Divorce is never an easy process to go through. However, when you're both doctors, and you have to deal with a medical practice, the process can become downright difficult. The first thing you need to do is hire a good divorce attorney. The next thing you'll need to do is determine how you're going to deal with the medical practice. As doctors, your medical practice is probably your biggest joint asset. There are three ways you can deal with your medical practice. First, you could remain partners, and continue running the practice together. Second, you could sell the practice and divide the profits equally. Third, you could buy out your spouses half of the practice. If you've decided to take that route, you don't have to take cash out of your savings account to complete the transaction. Here are four methods you can use to buy your spouse out of their half of the medical practice.
Take a Loan Out on Your Investment Accounts
If you have a strong investment portfolio, you can take out a loan against those investments. That will free up much-needed cash to purchase the practice, while keeping your investment account intact. You should avoid selling your investments outright, as that could leave you owing a hefty tax bill to the IRS.
Borrow Against the Practice
Depending on the equity you and your spouse have built up in the practice, you could take out a loan against the practice. The loan will be based on the value of your practice. One downside of this method is that you run the risk of losing your practice if you fall behind on a payment, which can happen if the practice goes through a slow period.
Guarantee Monthly Payments
If your practice is on solid ground, and you have a steady flow of income each month, you should consider offering your spouse guaranteed monthly payments until the debt is paid off in full. This will allow you to spread the payment over several months or years. It will also provide your spouse with a steady cash flow each month that can be used to build up their new practice.
Go With a Mix
Another way to successfully buyout your spouses half of the practice is to mix things up a bit. Instead of using one method for the buyout, use several. Create a package arrangement using funds from a home equity line of credit, guaranteed monthly payments, and early withdrawal from a retirement account. This method allows from some flexibility in the specific arrangements.
If you're going through a divorce, and your partners in a medical practice with your spouse, use the tips provided here to buyout their half of the practice. For questions and concerns, be sure to speak to a divorce attorney near you.