When the value of a business that is a marital asset is divided in divorce, the question of the “goodwill value” of the business will usually arise.
Goodwill is defined by Black’s Law Dictionary as “a business’s reputation, patronage, and other intangible assets that are considered when appraising the business, esp. for purchase; the ability to earn income in excess of the income that would be expected from the business viewed as a mere collection of assets.” (Black’s Law Dictionary (11th ed. 2019))
The Utah appellate case of Marroquin v. Marroquin defined institutional or enterprise goodwill as “based on the intangible, but generally marketable, existence in a business of established relations with employees, customers and suppliers, and may include factors such as a business location, its name recognition and its business reputation” (¶15, 440 P.3d 757 (Utah App. 2019)). In contrast, “Personal goodwill is based on an individual’s “reputation for competency” and is not subject to distribution upon divorce.” (Id.) This is why, in Marroquin v. Marroquin, where the court determined the only goodwill associated with the husband’s business was that of personal goodwill, the value of such goodwill was not subject to distribution upon divorce of the parties. Consequently, requiring the husband to pay the spouse part of the value ascribed to the personal goodwill would have been inequitable.
In the Utah appellate case of Stonehocker v. Stonehocker (2008 UT App 11, 176 P.3d 476 (Utah Ct. App. 2008)), the value of the husband’s business would be determined independent of any goodwill component where the business was the product of the husband’s reputation, goodwill, and sole efforts, and there could be no good will in a business that was dependent for its existence upon the husband who conducted the enterprise and would vanish were the husband to die, retire or quit work (Id. at ¶ 44).
Most small businesses do not have business or commercial goodwill, but that does not stop many spouses from claiming that business/commercial goodwill exists, that it exists in prodigious quantities, and that the spouse making the claims is entitled to a big ‘ole cash award equal to half of the alleged business/commercial goodwill.
What are ways divorcees reach a mutual agreement when splitting up their assets?
What they often do (but shouldn’t): rationalize and justify their greed and pettiness in advancing their “arguments”* for why they should get what they want. This results in claims for obviously lopsided divisions of marital property and to false and fatuous claims that what is marital property is actually “my separate property” and “that was a gift from my parents to us, so now that we are divorcing, it’s mine.” Being greedy and petty in the division of marital assets is self-defeating because it often leads to wasting more time, effort, and money than the property is worth.
What they could—and usually should—do: 1) think like your divorce court judge will think and do what the law requires your judge to do, i.e., divide all marital property equally (meaning an equal division of the value of the property), unless there are clearly evident exceptional circumstances that equitably warrant an uneven division of marital property.
*the definition of the word “argument” is not what many people believe. An argument is not the same as a quarrel. An argument is “a reason or set of reasons given with the aim of persuading others that an action or idea is right or wrong.”
What are ways divorcees reach a mutual agreement when splitting up their assets?
What they often do (but shouldn’t): rationalize and justify their greed and pettiness in advancing their “arguments”* for why they should get what they want. This results in claims for obviously lopsided divisions of marital property and to false and fatuous claims that what is marital property is actually “my separate property” and “that was a gift from my parents to us, so now that we are divorcing, it’s mine.” Being greedy and petty in the division of marital assets is self-defeating because it often leads to wasting more time, effort, and money than the property is worth.
What they could—and usually should—do: 1) think like your divorce court judge will think and do what the law requires your judge to do, i.e., divide all marital property equally (meaning an equal division of the value of the property), unless there are clearly evident exceptional circumstances that equitably warrant an uneven division of marital property.
*the definition of the word “argument” is not what many people believe. An argument is not the same as a quarrel. An argument is “a reason or set of reasons given with the aim of persuading others that an action or idea is right or wrong.”
If I have to give my spouse half of my retirement after a divorce, should I still go forward or just ride it out?
Great question, but not for the reasons you may think.
Remember this first: just because you do not file for divorce does not mean you will prevent a divorce from occurring; your spouse can file for divorce and obtain a divorce whether you “agree” to it or not. This is what “no-fault divorce” is.
“No-fault divorce” does not mean that “you can’t divorce if I’ve committed no fault.” No. What no-fault divorce really means is that one who files for divorce is not required to find fault or ascribe fault to his/her spouse as grounds for divorce.
Otherwise stated, even if your spouse is perfect in every way and done nothing wrong, you can file for divorce against your spouse anyway; no fault need be ascribed to your spouse to get a divorce from your spouse.
So, as you can see: if you think that “I’ll hang on to all of my retirement funds/benefits, as long as I don’t file for divorce,” that is not true. You can’t just “ride it out” and keep control of all of your retirement funds/benefits. The reason why is that your spouse could file for divorce against your will and seek (almost surely get), in the absence of exceptional circumstances, half of all retirement funds/benefits acquired or accrued during the marriage.
Utah Family Law, LC | divorceutah.com | 801-466-9277
My spouse abused me emotionally, so I get more money in divorce now, right?
Strongly believing or feeling that “I deserve” an unequal division of the marital estate does not mean that you do legally deserve any such thing or that the court will agree with you. That is not how divorce law works. There are exceptions to this rule, but they are very rare.
You need to understand first that courts generally do not divide and distribute the marital estate (“marital estate” is the term for the property and assets acquired during the marriage) to reward or to punish a spouse.
The presumption is that the marital estate will be divided equally, unless there is some extenuating, exceptional circumstance that would warrant an unequal division and distribution (such as showing that one spouse inexcusably diminished the value of the estate and/or dissipated marital assets during the marriage to the detriment of the other spouse).
Rarely, if ever, is an unequal division of the marital estate made merely because the other spouse was physically or emotionally abusive or engaged in “unethical behavior.” If the court does make an unequal division of the marital estate based upon physically or emotionally abuse and/or unethical behavior, such misconduct would usually need to be 1) first, shown to be severe or chronic and 2) second shown to warrant/justify an unequal distribution of the marital estate property.
Meet and talk with a knowledgeable attorney to find out what the specific law is on this subject in your jurisdiction to find out what the law is where your divorce action is or will be filed.
Utah Family Law, LC | divorceutah.com | 801-466-9277
Great question. The answer is (for Utah, where I practice divorce and family law), generally, no, your spouse is not entitled to half of property you inherited during the marriage.
Here is the answer for the jurisdiction where I practice law (Utah):
Premarital property, gifts, and inheritances may be viewed as separate property, and in appropriate circumstances, equity will require that each party retain the separate property brought to the marriage. However, the rule is not invariable. Burke v. Burke, 733 P.2d 133, 135 (Utah 1987) (footnotes omitted). Watson v. Watson, 837 P.2d 1 (Utah Ct. App. 1992).
In Utah, trial court making “equitable” property division pursuant to divorce statute should generally award property acquired by one spouse by gift and inheritance during marriage, or property acquired in exchange thereof, to that spouse, together with any appreciation or enhancement of its value, unless other spouse has by his or her efforts or expense contributed to enhancement, maintenance, or protection of that property, thereby acquiring equitable interest in it, or property has been consumed or its identity lost through commingling or exchanges or when acquiring spouse has made gift of interest therein to other spouse. Utah Code Ann. §30-3-5. Mortensen v. Mortensen, 760 P.2d 304 (Utah 1988).
Premarital property, gifts, and inheritances may be viewed as separate property, and in appropriate circumstances, equity will require that each party retain separate property brought to marriage; however, the rule is not invariable. Burke v. Burke, 733 P.2d 133 (Utah 1987).
In property division incident to divorce, inherited or donated property, including its appreciated value, is generally separate from marital estate and hence is left with receiving spouse. Burt v. Burt, 799 P.2d 1166 (Utah Ct. App. 1990).
Wife’s inheritance maintained its separate character even though inherited funds had been substantially changed in form, where inheritance was readily traceable to segregated accounts, portfolios and real estate. Burt v. Burt, 799 P.2d 1166 (Utah Ct. App. 1990).
As general rule, premarital property, gifts, and inheritances may be viewed as separate property when making distribution of property in divorce proceeding; however, in appropriate circumstances one spouse may be awarded property which other spouse brought into marriage. Naranjo v. Naranjo, 751 P.2d 1144 (Utah Ct. App. 1988).
Utah Family Law, LC | divorceutah.com | 801-466-9277
Why is dividing money in a divorce so difficult? Shouldn’t it be as simple as each takes what each earned?
In Utah (where I practice law), the law is not “take what we each earned.” In Utah, the law is:
“Marital property is ordinarily all property acquired during marriage and it encompasses all of the assets of every nature possessed by the parties, whenever obtained and from whatever source derived. (Dunn v. Dunn, 802 P.2d 1314, 1317–18 (Utah Ct.App.1990)”
See also Keyes v. Keyes, 351 P.3d 90, 99 (Utah Ct.App. 2015):
¶ 28 In addressing the distribution of property between divorcing spouses, the trial court must first determine whether the assets in dispute are marital or separate property. Dahl v. Dahl, 2015 UT 23, ¶ 121, 345 P.3d 566. “Marital property is ordinarily all property acquired during the marriage … whenever obtained and from whatever source derived.” Dunn v. Dunn, 802 P.2d 1314, 1317–18 (Utah Ct.App.1990) (citation and internal quotation marks omitted).
“In Utah, marital property is ordinarily divided equally between the divorcing spouses….” Stonehocker v. Stonehocker, 2008 UT App 11, ¶ 13, 176 P.3d 476. After identifying property as marital, the court must “consider whether there are exceptional circumstances that overcome the general presumption that marital property be divided equally,” “assign values to each item of marital property so that [a] distribution strategy … can be implemented,” and “distribute the marital assets consistent with the distribution strategy.” Dahl, 2015 UT 23, ¶ 121, 345 P.3d 566 (alteration and omission in original) (citation and internal quotation marks omitted).
On the other hand, “separate property, which may include premarital assets, inheritances, or similar assets, will be awarded to the acquiring spouse.” Stonehocker, 2008 UT App 11, ¶ 13, 176 P.3d 476 (citation and internal quotation marks omitted). In most cases, “equity requires that each party retain the separate property that he or she brought into the marriage, including any appreciation of the separate property.” Dunn, 802 P.2d at 1320. Separate property may lose its separate *99 character, however, “through commingling” or if “the other spouse has by his or her efforts or expense contributed to the enhancement, maintenance, or protection of that property.” Mortensen v. Mortensen, 760 P.2d 304, 308 (Utah 1988). In making this assessment, the court “look[s] to a party’s actions as a manifestation of a spouse’s intent to contribute separate property to the marital estate.” Dahl, 2015 UT 23, ¶ 143, 345 P.3d 566.
After you marry, your income from employment is marital property, not your separate property. That means that during the marriage your spouse has a right not just to half of your income, but all of it (your spouse has no spousal claim to all—or even half—of your income when he/she ceases to be your spouse). This also means that in the case of a divorce your spouse will get half of any retirement funds you save or benefits you accrue during the marriage. And even after divorce your spouse can get a portion of your income in the form of alimony, if your spouse came to be dependent upon you financially to maintain the standard of living to which he/she became accustomed during the marriage.
Can a wife expect a property to be split between partners if she cheated on her partner in the US (assuming no contract has been signed)?
Yes.
People who are not divorce lawyers think that courts really hate and really punish infidelity and adultery by making lop-sided property and/or alimony divisions in divorce.
They do not.
Sure, you may hear of the occasional outlier judge who does, but they are the exception that proves the rule.
The purpose of dividing marital property is to ensure a fair division between both spouses. An equal division is presumptively fair. While some acts or omissions of a spouse can result in a less than or greater than equal division of property, those instances are rare and infidelity is usually not one of the acts that will result in an unequal division of marital property or determine whether one gets or pays alimony.
While in many jurisdictions (including Utah, where I practice divorce and family law) a court can consider infidelity in awarding alimony, the purpose of alimony is not to punish. Instead, the purpose of alimony is to prevent an ex-spouse from becoming a welfare charge on the state. Alimony is thus primarily based upon need and ability to pay. Infidelity may result in a slightly greater alimony award or perhaps an award of slightly longer duration, but it usually won’t result in the innocent spouse being awarded the couple’s entire house or the like.
Utah Family Law, LC | divorceutah.com | 801-466-9277