When a couple decides to divorce, one of the many issues that they often grapple with is how to divide community property. California law provides that any and all assets acquired due to the efforts of either spouse during the course of the marriage are to be split evenly between them upon divorce. Sometimes this means awarding an asset to one spouse and requiring him or her to make an equalizing payment to compensate the other spouse for their interest in the property. First, of course, you have to know how much the property is worth. Assets such as real property or financial accounts are generally easy to value, whereas a business can be very complex. A recent case out of the Sixth District Court of Appeals is a good example of how courts may determine the value of a family business, a figure that often includes “goodwill” built up by the business over time.
Husband and Wife moved to California from India at some point after they married in 1976. Husband started his own trucking company in 1993, and Wife worked seasonally as a produce packager to supplement the family’s income. They bought a home in Watsonville, with Husband using income from the business to pay the mortgage and Wife using her wages to cover certain household expenses. They separated in February 2009 but continued to live in the home. Husband continued making the mortgage payments through May 2012, when Husband moved out of the home after Wife filed for divorce. They reached an agreement wherein Wife was responsible for the mortgage payments and Husband paid her $465 per month in temporary spousal support.
Following a divorce trial, a court awarded Husband the full trucking business and an equalizing payment to Wife. The trial court found the business had an overall value of $40,000, including $15,000 in actual value and $25,000 in goodwill. The goodwill aspect was based largely on Husband’s business relationship with his cousin, which the trial court said allowed him to gain a steady revenue stream without incurring marketing expenses.