When doctors, dentists, lawyers, and licensed professionals are estranged from their spouses, they might wonder about how the judicial system will treat their professional practices in divorce. A professional practice might be viewed as a hybrid of a job and a business; in some cases, the practice cannot operate apart from the skill and reputation of the professional who attracts and serves customers. In the world of forensic accounting, this concept is known as “personal goodwill.” One of the great challenges of handling professional practices in divorce is to recognize, quantify and protect personal goodwill – and find other ways to compensate the professional’s spouse in a divorce.
In many jurisdictions, personal goodwill may not be counted as marital property. Personal goodwill is not marital property if it is not transferable to a seller. If a licensed professional could sell the professional practice and walk away, then customers and clients might also leave. A buyer would pay little or nothing for a professional practice that could not attract and retain customers. So, for the purposes of a divorce, the practice might be worthless.
Personal goodwill is not self-evident. In most divorce cases, a family lawyer or forensic accountant must prove it by examining the referral sources for the professional practice, the existence of other professionals who could substitute for the seller, and the value added to the practice by elements apart from the licensed professional. For instance, a medical imaging practice might have value, apart from its radiologists, in the expensive equipment that a buyer would need to break into the field. A dental practice might have value in its cadre of skilled, trained hygienists.