Understanding Equitable Distribution, Community Property, and Goodwill When It Comes to Divorce Settlements


Different states and different individual circumstances can have an impact on dentists’ decisions about going to court or attempting to mediate a divorce settlement without court.

BACHO FOTO / STOCK.ADOBE.COM: Understanding Equitable Distribution, Community Property, and Goodwill When It Comes to Divorce Settlements


Not all marriages have fairytale finishes. Some end in divorce, which often leads to lawyers and lots of negotiations. When a dentist is involved, the division of assets can vary from state to state.

Depending upon where the dentist and his or her partner live, their divorce may assist the dentist or the dentist’s spouse. As an example, if the couple lives in a state in which equitable distribution is the rule, the dentist’s personal goodwill will help him or her escape a large judgement in favor of the spouse.

This is because the dentist’s personal goodwill is not considered to be a marital asset. It is aligned with the personal assets of the dentist and is not available for distribution to the spouse. The enterprise or dental practice goodwill is not a personal asset. It is considered a marital asset and that amount attributed to it is available for distribution to the spouse. It is not a personal asset, but it is considered marital property and is divisible based upon what the judge in the case decides is the percentage to go to the spouse and what will go to the dentist. This will enable the case before the judge to be complete. It is important to add a study of the goodwill attributes and the assignment to the marital and personal goodwill of the dentist.

What occurs at a trial in a state that is recognized as a community property state?

Unlike a state that is recognized as an equitable distribution state, in a state that is termed as a community property state, everything is divided into 2 parts. One is for the dentist and the other is for the spouse of the dentist. In this type of state, the spouse will most likely receive more of a distribution from the dental practice than in an equitable distribution state because of the valuation of the dental practice with no need for a goodwill allocation. The dental practice being evaluated presents no need for an allocation between a personal goodwill and dental practice goodwill step by step amount allocated because of the attributes of goodwill. Preparing for the tax approach if the practice is eventually sold, the personal and dental practice goodwill is an important approach to be allocated.

The hypothetical final settlement and the example for the dentist and his or her advisors:

To give a hypothetical example of the difference between the equitable distribution state and the community property state, the following should assist those wondering about who gets what in a divorce settlement: If there is $1,000,000 to distribute from the dental practice and the state is a community property state, the hypothetical distribution would be $500,000 to the dentist and the other $500,000 to the spouse of the dentist. There would be no regard to the goodwill of the dentist or of the dental enterprise. In an equitable distribution state, the goodwill of the dentist was $700,000 and the goodwill of the dental practice was $300,000. The dentist would then receive $700,000 and the spouse would receive $300,000. This allocation is what the court would decide. Of course, the judge’s final opinion could be appealed and the arguments would be put forth to an appeal’s court who would either concur with the trial judge’s opinion or change the amount that would go to each of the parties. An appeals court could also send it back to the trial judge for “reconsideration.”

Equitable distribution and community property states:

The dentist and the spouse of the dentist live where they live. They can not change their address just because they want to have their case heard in an equitable distribution state or a community property state unless the dentist moves his or her dental practice.

It is hard enough to move a house. Moving the dental practice is an arduous process that takes a lot of time. It can also ruin the positives that took so long to build in the prior existing dental practice office. The settlement is based on a court’s decision. The best approach is to allow the court to have as much information as possible and to present facts that will assist the court in its determination about whether the presentation by the dentist and his or her spouse is strong enough to favor the client who is being represented. If it is not, it is time to go back to the valuation and dental practice attributes and make as many revisions as it takes to assist the client. Pricing the presentation may have to be adjusted but if honesty is what the dental practice presenter wants to see and what his or her client wants then an adjustment to the valuation that may cost more now, can cost quite a bit less than if the dental practice evaluator must return to update the proposal.

Finding the best dental practice evaluator and the best attorney available to present the case and to win it:

Everything is all about the money. There is an adage that goes like this: “Pay me now or pay me later:”

Get the best dental practice evaluator that you can find. This person will be more expensive than an evaluator who does not specialize in dental practice evaluation. Get the evaluator who is also someone who may go to court. Do not get an evaluator who is leery about a court room appearance. The evaluator’s testimony may win or lose the case for you.During your interview process to get the best, remember that some of the top evaluators will not testify. They are afraid to go ahead with the valuation and critique of the other evaluator’s valuation. These people will want to know if there is going to be a definite court room appearance. They will many times not take the case if it means that they must testify. Having the adversarial attorney rip up your case is a humiliating and humbling feeling since you are an expert.

So, here’s a final bit of advice: Let the client interview you and he or she can assist your client’s attorney in deciding who to hire.

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