Breaking up with your spouse could be the the greatest threat to the financial health of your medical practice.
Breaking up with your spouse could be the greatest threat to the financial health of your medical practice. Divorce for physician-owners can be more daunting because of the unique circumstances of practice ownership.
Complicating matters further is the fact that physicians’ busy, stressful schedules may increase divorce risk. About half of all first marriages fizzle out, but physicians have a divorce rate 10% to 20% higher than the general population, according to Wayne M. Sotile, PhD, who studies medical marriages with his wife, Mary Sotile, a marriage counselor.
These heightened risks and consequences mean physicians need to be aware of the implications of divorce and take steps to minimize any professional damage caused by the end of a personal relationship.
The most proactive way for physicians to protect their interests in the case of a divorce is to have both parties agree to and sign a prenuptial agreement before conflicts arise.
But this step is shockingly uncommon, according to Ike Z. Devji, JD, an asset protection attorney with Lodmell & Lodmell P.C., in Phoenix, Arizona. “When I ask clients if they have a prenup, the most common response is, ‘No, we got married when we didn’t have anything, so it didn’t seem important.’ When you get divorced 20 years later, hindsight comes into play. Especially when you’re talking about doctors who marry other doctors, both people have significant income, earning potential, and assets,” he says.
The problem is even more pronounced in subsequent marriages, Devji adds, not just because divorces are even more common in second and third marriages, but also because they frequently happen during the spouses’ peak earning years. Women, he says, are particularly reluctant to protect themselves.
“Many people are getting remarried later in life when they actually do have money. And in those cases, the men protect themselves with a prenup, but successful women are still not thinking the right way. When I tell them I want them to have a prenup, they’re shocked I’d even bring it up.”
For both genders, “overlooking this issue is a huge, common, recurring flaw,” Devji says. “Many of the people who are most adversely affected by divorce are between age 50 and 60 and at their peak earning, and the potential for loss is great. It stands to cost you half of what you own and will earn going forward.”
Options for parting ways
Nonetheless, if you are among the majority of physicians with no premarital agreement detailing how you’ll handle property rights, assets, and other considerations, don’t panic. Physician divorces are complex with high dollar amounts at stake, but they needn’t be highly adversarial, says Kiilu Davis, JD, a certified family law specialist with Stone & Davis, P.C., in Scottsdale, Arizona.
One way you can reduce one of the costliest consequences of divorce-attorneys’ fees-is through mediation. Mediation is a voluntary process in which conflicting parties sit with a neutral third party knowledgeable about applicable laws (not necessarily a lawyer) to arrive at an agreement.
“Mediation is the cheapest [way to get divorced],” says Davis, who works primarily as a litigator but also as a mediator through an extension of his firm called Scottsdale Mediation. “Ultimately you could spend $100,000 on [litigating] a divorce, which is money you could use to put your kids through school or buy a new car,” he says. “I tell all my clients, ‘Would you rather put your kids through school or my kids through school?’”
The key to making a mediation work, Davis says, is taking the emotions out of it. “If you can treat it as a business transaction and you have two people who are actually willing to make a good-faith effort to resolve the issue, in the long run they both might come out much better,” Davis says.
But even when taking the mediation route, parties are allowed, if not encouraged, to seek their own counsel. Generally, outside attorneys’ names must be disclosed to the mediator, but nuances vary by state.
“Once the agreement’s been reached, what I tell each individual is to go out and have counsel take a look at the agreement simply to protect their interest,” Davis says. In many cases, the lawyer would be paid a one-time consulting fee for this service and not be expected to show up in court.
Regardless of the scope of counsel, any professional you hire should have specialized expertise and experience working with physicians, notes Devji. “What you don’t want to do is hire a contract lawyer who occasionally does divorce work on the side. You want a certified specialist. Domestic relations law is one of the few areas of law that does have a recognized legal specialty,” he says.
Thorny issues for physicians
Such high qualifications are necessary because even under the best circumstances, physician divorces can be complicated. Here are some issues experts say require special attention:
Alimony/spousal maintenance: The way spousal support is calculated varies by state, but factors such as whether one spouse supported the other while he or she was going to school are taken into account, Davis said.
In two-physician divorces, courts might factor whether one spouse ever had to curtail his or her practice for the other’s benefit, he adds. “It doesn’t have to make it harder, just more complicated. If two people are on more equal footing, then it’s that much easier because each one is much more willing to walk away with what they have,” Davis says.
Practice valuation: Practice value can be difficult to determine, especially when it comes to calculating the effect of goodwill.
“You have to look at it in terms of professional goodwill versus enterprise goodwill, and that’s what doctors have to think about,” Davis says. “How you do goodwill in a divorce can make it more complicated, but it does have a significant influence on the division of assets in the practice itself.”
In addition, there are various ways to factor in ownership of expensive medical equipment. If both spouses own half of a $500,000 magnetic resonance imaging machine, for example, a physician may get to keep the machine but forgo a half-million-dollar investment account. “Is that fair? I don’t know,” Devji says, “But I will tell you that the court routinely makes distributions that are equivalent but not in kind.”
Free labor: In many practices, a physician’s spouse serves as the de facto office manager, but often is never formally paid, Devji says.
“I will tell you that the claim of the labor that went into that practice and how she has helped build its value is significant when that relationship is terminated,” he says.
A better approach is to pay this individual a salary. Even a modest dollar amount will not only help the spouse-manager maintain an earnings history to use when trying to claim Social Security benefits later, but could also be invested entirely in a tax-protected 401(k). “Otherwise, free labor can cost you.”
Investment accounts: Another common scenario for physicians is that most of their net worth is tied up in investment accounts that they can’t access until age 65, Devji notes.
“I’ve seen the investment accounts and retirement accounts of physicians jeopardized and liquidated when we can’t divide them in a simple way to make a distribution,” Devji says. “[Individual Retirement Accounts], benefit plans, and other types of those things are costly, complex, and time- consuming to break up, especially for people who have put them in plans they didn’t plan to touch for another X number of years.” It’s another reason to hire expert counsel.
Avoid Poor Coping Techniques
Finally, physicians need to recognize that the stress and distraction of a divorce can put him or her at risk for stress-related health problems and behavior issues.
Devji has seen, for example, cases in which a marriage has broken up and a physician subsequently gets arrested for drunken driving, with potentially dire consequences for the reputation of the physician as well as the medical practice.
“The biggest risk for physicians is that they’re so indoctrinated and so, by nature, inclined to be heroic in the face of extraordinary stress that they tend not to take appropriate care of themselves when they’re going through the sorts of transitions that every human being finds to be incredibly difficult,” says Wayne M. Sotile, PhD, founder of the Center for Physician Resilience in Davidson, North Carolina.
What’s more, he adds, because of their medical training and societal expectations, physicians may feel a heightened sense of shame surrounding a divorce.
Therefore, physicians are at high risk for unhealthy coping patterns after a marriage ends, which can lead to dangerous consequences for the physician, the practice, and its patients.
“Under ordinary circumstances for most doctors, work is stressful. They come home from work with less energy than they went in because it takes energy from the doctor to deal with sick and scared and hurting people all day long,” explains Dike Drummond, MD, a physician burnout expert and founder of TheHappyMD.com.
“It’s not uncommon, though, when I see people who are unable to recharge at home, because of the collapse of their primary relationship, for it to show up as burnout at work, even if nothing at work has changed,” he says.
The risks of physician burnout and distress are far-reaching, and can potentially lead to lower physician productivity, lack of engagement, workplace conflicts, and even compromised patient safety. “No matter how strong you are, when you’re going through a divorce you’re at increased risk of substance abuse, self-medicating inappropriately or mismanagement of emotions.”
Despite the substantial financial and legal implications of a physician divorce, the personal side of the matter should not be overlooked. Fortunately, there are strategies physicians can employ to stave off these consequences:
1. Prioritize self-care
Because divorcing physicians are losing the ability to refill their emotional and spiritual bank accounts at home and through their marriage, it’s more important than ever that they do whatever they can to get adequate rest, exercise, and take really good care of themselves, says Dike Drummond, MD, founder of TheHappyMD.com.
Wayne M. Sotile, PhD, with the Center for Physician Resilience, agrees. “If ever there were a time to turn to personal friends and loved ones, it’s now. Or to get life coaching to help you understand the developmental process that goes on, to elucidate it in order to cope better. There’s no better time to find somebody to talk with and be sure you engage in healthy pleasures-including doing good work-and not unhealthy escapism,” he says.
2. Learn mindfulness techniques
“Mindfulness is the key to be aware of the extra stress and have a tool to let it go,” says Drummond.
One technique Drummond teaches as a physician coach and presenter is that of creating a “boundary ritual” between work and home. The example he uses is the well-known way Fred Rogers always changed into his sneakers and sweater at the beginning of Mr. Rogers’ Neighborhood. “You don’t know what he does outside that door, but he doesn’t ever start the show until he becomes ‘Mr. Rogers.’”
Boundary rituals for doctors can be simple, such as changing into or out of work clothes or making a mindful transition when taking a car key out of the ignition, Drummond says. Most doctors have never been taught how to do this he adds, and in the case of divorce it’s important it gets built into doctors’ routines when crossing both boundaries.
Most often, he explains, doctors need to learn this exercise to consciously leave work at work and “come all the way home” to be fully present. But in the case when there’s trouble at home, doctors need to also create a physical ritual to leave behind the frustration and sadness over their marriage and focus fully on being a doctor and taking care of patients.
3. Maintain the right level of openness at work
In many cases, it’s useful for physicians to be forthright with colleagues and staff about a divorce, Sotile says, with words along the lines of, “I’m going through a difficult time, and would appreciate your kind thoughts.”
But don’t overly rely on your work relationships to help you cope, he cautions. “You have to maintain the ‘sweet spot’ of sharing your own vulnerability and humanness, but also maintain a leader’s stance,” he says. “Emphasize to them that you’re getting help and support and that you as a group will get through this.”
And no matter what you say, Sotile adds, be sure to speak positively about your former spouse. “People are going to judge your character, not the other person’s, by what you say about them. In a small community they’re going to get the skinny on who did what to whom and it will soon be yesterday’s news. In the meantime, maintain your integrity by staying respectful of your spouse,” Sotile says.