Celebrity Divorce: Goodbye and “Goodwill”

Celebrity divorces attract media attention. This year already, television and web outlets have covered the dissolution matters of celebrities as diverse as Jennifer Aniston, Jennie Garth, Alicia Silverstone, Jack Osborne, Eric Dane, Julie Bowan, and Geena Davis.

In addition to having their lives and lifestyles dissected and discussed, these celebrities have the need to divide the assets they accumulated during their marriage with their soon-to-be-ex-spouses (who may or may not be celebrities in their own right).

What’s more, depending on where that celebrity lived during the marriage, and therefore where he/she is getting divorced, the celebrity’s personal “goodwill” may be considered an asset of the marriage that needs to be valued and divided up. Additionally, it is important to note that goodwill is not limited to entertainers.  Professional athletes, high-profile executives, fashion designers, artists, authors, and even retired politicians all have earnings that are enhanced by being in the public eye. For instance, Rudy Giuliani is one such celebrity who also is named on the list of divorcees in 2018.

What does “Goodwill in Celebrity Divorce” Mean?

“Goodwill” is generally defined as earnings in excess of what the person would ordinarily be paid, as compared to their peers, due to their status or fame. Goodwill creates the potential for higher future earnings based on a current reputation, and if that goodwill was created or added-to during the marriage, then it may be considered a marital asset.

But whether that goodwill should be valued and divided as part of a divorce depends on what jurisdiction is handling the divorce. Interestingly, few published cases address celebrity goodwill, despite the number of celebrity divorces that occur each year. That’s because most celebrities avoid litigation out of fear of negative publicity that could affect their earnings. Additionally, the lack of firm legal precedent makes many celebrities unwilling to risk the financial uncertainty that litigation involves.

The states of New York and New Jersey alone hold that personal or celebrity goodwill is a marital asset to be valued. Courts in these states take the position that what is being valued is the reputation which enhances future earning capacity due to probable future patronage from existing and potential clients.

Precedent-setting cases, including the key case of the divorce of Piscopo v. Piscopo (1989) 557 A.2d 1040 focused heavily on the comic’s goodwill commodity.  (Most people remember Joe Piscopo in the lase 80’s and 90’s as a headliner on Saturday Night Live.) In the Piscopo case, both he and his wife agreed that she had been “instrumental” in helping him develop his career and reputation during the marriage.  What they didn’t agree on was that Mrs. Piscopo wanted her husband’s reputation to be valued, which meant she should receive a significant portion of that “reputation value” as part of her reasonable portion of the marital assets.

Joe Piscopo claimed that celebrity reputations were too volatile and speculative and could not be sold, in the way that the reputation of dental or medical practices could be.  Nevertheless, the New Jersey Superior Court, Appellate Division affirmed the trial court’s decision – holding that personal or celebrity goodwill should be valued and divided as part of the divorce proceedings – and one’s goodwill-reputation may exist irrespective of a capital interest in it – so that no actual business was needed in order to create celebrity goodwill.

Why Other States Exclude “Goodwill” in Celebrity Divorce

On the other hand, the state of California and most of the remaining states in the country exclude personal goodwill from the marital assets but do preserve the right to value business goodwill.  The key reported case on celebrity goodwill in California is In re Marriage of McTiernan and Dubrow (2005) 133 Cal.App.4th 1090.   In McTiernan, the successful movie director, John McTiernan, had directed multiple blockbuster films and earned over $15 million. At trial, his wife’s accounting expert testified that her husband had developed a reputation which greatly exceeded that of most other directors and that he commanded a premium for his services.

The trial court determined he had personal goodwill of $1.5 million, but he appealed, and the Court of Appeal held that an individual performing services as a “natural person,” as opposed to as a business or profession, cannot have goodwill. Therefore, “celebrity goodwill” was not recognized. This decision was consistent with previous published California cases which had recognized that the spouse must have an ownership interest in the entity with which she/he is associated. But, today, things are changing and many non-earning or non-celebrity spouses are seeking value in determining their ex’s total worth.

“You may want to consider where you are living, how much time you are spending in each location, and where you are permitted to file for divorce before pulling the trigger.”

So, now imagine you are an actor, entertainer, or even a hot musical artist or an up-and-coming one.  You are married but have been considering divorce.  You and your spouse split your time between the Coasts: spending part of the year in New York and part of the year in California.  Over the course of your marriage, your professional reputation has grown, and you now can demand higher rates for your work. You may want to consider where you are living, how much time you are spending in each location, and where you are permitted to file for divorce before pulling the trigger in one state versus another.  The choice could mean the difference of hundreds of thousands or even millions of dollars either being added to or eliminated from your marital estate.

If you’re on the rise in your entertainment career, you should consider the following list of 4 safeguards:

1. Consider the worst-case scenario and plan for it (hoping it will never happen). Find a competent attorney to draft a pre- or post-nuptial agreement (Michael Jordan had one, thankfully, he says).
2. Confer with your business manager, accountant, agent and others who are guiding your career and ask them how to make certain your goodwill is not tied to any business entity. Then ask how to keep your goodwill assets under your own personal banner.
3. As you go about putting together the proper paperwork, don’t forget to also spell out certain provisions in your Living Trust or Last Will and Testament documents. Your goodwill is something that will reap major benefits for your heirs –those designated to cash in on your goodwill (think Michael Jackson and Elvis Presley).
4. Be upfront with your spouse or intended about how you feel about your separate, non-marital property. Let’s say you write a screenplay or song five years before you tie the knot. Six years into the marriage, it becomes a hit. You want to make certain that that asset is singled out as “strictly yours” before entering into any marital agreement so if the marriage fails, you won’t engage in a protracted battle over that artistic “work.”

Always keep this mind: Once you find that you have amassed a bankable amount of goodwill, it is prudent to make plans to protect it. Just remember that your goodwill value is just as valuable as your tangible assets, like real property such as a house, artwork, jewelry, car collection, etc. Don’t overlook it – and check occasionally to determine what it is worth.