How professional goodwill should be considered by a court when it is calculating spousal maintenance and marital property division is one of the more hotly debated issues in family law. Courts across the nation have come to different conclusions on the issue. Some courts will count professional goodwill only once for either maintenance or property division. However, other courts will use goodwill to determine both property division amounts and again for calculating spousal maintenance (sometimes called alimony.) At least one Wisconsin Court of Appeals has decided that business goodwill can be counted twice.
This last July, the Court of Appeals decided the case of McReath v. McReath, which allowed business goodwill to be counted twice. This month, the Wisconsin Supreme Court accepted review of the McReath case.
This case will have important ramifications for divorcing professionals throughout Wisconsin. Goodwill is a concept that broadly encompasses the intangible assets of a business, including customer loyalty. Even though goodwill is relatively hard to define with precision, Wisconsin courts will include it when dividing marital property.
In the McReath case, the husband is a dentist with an orthodontics practice. The McReaths were married for 20 years, and he had acquired the practice early in their marriage. In the marital property division contest, the trial court accepted the wife’s valuation of the practice at $1.058 million and it granted her half of that amount.
The trial court also awarded the wife $16,000 per month in maintenance for twenty years. The husband argued that this amounted in a double counting of his professional goodwill, and therefore requested that the property division amount be adjusted downward. The court of appeals rejected this argument, but did note that Wisconsin law is somewhat ambiguous on this subject. By accepting the McReath case, the Wisconsin Supreme Court has the opportunity to resolve the uncertainty in Wisconsin property division and maintenance law.
Sources:
State Bar of Wisconsin, “Wisconsin Supreme Court adds eight cases to docket, including high-capacity well dispute,” 12/16/2010
McReath v. McReath, 789 N.W.2d 89 (Wis. App. 2010)
