Key Insights:
- Professional practices can be marital property in Illinois. Under 750 ILCS 5/503, your spouse may have a claim to a share of your practice’s value if it was established or grew significantly during the marriage.
- Illinois law protects the value of your personal reputation and skills. The law separates “personal goodwill” from the general value of the practice. Personal goodwill belongs to you and cannot be divided in a divorce.
- The right legal counsel can make all the difference. Valuing a professional practice correctly requires industry experts and an attorney with experience in handling complex financial cases.
Owning a medical practice, dental office, or law firm puts you in a different position than most people going through divorce. You can’t liquidate a professional practice like a retirement account or split it down the middle like home equity. And how your professional practice is divided may be the most significant financial question of your entire divorce.
You’ve spent years, maybe decades, building your practice. The last thing you want is to be fighting over it in divorce court. When the stakes are this high, getting expert guidance early on in the divorce process can be essential to protecting your future and practice.
Is Your Professional Practice Considered Marital Property in Illinois?
Yes, it may be considered marital property. The answer depends on when you established the practice and on how much it grew during the marriage.
Here’s what Illinois law says: under the Illinois Marriage and Dissolution of Marriage Act (750 ILCS 5/503), property acquired during the marriage is presumed marital property. If you opened your practice after your wedding, it almost certainly falls into the marital estate, even if you’re the one who holds the license and does all the work.
If your practice predates the marriage, things get more complicated. The practice itself may be non-marital. However, if marital funds helped sustain or grow the practice, the marital estate may, under certain limited circumstances, have a claim to reimbursement if those contributions are well documented.
The same may apply if you drew a below-market salary during the marriage, effectively subsidizing the business at your family’s expense. Illinois law, specifically 750 ILCS 5/503(c)(2)(B), treats that unpaid value as a marital contribution, meaning your spouse may have a claim to part of the practice’s growth even if they were never involved.
Establishing what is and what isn’t marital property requires careful financial tracing and, in some cases, a qualified expert, such as a forensic accountant.
Understanding Goodwill in an Illinois Divorce
When you own a professional practice, part of its value goes beyond the bank account, office space and equipment. There’s also the reputation you’ve built and the patients or clients who keep coming back because of you. In legal terms, that intangible value is called “goodwill.”
The law draws a line between the value tied to the practice and the value tied to you personally. And that important distinction can translate to hundreds of thousands of dollars in your settlement. For professional practices, whether a medical practice, dental office, or law firm, goodwill can be the largest component of value (and the most contested).
Illinois law recognizes two types:
- Enterprise goodwill. This is the value of the practice as a functioning business, including your client base, staff, systems, location, and brand. It would survive if you stepped away and a replacement took over. Because enterprise goodwill exists independently of you, it’s marital property subject to division.
- Personal goodwill. Personal goodwill is the value tied directly to you: your reputation, personality, relationships, and individual skills. If you left, it would leave with you. Under Illinois law, personal goodwill isn’t marital property and can’t be divided.
Personal goodwill also represents your future earning capacity, which Illinois courts already factor into maintenance calculations under 750 ILCS 5/504. Treating it as a divisible asset would mean your future income is used against you twice, which is why Illinois courts don’t allow it.
In a solo practice, a valuation expert can often show that the bulk of goodwill is personal in nature, which can significantly reduce what your spouse is able to claim.
How Are Medical, Dental, and Legal Practices Divided in an Illinois Divorce?
Once it is determined that a practice (or a portion of its growth) is marital property, the next question is how to distribute that value. Illinois courts don’t typically split professional practices in two or force a sale. That’s rarely workable for a licensed professional business. Here are some of the more common ways of dividing professional practices:
- Buyout. A buyout involves the professional spouse paying the other spouse their share of the practice’s marital value, either as a lump sum or in structured installments.
- Asset Offset. In an asset offset, the practice-owning spouse keeps the business. In return, the other spouse receives comparable marital assets, such as retirement accounts or home equity. This can be a practical solution in medical and dental divorces, where forcing a sale would disrupt patient care.
- Deferred Distribution. When liquidity is a problem, deferred distribution allows the non-owner spouse to receive a secured interest in future sale proceeds. The physician, dentist, or attorney can continue operating without an immediate financial burden.
Property division can become more complex when both spouses own the practice. Illinois law restricts ownership of certain licensed practices to qualified professionals, which can limit your options if only one spouse is licensed. In those cases, a buyout or a full sale of the practice may be the best option.
Don’t forget that tax consequences can vary significantly by approach, and Illinois courts are required to consider them under 750 ILCS 5/503(d)(11). Since the tax treatment of a property transfer can affect the settlement’s real-world value, it needs to be factored in from the start.
Why You Need a Specialist Attorney for a Professional Practice Divorce in Illinois
Professional practice divisions involve a level of legal and financial complexity that most divorce attorneys rarely encounter. Your attorney needs to understand business valuation and have the courtroom skills to challenge an opposing expert who overstates what your spouse should receive.
Without that experience in your corner, you may accept a valuation with errors, such as improperly including personal goodwill or failing to account for the tax consequences of the proposed settlement. Those errors can cost you and jeopardize your practice’s future.
What If My Practice Is Part of a Partnership or Group?
If your practice is part of a partnership or group, your partners’ rights and any existing agreements between you can affect what happens in your divorce. Such details aren’t always immediately obvious, but they can become stumbling blocks. Working with an experienced Illinois divorce attorney can help you identify issues you might not have thought of and prevent problems for your practice down the line.
FAQs: What Illinois Physicians, Dentists, and Attorneys Ask Us About Divorce
Can a prenuptial agreement protect my medical or dental practice in an Illinois divorce?
Yes, and many professionals use prenuptial agreements for just that. A valid agreement under 750 ILCS 10/1 can designate the practice as non-marital property. This completely removes it from division. If you’re already married, a postnuptial agreement may achieve a similar result.
Can my spouse claim part of my professional license?
No. Your license is personal to you and not a divisible asset. What CAN be subject to division is the value of the practice you helped build during the marriage. Such value can include enterprise goodwill, equipment, and any other business assets.
My practice predates the marriage. Am I protected?
No, you’re not automatically protected. If money from the marriage went into the practice, or if you paid yourself less than you should have while running it, your spouse may have a claim to some of its growth. A forensic accountant can establish what’s marital property and what isn’t.
Will the value of my practice affect spousal support?
Not directly. Personal goodwill is excluded from the marital estate to prevent your future earnings from being counted twice. But the income your practice generates remains relevant to spousal maintenance under 750 ILCS 5/504. Your attorney needs to plan for both.
Peskind Law Firm Protects What You Have Built
Divorce is difficult enough without the added weight of worrying about the practice you’ve worked so hard to build. At Peskind Law Firm, we understand what’s at stake professionally and personally when you’re going through a divorce. We have spent decades representing physicians, dentists, attorneys, and other professionals in Illinois divorce cases, and bring the depth of experience these complex cases demand.
Our principal, Steven N. Peskind, is a Diplomate of the American College of Family Trial Lawyers, an organization limited to 100 of the nation’s top family law trial attorneys, and the author of five books on divorce and family law. That standard of expertise runs through everything we do.
If you are facing divorce and own a professional practice in Illinois, contact us today to schedule your consultation. We have offices in St. Charles and Wheaton and serve clients throughout Kane and DuPage Counties and the broader Chicagoland area.
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