Goodwill, double dipping, and the discounts that move the number

Three arguments decide most of the money in a business valuation, and none of them is about accounting. Whose goodwill is it. Is the same income being counted twice. And may the number be discounted because the share is hard to sell. Each is answered differently in different states, and each can move the result by a third.

Standard of value: the choice that moves the number most

Before any method is applied, someone has to decide what kind of value is being measured. Fair market value asks what a hypothetical willing buyer would pay. Fair value usually strips out the discounts. Investment value asks what it is worth to this particular owner. The standard is set by your state, not by the valuer, and most people never learn the word.

Standard of value: the number-changer nobody explains

Before anyone picks a method, a court has to decide what kind of value it wants: fair market value (a hypothetical willing buyer and seller), fair value (value to the actual owner-spouses, often without the discounts a real buyer would demand), or investment/intrinsic value (value to this specific owner). This choice is set by state law and moves the number more than the choice of method does.

Massachusetts uses a ‘fair value to the holder’ standard in divorce, not fair market value, meaning the court does not pretend a hypothetical outside buyer exists.

Reported consistently, not settled

The Supreme Judicial Court’s Bernier decision addressed how to value a business where each spouse effectively owned 50 percent, and rejected simply mimicking an open-market sale.

business valuations assumed each party had 50% ownership

Bernier v. Bernier, 449 Mass. 774, 873 N.E.2d 216 (2007)

New Jersey requires ‘fair value,’ not fair market value, and on that basis bars marketability and minority discounts in equitable distribution because no actual sale is happening.

The Appellate Division held that applying a discount premised on an outside buyer’s perspective unfairly shrinks the marital estate when the business is not actually being sold to a stranger.

no actual transfer of shares is involved in this equitable distribution case

Brown v. Brown, 348 N.J. Super. 466, 792 A.2d 463 (App. Div. 2002)

Virginia’s standard leans toward the property’s value to these specific parties (an intrinsic/investment-value orientation), not a generic market price.

Reported consistently, not settled

Virginia’s Court of Appeals framed the valuator’s job as finding the property’s worth to the parties themselves.

that value which represents the property’s intrinsic worth to the parties

Patel v. Patel, 2013 Va. App. LEXIS 110 (Va. Ct. App. 2013)

New Hampshire’s default in divorce valuation is fair market value.

Reported consistently, not settled

Compiled practitioner surveys list New Hampshire as an FMV state; this claim rests on a secondary compilation rather than a primary case holding located in this research, so treat the specific New Hampshire standard as unverified against a named statute or case.

unverified against a primary NH statute/case in this research

What to actually do

• Before hiring an expert, ask your attorney what standard of value your state’s courts apply in divorce. If it is fair value rather than fair market value, marketability and control discounts may not be allowed at all, which can matter more than the valuation method chosen.
• Do not assume a valuation done for a different purpose (a bank loan, an SBA application, a buy-sell agreement) used your state’s divorce standard of value. It probably did not.

Enterprise goodwill versus personal goodwill

This is the single largest fight in the field. Enterprise goodwill is value that would survive if the owner walked away: the location, the systems, the client list, the name. Personal goodwill is the owner’s own reputation and skill, which cannot be sold and which walks out of the door with them.

Many states hold that personal goodwill is not a divisible marital asset at all, on the reasoning that it is really future earning capacity — and future earning capacity is already being accounted for in support. Other states divide all goodwill without the distinction. The same surgeon’s practice is worth a very different number in Indiana and in New Jersey.

Read on the courts’ own opinions where we could reach them, 31 August 2026. This is a live area: North Carolina moved in 2026. If your state is not here, it is because we had not read the case ourselves, not because the answer is obvious.

Goodwill: enterprise versus personal, where the real money is

Goodwill is the value of a business above its hard assets. Enterprise (or practice) goodwill belongs to the business and transfers with it; personal goodwill is the owner’s own name, relationships, and skill. Roughly half the states or more say personal goodwill is not a divisible marital asset at all, because it is really just future earning capacity, and support already accounts for that.

Indiana holds that goodwill tied to a particular person is not marital property because it is really just future earning capacity.

The Indiana Supreme Court drew the enterprise/personal line explicitly and tied personal goodwill to earning capacity, which Indiana law already excludes from divisible property.

goodwill that depends on the continued presence of a particular individual is a personal asset, and any value that attaches to a business as a result of this ‘personal goodwill’ represents nothing more than the future earning capacity of the individual and is not divisible

Yoon v. Yoon, 711 N.E.2d 1265 (Ind. 1999)

Pennsylvania excludes goodwill that depends on an individual’s own attributes or skill, and grounds the exclusion partly in avoiding double counting against alimony.

The Pennsylvania Supreme Court found a lawyer’s client base (Greek-community clients who would follow him) was personal, not firm, goodwill, and not marital property.

That goodwill value which is intrinsically tied to the attributes and/or skills of certain individuals is not subject to equitable distribution because the value thereof does not survive the disassociation of those individuals from the business.

Butler v. Butler, 541 Pa. 364, 663 A.2d 148 (1995)

North Carolina’s Supreme Court, in an August 2026 decision reversing the Court of Appeals, held personal goodwill of a professional practice is not marital property.

This is a very recent, and significant, reaffirmation of the majority approach; it reversed a Court of Appeals panel that had allowed inclusion.

the personal goodwill of a professional practice does not qualify as marital property for equitable distribution purposes

Sneed v. Johnston, No. 130PA24 (N.C. Aug. 14, 2026), rev’g 293 N.C. App. 650 (2024)

Kentucky’s Court of Appeals excludes personal goodwill and requires an actual allocation between personal and enterprise components, rejecting any rule limiting the distinction to licensed professional practices.

Reported consistently, not settled

The court rejected the argument that only classic professional practices (law, medicine) have a personal-goodwill component distinct from business goodwill.

Maginnis v. Maginnis, No. 2019-CA-1090-MR (Ky. Ct. App. 2021)

Texas’s Supreme Court held over 50 years ago that goodwill dependent on personal qualities is not property in the marital estate at all.

The court reasoned this kind of goodwill is a mere expectancy, extinguished by the professional’s death, retirement, or loss of patients, and so lacks the character of a vested property right.

the good will of petitioner’s medical practice that may have accrued at the time of the divorce was not property in the estate of the parties

Nail v. Nail, 486 S.W.2d 761 (Tex. 1972)

New Jersey treats even a solo professional’s reputation-based goodwill, earned during the marriage, as divisible marital property.

The New Jersey Supreme Court held that an attorney’s professional reputation and probable future client patronage, distinct from the underlying license, is marital property, even though the attorney personally cannot sell it.

goodwill is property subject to equitable distribution

Dugan v. Dugan, 92 N.J. 423, 457 A.2d 1 (1983)

California treats goodwill of a professional practice built during the marriage as community property, without carving out a separate personal-goodwill exclusion.

The Court of Appeal affirmed that a sole practitioner’s medical practice goodwill is community property, factored into the community property award.

in a divorce case it is well established that the goodwill of a husband’s professional practice as a sole practitioner is taken into consideration in determining the community property award to the wife

In re Marriage of Foster, 42 Cal. App. 3d 577 (1974)

Wisconsin’s Supreme Court counted the entire salable value of professional goodwill, including the personal component, as divisible marital property, and separately held that doing so did not amount to impermissible double counting against the maintenance award on the facts of the case.

McReath is also a leading double-dipping case; the court reasoned that because the husband could keep earning at the same rate post-divorce without eroding the practice’s value, using goodwill in both property division and maintenance was not duplicative on these facts.

the entire value of the salable professional goodwill was properly counted as divisible property in the marital estate

McReath v. McReath, 2011 WI 66, 335 Wis. 2d 643, 800 N.W.2d 399 (2011)

What to actually do

• Ask your expert, explicitly, for a goodwill allocation split into enterprise and personal components, even in a state that includes all goodwill, because the split affects negotiation leverage and because appellate law can change (see North Carolina, 2026).
• If you are the out-spouse in an excluding state, do not let a global ‘goodwill’ number go unchallenged; push for the split to be shown and defended.

Double dipping: the same dollar counted twice

If a business is valued using its income stream, and the out-spouse gets half the resulting asset value, then the same income stream is used again to calculate alimony from the in-spouse, the same dollars can be counted twice: once as an asset, once as future income. Courts are split on how much this matters and when.

New York’s highest court held it is impermissible to convert a stream of income into a property asset and then use that same income again to calculate maintenance.

The Court of Appeals found impermissible double counting where a business valuation built on projected excess earnings and the support calculation both drew on those same earnings.

Once a court converts a specific stream of income to an asset, that income may no longer be calculated into the maintenance formula

Grunfeld v. Grunfeld, 94 N.Y.2d 696 (2000)

New Jersey’s Supreme Court rejected the double-dipping doctrine outright, treating equitable distribution and alimony as separate exercises that may legitimately draw on the same income.

Reported consistently, not settled

This is squarely the opposite conclusion from Grunfeld, showing the split is real and not just a difference in facts.

separate, distinct exercises with no inequity in using different valuation methodologies

Steneken v. Steneken, 183 N.J. 290, 873 A.2d 501 (2005)

Massachusetts has gone both ways depending on whether the income streams used for the asset value and the support award were actually the same dollars.

Reported consistently, not settled

Massachusetts courts have found no double counting where the asset and income portions came from genuinely separable sources, and found likely double counting and remanded where they did not.

Dalessio v. Dalessio, 409 Mass. 821 (1991); Sampson v. Sampson, 62 Mass. App. Ct. 366 (2004)

Wisconsin’s Supreme Court allowed both a full goodwill-inclusive property award and a maintenance award drawing on the practice’s earnings, reasoning the husband could keep earning at the same clip without depleting the value already awarded.

This is a fact-specific escape hatch some courts use: double counting is only a problem if using the income for support actually erodes the value already divided.

husband had the option of continuing to generate income from his orthodontic practice without diminishing its value

McReath v. McReath, 2011 WI 66 (2011)

What to actually do

• If you are the spouse likely to pay both a buyout and support, raise double dipping explicitly and ask your expert to identify which portion of the valuation’s earnings stream, if any, will also be used in the support calculation.
• If you are the out-spouse, do not assume the paying spouse’s double-dipping argument automatically reduces your award; whether it applies depends heavily on your state and on whether the same specific income is really being used twice.

Discounts for lack of marketability and lack of control

A discount for lack of marketability (DLOM) reduces value because there is no ready buyer for a private-company interest. A discount for lack of control (DLOC, sometimes called a minority discount) reduces value because the interest being valued cannot unilaterally direct the company. States split sharply on whether either belongs in a divorce valuation, largely tracking the fair-value-versus-fair-market-value divide above.

New Jersey bars marketability and minority discounts in equitable distribution because no actual sale of the interest to an outsider is happening.

applying such a discount would unfairly reduce the non-owner spouse’s equitable share

Brown v. Brown, 348 N.J. Super. 466, 792 A.2d 463 (App. Div. 2002)

South Carolina’s Supreme Court refused to apply a marketability discount, calling it a legal fiction in this context.

Reported consistently, not settled

we see no legitimate reason to indulge in the fiction of a marketability discount

Moore v. Moore, Op. No. 27579 (S.C. 2015)

Massachusetts’s Appeals Court reversed a marketability/minority discount, finding it would unfairly deflate the value of the marital asset.

Reported consistently, not settled

Caveney v. Caveney, 81 Mass. App. Ct. 102 (2012)

Colorado allows the trial court discretion to apply a marketability discount when valuing a spouse’s interest in a closely held corporation.

Reported consistently, not settled

it is within the trial court’s discretion to apply a marketability discount when valuing a spouse’s ownership interest in a closely held corporation

In re Marriage of Thornhill, 232 P.3d 782 (Colo. 2010)

Louisiana’s appellate court affirmed a 20 percent marketability discount in a divorce business valuation.

Reported consistently, not settled

Cited as an example of a state permitting the discount, with a specific percentage affirmed on appeal.

Trahan v. Trahan, 49 So. 3d 889 (La. Ct. App. 2010)

Indiana permits marketability and minority-interest discounts and rejected the idea that divorce cases categorically bar them.

Reported consistently, not settled

no court applying Indiana law had concluded that these discounts were always inapplicable to closed-market sales, only that the discounts were inapplicable in certain situations

BigInch Fabricators & Constr. Holding Co. v. Reed, 2021 Ind. LEXIS (Ind. 2021), citing Eyler v. Eyler, 492 N.E.2d 1071 (Ind. 1986)

What to actually do

• Find out early whether your state permits these discounts at all; if it does not, resist paying an expert to build a report around a discounted number that a court will not accept.
• If discounts are permitted, ask what percentage is being applied and why; DLOM and DLOC figures used in practice vary widely by industry and company size, and there is no single accepted number, so treat any specific percentage as case-specific, not a rule of thumb.

Keep reading

• The approaches, and how a valuation is done
• Alimony by state — the other half of the double-dip problem
• What your state calls things