Dividing marital assets in a divorce – goodwill. One of the most challenging parts of a divorce involves dividing marital assets between divorcing spouses. Couples easily recognize that such assets includes things like the family house, the family car, and the family bank account. However, many divorcing spouses do not recognize that such assets may include goodwill associated with a family business or a spouse’s profession.
What Is Goodwill?
In short, goodwill is the expectation of continued public patronage associated with a person or business. According to the California Court of Appeal, goodwill is the advantage acquired by an establishment beyond the value of capital, funds, and other property associated with the establishment. It is the value received by regular customers due to an establishment’s local position, common celebrity, or reputation for skill or affluence.
Perhaps the easiest type of goodwill to understand is goodwill associated with a business. For example, a particular Mexican restaurant in your local town may have a reputation for good food and excellent service. This reputation means that customers are likely to continue coming to the restaurant in the future. This reputation–that is, goodwill–represents a value to the business beyond the normal assets we tend to associate with a restaurant, such as its building, recipes, kitchen appliances, tables, chairs, etc.
Professionals, such as lawyers and doctors, can have goodwill, too. Such a professional may acquire a reputation for skill or learning in a given profession that wins the confidence of patrons and ensures a certain amount of immunity from competitors.
Goodwill As a Marital Asset in a Divorce
Because businesses and professionals may possess a certain amount of goodwill, that goodwill may be considered part of the community property (e.g., property owned by both spouses) if acquired during marriage. In a divorce, a court will consider the value of such goodwill when dividing marital assets. Thus, if a person can establish the value of goodwill associated with a spouse’s professional practice, that goodwill will be considered when determining the community property award to that person.
What About Celebrity?
On its face, goodwill may seem a lot like fame or celebrity. However, California courts have made a distinction between the value of fame associated with a celebrity and goodwill associated with a business or professional practice. In short, celebrity is not an asset that can be divided during a divorce.
Because most of us are not famous we may not be bothered by this distinction. However, this rule means that if you divorce a spouse who has achieved some recognition and reputation as an artist, musician, writer, or the like, that the courts will not consider the value of such reputation when dividing assets.
Getting Legal Help in Sonoma County, Lake County or Mendocino County
If you are considering a divorce and have questions about how a Sonoma County court is likely to value your assets, including professional and business goodwill, Beck Law P.C., can help you. The family law attorneys at Beck Law P.C. can answer your questions and help you determine the best method of obtaining a divorce given your unique circumstances. For a free consultation regarding mediation or divorce, contact Beck Law P.C. at 707-576-7175 or visit us online.
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