Only two state jurisdictions had yet to address the determination of professional practice goodwill value in divorce—and now only Alabama stands alone. In Miller v. Miller, 2010 WL 4704326 (Ga.)(Nov. 22, 2010), the trial court valued the husband’s solo medical practice at $314,000, based on the wife’s expert appraisal, which applied the market and capitalization of earnings approach. The husband asserted several challenges on appeal. In particular, capitalizing his earnings was inappropriate when he paid himself a “normal” salary and double-counted his income to determine property division and support. More importantly, he said, the trial court’s valuation included his personal goodwill, which the majority rule in most states currently bars from the marital estate.

The Georgia Supreme Court agreed with his recitation of the majority rule, and based on leading precedent from other states (including May v. May (W.Va.) and Steneken v. Steneken (NJ), available at BVLaw) it decided to follow “the vast majority of jurisdictions and include enterprise goodwill in the valuation of a professional practice as part of marital property.” Further, professional goodwill “does not constitute marital property in Georgia,” the court held. The court confirmed the wife’s expert valuation in all respects, finding that it did not erroneously double count the husband earnings and it adjusted for professional goodwill. Read the complete case digest of Miller v. Miller in the next (January 2011) Business Valuation Update.

Updated free download and new Goodwill Guide. In the meantime, we’ve also updated our free download, “Goodwill Hunting,” a state-by state summary of the leading decisions on the disposition of private practice goodwill in divorce, posted now among the plethora of BVR’s free resources. We’re also including the most recent court decisions and expert articles in the 2011 edition of BVR’s Guide to Personal v. Enterprise Goodwill (Book & Online Guide), making it the most current, comprehensive resource on this complicated and recurring topic. Look for the updated guide at the BVR bookstore by January 2011.