800 N.W.2d 399 (Wis. 2011)
Tracy and Tim McReath were married on August 27, 1988, and three children were born of the marriage, all minors when divorce proceedings began.1
In 1991 Tim received his dental degree and in 1993 a master's degree in orthodontia, with most of his education occurring during the marriage and student loans repaid using marital funds.2 Upon completing his education Tim worked as an associate at Orthodontic Specialists for two years before purchasing the Baraboo and Portage locations from Dr. Grady for approximately $930,000.3
The purchase price allocated $100,000 to physical assets, corporate name, and corporate goodwill, with the remaining $830,000 attributed to Dr. Grady's name, a noncompete clause, and an employment agreement for transitional services.4 Tim has operated as the sole owner of Orthodontic Specialists since the purchase, historically working sixty-hour weeks that later reduced to forty-five hours, generating annual gross revenues between $1.6 million and $1.8 million and average yearly net cash flow of $697,522.5
Tracy, a high school graduate without a college degree, worked outside the home during Tim's schooling but primarily served as homemaker from 1993 to 2000 and later performed financial and clerical duties for the practice earning $15,000 to $16,000 annually, with a court-determined earning capacity of $14.50 per hour or $30,160 per year.6
On May 16, 2007, Tracy filed for divorce in Sauk County Circuit Court.7 The parties stipulated to the value of most marital assets and to an equal division with a balancing payment, but hearings addressed the fair market value of Orthodontic Specialists, resulting in the circuit court adopting Tracy's expert valuation of $1,058,000 and rejecting Tim's expert valuation of $415,000.8 The court awarded Tim the practice and ordered him to pay Tracy $796,720 to equalize the property division at a minimum rate of $80,000 per year plus interest.9
To determine maintenance the circuit court adjusted Tim's average annual earnings from the practice to reflect a forty-hour work week, setting his expected annual income at $465,000, combined with other income sources to reach total annual income of $535,806 for Tim and $75,944 for Tracy.10 After considering statutory factors the court awarded Tracy $16,000 per month in maintenance for twenty years.11 Tim appealed to the court of appeals, which affirmed the circuit court's orders, and the Supreme Court of Wisconsin granted review.12
Whether the entire value of the salable professional goodwill of Tim's interest in Orthodontic Specialists, S.C. can be counted as divisible property in a marital estate?13
Wisconsin Stat. § 767.61 requires division of the marital estate upon divorce under a presumption of equality, and salable professional goodwill is not among the excluded properties listed in § 767.61(2); therefore, when professional goodwill is salable, as demonstrated by actual transactions, it constitutes divisible property.14
Yes. The circuit court included the $1,058,000 fair market value of Orthodontic Specialists in the marital estate and divided it equally by ordering Tim to pay Tracy $796,720.15 Tim purchased the practice from Dr. Grady for $930,000, with $830,000 paid for Dr. Grady's name, noncompete clause, and transitional services, confirming that personal goodwill is salable. Tracy contributed to the marriage as homemaker and performed duties in the practice, consistent with the policy that each spouse's contributions support equal division of assets developed during the marriage.16
The entire value of the salable professional goodwill of Tim's interest in Orthodontic Specialists was properly counted as divisible property in the marital estate.17
Whether the circuit court double counted the value of the professional goodwill in Orthodontic Specialists when it based Tracy's maintenance award on Tim's expected future earnings from Orthodontic Specialists?18
The rule against double counting prohibits counting the same asset both as property in the marital estate division and as income for maintenance purposes, but this prohibition is flexible and does not apply to income-producing assets where the value at division is separate from future income generated, as with salable professional goodwill.19
No. The circuit court valued Orthodontic Specialists at $1,058,000 for property division and awarded Tim the practice while ordering the equalizing payment.20 It then used Tim's adjusted annual income of $465,000 from the practice to calculate maintenance of $16,000 per month for twenty years.21 Because Tim could sell the practice for its value at any time while continuing to earn income from it, the goodwill functions like an income-producing asset whose value is distinct from the income stream, so no double counting occurred.22
The circuit court did not double count the value of the professional goodwill in Orthodontic Specialists when it based Tracy's maintenance award on Tim's expected future earnings from Orthodontic Specialists.23