By Maccarrone, Eugene T.; Weisel, Martha S.
The CPA Journal , Vol. 62, No. 3
CPAs are routinely asked questions concerning economic issues when clients divorce. However, when a CPA is involved in his or her own divorce these issues take on special significance. As most CPAs understand, marital assets are not limited to the family home and some jointly owned bank accounts. Experience has taught that their practices and their pension and profit sharing plans are part of the property of the marriage and therefore subject to division at the time of divorce. However, even experienced CPAs are often shocked to discover that the courts in many jurisdictions have determined that the CPA's professional license may be considered marital property and must be accounted for in some way before a divorce can be finalized, whether the matter is settled through agreement or court order.
DIVORCE AND PROPERTY
Although we tend to think of property as something that is acquired through gift or purchase, the legal concept of property is much broader. The thrust of current divorce law contemplates that each spouse may have economic rights to any property if that property, or its appreciation in value, is earned during the marriage. At the time of divorce, the concept of ownership of property is not connected with title thereto. Such property may be titled in the name of one spouse, but in the court's view be of value to both.
Property under equitable distribution and community property divorce law includes many items not traditionally included as such. For example, pension rights vested and unvested, even when the pension is not yet available, are considered property in nearly all states. If the property was earned during the marriage, and both spouses contributed to its acquisition and increase in value, the property must be divided between the spouses. It is a major tenet of current divorce law that a spouse may contribute to the acquisition and increase in value of property without making an economic contribution. That is, the homemaker spouse who creates a stable and supportive environment so that the licensed spouse can devote energies to building assets, is entitled to a share of that property at divorce.
CPA LICENSE AS PROPERTY
It is well settled that an individual's interest in a business or profession is subject to division at divorce. A CPA's partnership interest in an accounting firm will be considered marital property if partner status was achieved during the marriage. Even if the CPA became a partner before marrying, the appreciation in value of the partnership interest will be considered marital property.
That approach works if there is a professional practice involved. A problem arises when there is no practice and therefore it appears that there is no property to divide. This may occur in a marriage of short duration, where the licensed spouse has not begun a practice, or where the practice is in its infancy. Regardless, New York's highest court, in such a scenario, determined that a professional license, if earned during the marriage, is marital property.
The landmark case, O'Brien v. O'Brien, which determined that a license is marital property, concerned a medical, rather than CPA license. However, since the original decision, the New York courts have determined that all professional licenses, as well as college and graduate school degrees, must be treated as marital property. In O'Brien, the wife had spent nine years of the marriage working and supporting her husband, who eventually became a doctor. Two months after he became licensed to practice medicine, the husband filed for divorce.
The parties owned no property. Basically, everything earned by the wife went to pay the couple's living expenses as well as her husband's school costs. At the time of divorce, there appeared to be nothing to divide. The husband argued that the license was not property--rather "a personal attainment in acquiring knowledge." Nonetheless, the court determined that marital property is a creation of the divorce laws. …