Valuing Goodwill of a Law Firm in an Arizona Divorce
If you or your spouse is an attorney going through a divorce, you will need to know the rules regarding valuing goodwill of a law
firm in an Arizona divorce.
Goodwill is an intangible asset that can be defined as an advantage a business has as a result of its reputation.
Valuing goodwill can be tricky due to its intangible nature.
In its published opinion in Walsh v. Walsh, 230 Ariz. 486 (App. 2012), the Court of Appeals examined the methods of valuating goodwill.
Walsh involved a divorce between Husband and Wife, who were both successful attorneys. The husband was a shareholder at the Phoenix branch of a national law firm and the parties disagreed over the community property interest in his professional goodwill.
Appraisal Standard in Valuing Goodwill of an Attorney
Using the realizable benefits standard, Husband’s position was that his goodwill of the law firm should be valued at $140,000 – which was equivalent to his stock redemption value at the firm.
Using the capitalization-of-earnings approach, Wife’s position was that Husband’s goodwill was worth $1,269,000.
The trial court agreed with Husband and valued his interest in the firm to $140,000 and Mother appealed.
The Court of Appeals rejected the trial court’s limited approach to valuing goodwill, finding that the realization benefits approach applied to Husband’s interest in the firm’s assets, not his goodwill based upon his reputation and experience.
The Court of Appeals ruled that the court may apply the Wisner factors in valuing goodwill: namely, the practitioner’s age, health, past earning power, reputation in the community for judgment, skill and knowledge, and his or her comparable professional success.
The Court of Appeals remanded the case to the trial court for a new determination of Husband’s goodwill, with the caveat that in applying the Wisner factors, the court must ensure that it does not divide as community property future earnings that are based solely on the professional’s post-dissolution work effort.
More Articles About Arizona Community Property Laws
- Community Lien on Sole and Separate Property in Arizona
- Community Lien in Arizona
- Community Liens Separate Property in Arizona
- Community Property and Personal Guaranty in Arizona
- Determining Community Versus Sole Property in Arizona
- The difference Between Community and Separate Property in Arizona
- Disclaimer Deed in a Divorce in Arizona
- Divide Retirement Accounts in an Arizona Divorce
- Dividing Property Not Included in Divorce Decree in Arizona
- Division of Debt in an Arizona Divorce
- Do Rules Regarding Property Apply to Debts in an Arizona Divorce
- Enforce Division of Property and Debt in an Arizona Divorce
- Enforcing a Property Settlement Agreement in Arizona
- Filing a Lis Pendens in a Divorce in Arizona
- How is Property Divided in a Divorce in Arizona
- How to Divide Property in Arizona When a Spouse is Hiding Assets
- Is All Property Community Property in Arizona
- Is Arizona a 50 50 State in a Divorce
- Is Separate Property Divided in Arizona Divorce
- Marital Property Laws in Arizona
- Military Retirement Pay and Divorce in Arizona
- Pensions and Divorce in Arizona
- Separate Property Used to Purchase a Home During Marriage in Arizona
- Sole and Separate Property Divorce Arizona
- Is a Spouse Liable for Credit Card Debt in Arizona
- Stock Options Divided in an Arizona Divorce Case
- Stock Options in an Arizona Divorce
- Unequal Division of Property in Arizona Divorce
- Unfair Separation Agreement in Arizona
- Valuation and Distribution Options For Pensions in an Arizona Divorce
- What is Community Property in Arizona
- What is Separate Property in Arizona
Chris Hildebrand wrote the information on this page about appealing an arbitration award in a divorce in Arizona to ensure everyone has access to information about divorce laws in Arizona. Chris is a family law attorney at Hildebrand Law, PC. He has over 24 years of Arizona family law experience and has received multiple awards, including US News and World Report “Top Arizona Divorce Attorneys”, Phoenix Magazine “Top Divorce Law Firms”, and Arizona Foothills Magazine “Best of the Valley” award. He believes the policies and procedures he uses to get his clients through a divorce should all be guided by the principles of honesty, integrity, and actually caring about what his clients are going through.