Divorce for Physicians, What 5 Things Should I Know?
Five issues that do not come up in an ordinary case, and the practice entity is only one of them.
- Missouri splits practice goodwill into a part that can be divided and a part that cannot
- Your spouse generally cannot function as a shareholder in your professional corporation, even if a decree moves the shares
- Your degree and license are not marital property, though a spouse who supported you through training has a recognized argument
- The same earnings can appear in a practice valuation and in a maintenance analysis
- The buy sell provision you signed years ago may matter more than any appraisal
Each one is below. Taken together they decide how the practice is valued, what happens to the ownership, and how support gets argued. None of the five is intuitive, which is why a divorce for physicians goes wrong most often in the first month rather than the last.
Is the Goodwill in My Practice Divisible?
Part of it may be, and Missouri drew that line in a case about an oral surgery partnership.
In Hanson v. Hanson, 738 S.W.2d 429 (Mo. banc 1987), the Supreme Court of Missouri defined goodwill “within a professional setting to mean the value of the practice which exceeds its tangible assets and which is the result of the tendency of clients/patients to return to and recommend the practice irrespective of the reputation of the individual practitioner.”
Everything turns on the last clause. If patients return because of the location, the staff, the records, the referral relationships and the name, that value may survive your departure and is on the table. If they return because of you, it walks out with you. That single distinction decides more money in a divorce for physicians than any other issue on this page.
Hanson also closed a door people walk into. “Professional goodwill may not be confused with future earning capacity. We have not declared future earning capacity to be marital property.” A valuation that quietly converts your expected future income into a property award is doing the thing Hanson forbade.
And goodwill cannot be assumed into existence. Hanson holds that its existence “is shown only when there is evidence of a recent actual sale of a similarly situated professional practice, an offer to purchase such a practice, or expert testimony and testimony of members of the subject profession as to the existence of goodwill in a similar practice in the relevant geographic and professional market.” Three routes, and the third usually needs two witnesses rather than one.
Can My Spouse End Up Owning Part of My Practice?
Not as a functioning shareholder, and Missouri’s professional corporation statute is unusually specific about it.
Section 356.111.1 RSMo allows a professional corporation to issue shares “only to” natural persons authorized to render that professional service, certain trusts, licensed partnerships, professional corporations and limited liability companies “in which all members are licensed.” A spouse who is not a physician is outside those categories, which makes them a disqualified person as Section 356.021(1) RSMo defines the term.
There is an express exception for a decree, and it is the part most owners have never read. Section 356.111.3 RSMo makes a transfer in violation of the section void, “except that, nothing contained in this subsection shall prohibit the transfer of shares of a professional corporation by operation of law or court decree.” Note what that subsection does not contain. Any time period. The clocks live somewhere else.
The chapter also does not override your licensing board. Section 356.191 RSMo provides that nothing in the chapter “shall restrict or limit in any manner the authority and duty of any licensing authority,” which for a physician means the Missouri Board of Registration for the Healing Arts.
What Happens If the Shares Do Move?
They arrive stripped of almost every right, and they can be cancelled by operation of the statute.
Section 356.151 RSMo is one sentence and it does the work. On a disqualifying event the shareholder “shall not be entitled to hold any office or be a director in the corporation, render any professional service of any kind for the corporation or its customers or clients, or receive dividends on or be entitled to vote such shares.”
Section 356.141.1 RSMo then provides that where shares “are transferred by operation of law or court decree to a disqualified person,” the shares “may be transferred to a qualified person and, if not so transferred, shall be purchased or redeemed by the corporation.”
Then the clock, and it is not the one people quote. Section 356.141.6 RSMo gives twelve months after the death of a deceased shareholder but only six months after the disqualification or transfer. If nothing is completed in that window the shares “are automatically cancelled,” leaving the holder “no further interest as a shareholder” other than a right to payment or to pursue a fair value proceeding.
So a decree can move the value. It cannot make your former spouse your partner, and if nobody acts inside six months the certificate becomes a payment claim by operation of law. This is the most reassuring provision in a divorce for physicians and almost nobody knows it is there.
Does a Buy Sell Agreement Control?
It can displace the statutory route entirely, which is why it should be found before an appraisal is ordered.
Section 356.141.9 RSMo provides that any provision about the purchase, redemption or transfer of shares contained in the articles, the bylaws, “or in any private written agreement relating thereto, shall be specifically enforceable in the courts of this state and shall preempt the right” of the estate, the disqualified person or the corporation to bring an action under the section.
Specifically enforceable, and preemptive. The document you signed when you joined the group may decide more of this than any valuation report. Find it first, and read our page on divorce for business owners for how ownership agreements shape property division generally.
Is My Medical Degree or License Marital Property?
No, and two Missouri cases say so from different directions.
In Riaz v. Riaz, 789 S.W.2d 224 (Mo. App. E.D. 1990), a case where one spouse completed a neurology residency and became board certified during the marriage, the Eastern District stated that “Missouri courts have not recognized that an educational degree, or a professional license secured as a result of such education, constitutes marital property subject to division.”
The qualification comes from Sullivan v. Sullivan, 159 S.W.3d 529 (Mo. App. W.D. 2005), a case about a spouse who earned a medical degree during the marriage while the other worked. The court held that “a spouse’s contribution to the other spouse’s obtaining a professional degree, as was the case here, may be considered by the trial court in making a fair and equitable division of the parties’ marital property, and, if warranted, the contributing spouse may be awarded a higher percentage of the property that is properly classified as marital.”
The accurate version is narrow. The degree has no sale price and is not an asset. The years somebody worked, moved, and carried the household while you trained are a live argument about how the actual marital property gets divided, and they can also matter to spousal maintenance.
Can the Same Income Be Counted Twice?
It is a real concern, and Missouri has answered part of it rather than all of it.
If the practice is valued by reference to what it earns and maintenance is then ordered from those same earnings, the same income stream has done two jobs. Which valuation method was used therefore matters a great deal.
In Hill v. Hill, 53 S.W.3d 114 (Mo. banc 2001), the Supreme Court of Missouri held that “when calculating maintenance, a trial court must consider the income from retirement and IRA accounts to be apportioned as marital property,” while “the trial court determines the amount of income, if any, imputed from these accounts based on the facts and circumstances of each case.”
Now read what Hill was actually about. Roughly half a million dollars in retirement and IRA accounts. The opinion contains no discussion of a closely held business, a professional practice, goodwill or capitalized earnings.
So the retirement version has been decided and the practice earnings version has not, which leaves a real open question in every divorce for physicians where maintenance is contested. Anyone who tells you Missouri has resolved the second one is going past the published law. The argument is still worth making deliberately, with the valuation methodology in front of the court rather than assumed either way.
What Should I Gather First?
The governing documents, before anybody commissions an appraisal.
- Articles, bylaws, shareholder or operating agreement, and every buy sell provision and amendment. Section 356.141.9 RSMo is the reason this sits at the top of the list
- Your employment agreement, with the compensation formula, productivity credits, deferred compensation and restrictive covenants
- Several years of practice and personal financial records, meaning tax returns, K-1s, profit and loss statements and balance sheets
- Compensation history, because normalising owner compensation is where two valuation opinions most often part company
- Any prior offer, letter of intent or comparable practice sale, which is the market evidence Hanson actually asks for
That last category does more work than its length suggests. Under Hanson, market evidence is what separates goodwill that exists from goodwill that an expert asserts, and it is the item most often missing from the file at the start of a divorce for physicians.
Will I Have to Mediate Any of This?
In St. Louis County, quite possibly, and that surprises owners more than anything else on this page.
Local Rule 68.14 of the 21st Judicial Circuit requires parties in contested domestic relations and paternity cases to participate in mediation, and it reaches contested property division and maintenance rather than only the children’s issues. Good cause can include domestic violence, abuse or a significant imbalance of negotiating power, which the rule names in two separate places.
Statewide, Rule 88.04 lets a court order mediation of any contested issue in a domestic relations case, expressly including property division and maintenance.
So a contested practice valuation in a divorce for physicians can end up in a mediation session whether or not either party chose it. That is an argument for arriving prepared rather than an argument against the process. Our mediation page covers how we work inside it, and local rules change without notice, so confirm the current version.
What Does the Practice Question Not Decide?
Three things, and keeping them separate is most of the work.
It does not decide classification, meaning whether the interest is marital, separate or mixed. That is Section 452.330 RSMo, and our page on marital versus separate property covers it.
It does not decide division. Section 452.330.1 RSMo asks for proportions the court deems just after weighing five factors, and just has never meant equal. Our FAQ on dividing marital property covers those factors.
And it does not convert future earning capacity into an asset, which is the specific confusion Hanson warned against and the one that costs physicians the most.
Who Can Help With a Divorce for Physicians in St. Louis?
A divorce for physicians puts classification, valuation, support and the terms of a shareholder agreement in play at the same time, and the order in which they are addressed changes the answer.
Bardol Law Firm practices only family law and handles property and asset division for physicians and other professionals in St. Louis County, St. Louis City, St. Charles County and Jefferson County. You can read more about our high net worth divorce practice, about property and asset division, and the rest of our family law questions and answers.
You should not have to chase your attorney for basic updates while a valuation is running. Every client here has a named paralegal on the file, and we generally return calls within one business day.
Family Law, Simplified.
Bring the shareholder agreement to a first conversation. It usually shapes everything that follows. Contact Bardol Law Firm or call 314.918.0100.
This page is general information about Missouri law and is not legal advice, and it is not advice about a physician’s own licensing obligations. Bardol Law Firm practices family law only and does not provide tax, valuation or business advice. Every case turns on its own facts. The choice of a lawyer is an important decision and should not be based solely upon advertisements.