How is a share in a partnership valued in a divorce? How are professional practices valued in a divorce?
People facing a divorce are often concerned about their financial futures. One such financial concern regards how shares in a partnership are valued in a divorce. Parties may also wonder how professional practices are valued in a divorce.
Say, for example, that Taylor and Alex have shares in a financial management business. Also, Taylor owns a medical practice. Now that they are divorcing, Taylor and Alex want to know how their assets will be divided, and specifically, how the shares in the financial management business and the medical practice will be divided.
In Massachusetts, assets are divided on an equitable basis. A judge’s decision as to what is equitable will not be reversed unless “plainly wrong and excessive.” A court may assign all or any part of the estate of the other, including, but not limited to, retirement benefits, military retirement benefits, pension, profit-sharing, annuity, deferred compensation, and insurance. The definition of estate is broadly defined, however. In fact, Massachusetts courts allow the division of premarital property and post-marital property on a case-by-case basis. With regard to the division of shares in a partnership, courts will generally interpret G.L. c. 208 § 34 to include partnership assets within the scope of the possible assets that may be divided in a divorce.
Shares of a partnership and business practice interests are part of the marital estate and may be valued by a valuation expert to assess the market value of the asset. A professional practice, like a medical practice, is considered in Massachusetts to be subject to division during the divorce process. Massachusetts courts may order one of the parties in a divorce to relinquish their share of ownership in the business and receive payment either as a lump sum or in a series of installment payments. A court may order that the business be sold and the spouse receives the profits. One spouse could buy-out the business from the other spouse or offset the business with other assets.
During the valuation process, there are generally three valuation methods: the market approach (estimates business value by comparing the business to a similar business that is recently sold); the income approach (estimates business value by converting economic benefits into a value); and the asset approach (estimates business value based on the assets and liabilities of the business).
In the above example, Taylor and Alex have several possible options afforded to them. A Massachusetts Probate and Family Court will divide the estate equitability based upon the parties’ needs and what is most equitable based on their individual case.
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 Adams v. Adams, 459 Mass. 361, 371 (2011) (citing to Bowring v. Reid, 399 Mass. 265, 267 (1987))
 Adams, 459 Mass. at 371 (citing to Redding v. Redding, 398 Mass. 102, 108 (1986))
 M.G.L. c. 208 § 34
 Rice v. Rice, 372 Mass. 398, 400 (1977) (holding that an estate is all property to which the party holds title, however acquired.)
 Moriarty v. Stone, 41 Mass. App. Ct. 151, 156 (1996) ; Brower v. Brower, 61 Mass. App. Ct. 216, 218 (2004)
 Goldman v. Goldman, 28 Mass. App. Ct. 603, 613 (1990).
During the divorce process, most parties want to ensure that the end of the marriage won’t result in the end of their preferred lifestyle. How are automobiles treated during property division? How are other personal items of value, such as jewelry and antiques valued in a divorce?
Say, for example, that Alex and Jamie were married for twenty years and have filed for divorce. They appreciate their belongings and want to know how their material items will be divided. Alex is a collector of antiques and also owns two expensive automobiles. Jamie drives the family van and also owns jewelry. Because they cannot agree on the division of their property, they want to know how the antiques, vehicles, and jewelry will be divided by a Massachusetts family court during the divorce process.
If the parties in a divorce agree to their own division of property, the courts in Massachusetts will usually support the fair and reasonable distribution of their agreement related to the property division. However, if the parties cannot agree, Massachusetts courts will make the determination as to how assets should be divided. This division is known as an “equitable division.” Equitable does not necessarily mean that each party is entitled to “equal” or 50/50 division of assets. Instead, the courts will use several factors to determine the fair division of assets. Although the list is not exhaustive, courts determine what is fair by examining the following factors:
- length of the marriage;
- conduct of the parties during the marriage;
- age, health, station, occupation, amount and sources of income, vocational skills, employability, estate, liabilities and needs of the parties;
- opportunity of each for future acquisition of capital assets and income;
- amount and duration of alimony;
- present and future needs of dependent children of the marriage; and
- contribution of each of the parties in the acquisition, preservation or appreciation in value of their respective estates and the contribution of each of the parties as a homemaker to the family unit.
If one former spouse believes that she is entitled to more property than a judge initially awarded, another judge may order that without a clear and adequate explanation for the amount of property awarded between the parties, the division of property may not be equitable.
If they cannot agree, Alex and Jamie would experience the Massachusetts court-imposed “equitable division” standard. Their twenty years married, their conduct during the marriage, and the personal items and property shared between them, including the antiques, cars, and jewelry, would be evaluated and divided.
The value of the personal items is dependent on the circumstances which arrant division of property in recognition of the marital partnership concept [. . .] Therefore, Alex’s and Jamie’s tangible property could be valued at a fair market value rate, which means that the amount that the property would sell within an open market. If the amount of an item cannot be determined, a judge could look to professional appraisals, receipts, and other material documentation to reach the property monetary amount.
If you have any questions about the divorce process or assignment of property, you may schedule a free consultation with our office. Call 978-225-9030 during regular business hours or complete our contact form online, and we will get back to you at our earliest opportunity.
 Mass. Gen. Laws ch. 208 § 34
 Bowring v. Reid, 399 Mass. 265, 268 (1987) (remanding a decision so that a judge may articulate the rationale for the Section 34 alimony and property awards, especially because the plaintiff alleges that the defendant was unfaithful and abusive and the plaintiff’s contribution to the marriage, her needs, and her sources of income were not considered.); See, Redding v. Redding, 398 Mass. 102 (1986).
 Davidson v. Davidson, 19 Mass.App.Ct. 364, 370 (1985) (citing to Inker, Walsh & Perocchi, Alimony and Assignment of Property: The New Statutory Scheme in Massachusetts, 10 Suffolk U.L.Rev. 1, 8 (1975))
A property attachment is a possibility during divorce: either spouse, under Massachusetts divorce laws, may attach the other spouse’s real and personal property to ensure suitable support for the attaching spouse and children in his/her care and custody.
Consider the example of Betty and Bob, who made their marital residence a ranch home Bob purchased in his name before their union. When the marriage dissolved, Bob tried to sell the home, despite a restraining order that prohibited him from putting the home up for sale. In such a scenario, a writ of attachment filed in the Registry of Deeds of the county in which the couple resides will notify any would-be buyer that title to the property is not clear because of pending litigation. This includes Betty’s spousal lien, which preserves her rights to distributable property in the separation agreement.
A writ of attachment, signed by the applicable Probate Court clerk under the Commonwealth court’s seal, must include the following information:
- the parties’ names and residences;
- the divorce complaint date;
- the name and address of the plaintiff’s attorney, if any; and
- the name of the justice granting the attachment and the approval date.
The writ directs the applicable county sheriff or deputy, or other individual duly authorized by law, to attach the defendant’s targeted real or personal property in the court-approved amount and return the process to the court.
The spouse seeking the property attachment must file the complaint for divorce, along with a motion for attachment backed by an affidavit containing facts based on the spouse’s own knowledge or belief. The defendant spouse must be given notice of the application for the attachment, which, after hearing, a justice may grant only after finding “a reasonable likelihood that the plaintiff will recover judgment, including interest and costs, in an amount equal to or greater than the amount of the attachment over and above any liability insurance shown by the defendant to be available to satisfy the judgment.” Attachment must be made within 30 days of the writ’s approval.
A property attachment may be made by a court-ordered injunction that would enable a party to attach in equity stock shares and other property unreachable in actions at law. Alternatively, attachment may be made by trustee process, under which service of a summons is made on a trustee notifying the trustee to attach designated goods, effects and credits of the defendant in the trustee’s hands.
Another form of encumbrance is a lis pendens, whereby a party makes a claim of right to title to real property or its use and occupation. If, after a hearing, a judge approves the motion, a memorandum is filed in the appropriate registry of deeds identifying the court where the case is pending, the date of the writ, and a description of the property and town where it is located.
Attachment of property in a divorce action may also be made by a counterclaim, cross-claim or third-party complaint. The rules allow one party to seek an attachment “ex parte.” A court must find reasonable likelihood of recovery by the plaintiff and circumstances such as not having jurisdiction over the defendant spouse or evidence that the defendant will destroy, conceal or try to unload the targeted property if notified in advance of the attachment action.
If you have any questions about issues of divorce or property assignment, you may schedule a free consultation with our office. Call 978-225-9030 during regular business hours or complete our contact form online, and we will get back to you at our earliest opportunity.
 M.G.L. c. 208 §12; Mass. Dom. Rel. Proc. Rule 4.1 (a).
 Mass. Dom. Rel. Proc. Rule 4.1 (b).
 Mass. Dom. Rel. Proc. Rule 4.1 (c).
 M.G.L. c. 208, §13; Mass. Dom. Rel. Proc. Rule 4.2.
May a party recover damages from a former romantic partner with whom the party cohabited, where the party contributed significantly to the improvement of the common home? Say, for example, that two people live together but never marry. One of them happens to be in the home improvement business. As the years pass, that party performs significant home repairs and improvements, paying for materials out of his pocket. When the parties break up, may that party recover for the amount of money and work he put into the home—which is staying with the other half of the couple, who happens to be the title owner?
The Massachusetts Appeals Court recently decided a case which dealt with this issue. Bonina v. Sheppard involved a long-term cohabiting relationship, where the parties never married. 1 The plaintiff was a contractor, and he expended significant funds, resources, and labor on fixing up the home, which was owned solely by the defendant. After the relationship ended, the plaintiff brought suit against the defendant, claiming that she was unjustly enriched by his contributions to the home’s improvement. The trial court ruled that the plaintiff could recover damages in the amount of over $156,000, and the defendant appealed.
The Appeals Court explained that unjust enrichment occurs “where a party retains the property of another ‘against the fundamental principles of justice or equity and good conscience.’” 2 The Court first shot down the defendant’s assertion that she could not have been unjustly enriched, because the parties were in a romantic relationship. “The parties’ romantic relationship does not prevent the plaintiff from recovering from the defendant under an unjust enrichment theory,” the Court explained. “In Massachusetts, there is no presumption that a claimant’s contributions during a romantic relationship are gratuitous.” 3
The Court also agreed with the trial judge in finding that the plaintiff’s contributions were not meant to be gifts. Instead, the court sided with the defendant’s argument that he believed the couple would eventually jointly increase the value of the home, and then jointly buy a bigger home. The plaintiff could recover damages under a restitution theory, the Court noted.
Next, the Court discussed whether the trial judge’s arrival at the damages amount was properly calculated. The Court recognized that the way to measure restitution damages is by reviewing not the defendant’s gains, rather than the plaintiff’s losses. However, the Court noted, the plaintiff’s costs may be used as evidence of and relevant to the value of the benefit the defendant received.
“The correlation of costs with benefits is especially valid where, as here, the costs that the plaintiff incurred were for construction materials and fixtures for the defendant’s home. In these circumstances, there is a direct dollar-for-dollar correlation between the costs incurred by the plaintiff and the benefit conferred on the defendant,” the Court explained. “Moreover, in the present case, neither the plaintiff nor the defendant presented evidence regarding other possible measures of unjust enrichment, such as the increased value of the home resulting from the materials and the services. As such, the trial judge had no other reliable, measurable basis on which to calculate the award.” 4 The Appeals Court affirmed the trial court’s award of damages.
If you have any questions about domestic relations issues, you may schedule a free consultation with our office. Call 978-225-9030 during regular business hours or complete our contact form online, and we will get back to you at our earliest opportunity.
1 Bonina v. Sheppard, No. 16-P-771 (March 2, 2017-June 1, 2017).
2 Id., at 6.
4. Id., at 11.
Under some circumstances, there may be income imputed to a party for purposes of calculating alimony and child support. For example, if a party voluntarily changes careers to a less lucrative or takes an early retirement, the court may impute income to that party to reflect his or her potential and demonstrated earning capacity. But what if the party left his or her job – though voluntarily – reluctantly and due to unfortunate circumstances? Should the court impute income? The Massachusetts Appeals Court recently addressed this issue.
In the case, 1 the husband had a high-paying position as head of a private school: including his base salary, bonuses, and other benefits, his compensation package equaled approximately $450,000 annually. However, after engaging in an affair with one of his subordinates, the husband resigned from his position. The parties separated, and the husband engaged in an extensive job search—he applied for dozens of comparable positions, traveled frequently to meetings and interviews, worked with recruiters, and honed his professional skills to increase his marketability. After eleven months, the husband received one job offer, which he accepted. However, his new position paid him considerably less. In fact, he was making about a third of his previous salary.
Meanwhile, the parties divorced. The trial judge ordered the husband to pay child support and alimony and based the respective calculations on the husband’s previous income, with income imputed to the husband. After accepting his new offer of employment, the husband petitioned the court for a modification of his child support and alimony payments. He noted that his income was substantially less than it had been at the time of divorce. The wife, meanwhile, filed several complaints for contempt, alleging that the husband owed her back alimony and child support.
During the trial proceedings, the divorce judge concluded “that no material change in circumstances had occurred because the husband’s ‘actual earnings…are less than his potential and demonstrated earning capacity,’ and the reduction in the husband’s income was caused by ‘his voluntary decision to resign from [his job.]’” 2
On appeal, the Appeals Court disagreed with the divorce judge’s decision. “The facts of this case are distinguishable from the voluntary career change line of cases. The husband did not take an early retirement, nor did he resign from [his job] to pursue a less lucrative career in a completely unrelated field. Moreover, while the judge found that ‘[t]he [h]usband’s position…remained available to him, but for his resignation.’ there was no evidence demonstrating that the husband’s employment with [his previous employer] would continue indefinitely,” the Appeals Court stated. 3
The Appeals Court also noted that the trial judge failed to give proper consideration to the efforts of the husband to find higher-paying employment. “not only did the judge fail to make a specific finding that the husband could earn more with reasonable effort, it is apparent that such a finding cannot be made on this record.” 4
If you have any questions about issues of divorce, custody, or support, you may schedule a free consultation with our office. Call 978-225-9030 during regular business hours or complete our contact form online, and we will get back to you at our earliest opportunity.
1 Emery v. Sturtevant, No. 16-P-443 (December 2, 2016 – May 12, 2017).
2 Id., at 6.
3 Id., at 15-16.
4 Id., at 19.
In what ways is intellectual property important during a divorce? Is it something that may be divided by the court between the parties?
Intellectual property and domestic relations
Intellectual property includes patents, trademarks, copyrights, trade secrets, and trade dress. Each of those categories may present property to be considered by the court as part of a couple’s marital estate. Therefore, during a divorce, it is important to consider any intellectual property holdings in property assignment.
The Massachusetts Probate and Family Courts use a process called equitable distribution to divide marital property in general. Here, the term “equitable” means “fair,” and not necessarily equal: the court will determine how best to divide marital property in the fairest manner in each particular case. Intellectual property, like all other property, will be divided in this manner.
Future income from intellectual property
In addition to present property values, future income must also be considered. For example, royalties from copyrighted work or licensing fees from patents and trademarks may present considerable future income opportunities.
In one 2015 case, 1 the Appeals Court held that future royalties derived from a wife’s tremendously successful novel should be divided equitably between the parties. In that case, the trial judge noted that the husband supported his wife financially and emotionally while she wrote the novel. The judge also noted that the wife’s earnings from the novel neared $3,000,000 at the time of the divorce, and he ordered that she pay the husband a lump sum of $570,000. As for future royalties, the trial judge held that because they were too speculative, the husband was not entitled to them.
The husband appealed, seeking equitable distribution of future royalties obtained by the wife.
The Appeals Court agreed with the husband, holding that the wife’s “contractual rights to future royalty and other payments do not, in our view, involve mere expectancies as described in the foregoing cases. While the amount of the royalty and other payments to be received by [the wife] in the future cannot yet be ascertained, the right to receive those royalties and other payments was contractually established at the time of the divorce. Indeed, [her] interests in the present case are, in certain respects, analogous to a party’s interest in the payment of pension rights which has been recognized as marital property subject to division.” 2
The Court suggested that future royalties were particularly suited to “division on an “if and when received” basis, with the judge determining the percentages of any future payments to be assigned to [wife and husband.]” 3
Valuing intellectual property during a divorce
In many cases, it may be possible (whether through past royalties or payments or expert valuation) to establish the value of intellectual property. In those cases, the court may use those reasonable values in calculating marital property division.
If the value of intellectual property is too speculative to consider, however, the judge may opt to exclude the property from marital property calculations. In one case, for example, 4 the court considered the invention of the husband, who held patents on artificial skin. The trial judge held that future income from those patents was so speculative that they did not need to be included as part of property assignment. The Supreme Judicial Court agreed that the judge did not abuse his discretion in his division of the marital assets.
“He was not obliged to place a value on the husband’s royalties, patents, or copyrights. He was warranted in declaring uncertain the value of the husband’s patents on artificial skin,” the high Court noted. “The judge could have concluded on the evidence that the present value of the husband’s future income from this source was too speculative to consider. The asset was not one which obviously has current value but is difficult to appraise (such as a close corporation).” 5
1 Canisius v. Morgenstern, 87 Mass. App. Ct. 759 (2015).
2 Id., at 767.
3 Id., at 771.
4 Yannas v. Frondistou-Yannas, 395 Mass. 704 (1985).
5 Id., at 714.