McReath v. McReath: A circuit court shall include the value of the salable professional goodwill when it is developed during the marriage.
By Laura Morgan, Family Lawyer Consultant
When valuing a business interest that is part of the marital estate for purposes of divorce, a circuit court shall include the value of the salable professional goodwill attendant to the business interest; when the salable professional goodwill is developed during the marriage, it defies the presumption of equality to exclude it from the divisible marital estate. When professional goodwill, which is part of the divisible marital estate, is divided into two subgroups, namely personal goodwill and enterprise goodwill, “enterprise goodwill” is characterized as goodwill in professional practice attributable to the business enterprise itself by virtue of its existing arrangements with suppliers, customers or others, and its anticipated future customer base due to factors attributable to the business; however, “personal goodwill” is characterized as the goodwill that is attributable to the individual owner’s personal skill, training or reputation, i.e., it is the goodwill that depends on the continued presence of a particular individual. If a spouse is awarded income property, that spouse can turn around and sell the income property the next day and, thereby, attain the value of the property, or the spouse can elect to keep the property and earn income from it, and, as the spouse earns income, he does not lose the value of the property because he always has the option to sell the property for fair market value; therefore, unlike pension benefit payments (up to the present value placed on the pension at the time of the division), the value of investment property is separate from the income it generates and, consequently, in determining maintenance, counting income from income-earning assets assigned to a spouse in property division will typically not implicate double counting.
Laura Morgan is a Family Law Consultant. Laura is available for consultation, brief writing and research on family law issues throughout the country. She can be reached through her Web site.
Reprint with permission.