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Julian Ribet, partner and founder at Ribet Myles Family Law, urges doctors to understand the nature and value of their financial assets before agreeing divorce settlements.
Most doctors will have complex financial arrangements. This stems from the myriad career opportunities and benefits the profession now has in both the NHS and the private health sector. Doctors may receive a mixture of NHS (including locum) and private patient salaries, hold NHS and private pensions, be a GP partner, own a private practice and have other medical business interests.
Yet this financial picture, unique to the medical profession, can pose challenges for doctors going through the divorce process. It is not as straightforward as just dividing property and savings between the spouses.
The value of these assets at face value won’t necessarily be clear and may not be easily splittable. Without proper scrutiny and understanding, a financial settlement reached with an ex-spouse could be disadvantageous to the doctor, or even both parties (especially when incorrect values are used to decide how much to offset against other assets belonging to the couple). An accurate evaluation of the income streams is especially important when spousal and child maintenance are being considered.
Therefore, before agreeing on any financial settlement, it is important to understand and seek advice on the true nature of these interests and assets, and how their value is to be properly determined and treated by the divorce process and the courts. This applies to all doctors, be they surgeons, consultants, resident doctors, GP partners or private medical practice owners.
Multiple salary streams and future earnings
Employment salaries from private, NHS and consultancy work will need to be assessed, as will potential future earning capacity. Levels of income will likely be different across these streams; for example, locum and consultancy work will be variable. Career progression throughout the marriage, as well as beyond, should also be considered. This is particularly important in situations where the doctor is still undergoing medical training or where one spouse may have made sacrifices to support their spouse’s medical career.
While future earning capacity cannot be treated as an asset and split, the court – if the couple cannot agree between them – will consider the doctor’s career progression and likely future earning capacity in the wider context of deciding on the financial needs of each party, as well as levels of spousal and child maintenance. For example, the court might find it pertinent if the doctor is transitioning to a consultant role, or if there is likely to be a large increase in income.
This ever-changing and inconsistent picture means a doctor’s various salary streams should be understood and explained very carefully before putting them forward in settlement negotiations.
GP partnerships
For GPs who are partners within the practice where they work, partnership shares, profit distributions, income from surgery premises, capital accounts as well as their salary may also need to be accounted for in the financial settlement process.
Some of these assets may be less lucrative than others – for example, the partnership interest may be of less value than the premises. Hence why it is wise for the parties to jointly instruct an independent valuer who will be able to assess how much value the partnership and its constituent parts bring to the divorce. It is also important to revisit the terms of the GP partnership agreement.
NHS pension
An NHS pension can be one of the most valuable assets for a doctor. However, doctors should not rely on the cash equivalent transfer value of their pension. This calculation usually undervalues the pension by a large margin. The NHS pension is also a defined benefit scheme which has its own complex rules, especially compared to private pensions.
The NHS pension will need to be addressed in the financial settlement through a pension sharing order, or by considering its value offset against the value of other assets. Therefore, specialist actuarial advice from a Pension On Divorce Expert (known as a PODE) is likely to be necessary to determine its true value (as well as any other private pensions), so that the correct value is attributed to these assets within the settlement negotiations.
Private practice ownership and other business interests
While a doctor may benefit from a large income from a private practice and is likely to in the future, its saleable value may be modest. This is due to the business’s goodwill being connected to the individual doctor running it, and therefore the small pool of potential buyers.
Some doctors may also provide their clinical work under a limited company or consultancy business, which is bound by various financial regulations and responsibilities, which can impact their value.
An independent valuer can work with a lawyer to help doctors understand the true value of their commercial interests.
It really is worth seeking early legal advice to formulate a strategy and to understand how a court would be likely to divide the assets and income so as to be able to achieve the best possible outcome.
