Getting the lead out when going through a dental divorce!!

July 15, 2019 News

by Bruce Bryen, CPA, CVA

Why the delay? 

Going through a divorce when one or two dentists are involved is a time consuming, frustrating and costly matter.  In the event that there are delaying tactics, the party with the money and most to lose is probably the one trying to forestall the presentation of fact as long as possible for self preservation (in his or her mind).  A dental practice valuation should reveal the worth of the practice and the allocation between the marital and personal goodwill of the dentist and the dental practice.  The resultant value of this asset owned by the dentist is what a court or a mediator will want to see in the dental practice valuation.  This is so he or she can make an informed decision when evaluating which party gets how much of the distribution of the dental practice assets.  The division of that asset is certainly what each spouse is waiting for when the court or an arbitrator has the facts about the dental practice value as presented by a qualified dental practice valuator.  Delaying the inevitable will give the dentist more time to “arrange,” his or her affairs in the most favorable way that can be allowed prior to the dental practice valuation preparation being undertaken.  This is something that the non-delaying spouse should not want to happen.

Let’s speed up the information so that the dental practice valuation can be completed

There is certain information that a dental practice evaluator must have in order to complete an accurate valuation of the dental office.  A competent dental practice divorce valuation expert will send an engagement letter to whom ever has retained him or her so that the process can begin.  Without a response to the questions presented in the engagement letter, the parties will all be waiting.  If the delay is caused on purpose because there is something to hide, the attorney for the party who is experiencing the delay should file a motion with the court to compel the response to the engagement letter or questionnaire.  As one of the parties to the divorce, there may be aggravation and irritation but without the filing of the motion to compel the answers, there is little or nothing that can be done except complain and sit there.  Besides getting a court to expedite the response to the questionnaire that is part of the engagement letter, the motion to compel the answers will put the court on notice that one of the parties to the action is not working in good faith to resolve the issues.  Those causing the problem may think they are winning the battle but in fact, they are losing the war. 

What can the evaluator do to present the dental practice value in its most favorable light? 

A dental practice valuation that is being prepared for the purpose of a divorce dispute is quite different than that presented for a practice transition.  There are many factors involved but the segregation of the goodwill allocation is the primary difference between the two.  Many states have a designation of being equitable distribution states.  That means that a court will decide upon the fairness of the distribution of the assets of the dental practice based on what it considers equitable.  The definition of equitable is not equal. 

An independent dental practice valuation should be prepared by an independent dental practice valuator.  There are many guidelines that the valuator must follow to be in compliance with the designation earned by that valuator.  One of the most common designations of a dental practice valuator is that of a CVA, or certified valuation analyst.  The independent valuator will present the valuation fairly and independently.   Even though there may be differences in the presentations between evaluators, there should be a similarity since the term “independence,” precludes favoritism.  Each party to the divorce should understand that reality forces a presentation that a court will not laugh out of the court room.  If the evaluator is coerced by the client, the evaluator should resign from the engagement since the work product will hurt the client as well as the evaluator.  If a court does not sense credibility in the report of the value of the dental practice, the report will not be worth much.  If the client insists on “leading,” the evaluator’s judgements, the report will not be worthy of a challenge by the opposition and the other party to the case will have the credentials and sense of honesty that the judge or arbitrator will rely upon for his or her final opinion of the dental practice division’s award to the appropriate spouse.