the idea of allowing a staff member who is trusted to gather the information. If he or she does so, there will be a slight out-of-pocket cost, but by continuing to be involved clinically, he or she will still be able to have gross revenue remain somewhat constant. This will be because his or her work will continue being charged to the patient. This will at least allow the dental practice to continue to operate profitably and to enable the dentist to have enough financial wherewithal to pay the bills. If there is no one from the dental practice who can be trusted to gather this sensitive information, then the dentist must arrange for some other decision to keep the practice financially stable. This is part of the cost and aggravation being encountered frequently by the dentist because of the divorce proceedings in addition to the normal problems encountered at the dental practice.
What is the best advice for the dentist and the spouse of the dentist?
If possible, settlement discussions should be ongoing no matter how difficult the talks may be. The amount of money involved with expenses and fees is incredibly high. A settlement of course is where each side feels like the loser. Neither party gets what they want but there should be enough money saved with the settlement that a reasonable life can continue. Sometimes, even with settlement discussions continuing, the participants are still too bitter or too far apart in the financial side of the settlement talks that court must be considered. Try for the settlement no matter how much neither side wants it since it will allow life to continue in fairly stable financial terms.
Editor’s Note: Bruce Bryen is a certified public accountant with over 45 years of experience and is a part of Baratz & Associates CPAs. He is a regular contributor to Dentistry Today and more articles on finance and practice acquisitions can be found at dentistrytoday.com. Bryen specializes in deferred compensation, such as retirement planning design; income and estate tax planning; determination of the proper organizational business structure; asset protection and structuring loan packages for presentation to financial institutions. He is experienced in providing litigation support services to dentists with Valuation and Expert Witness testimony in matrimonial and partnership dispute cases. You may contact him at [email protected].
