USA – ARKANSAS Trends and Developments Contributed by: Aaron Bundy and Grace Ann Green, Bundy
Introduction In Arkansas, the landscape for family law litigation has shifted away from generalised equitable princi ‑ ples towards a more rigorous adherence to statu ‑ tory and evidentiary standards. While the emotional aspects of divorce often garner attention, appellate courts have quietly but firmly continued to raise the bar for financial advocacy. The casual presentation of assets, reliance on “rule of thumb” valuations, and the assumption that fairness will cure procedural defects are no longer viable strategies (if they ever were) in marital dissolutions. Current trends underscore this reality: precision is paramount. Recent appellate decisions have sharp ‑ ened the boundaries of business valuation, particu ‑ larly regarding the classification of goodwill; expanded the definition of marital property to include “privileges” previously thought to be personal; and issued stark warnings regarding the intersection of estate planning and marital rights. Business Valuation and the “Saleability” Test The valuation of closely held business interests is one of the most financially significant issues in high net worth divorces. Arkansas uses the “fair market value” standard, yet the application of this standard has been inconsistent in trial courts at times, particularly when distinguishing between the personal reputation of the owner and the value of the enterprise. The Arkansas Court of Appeals recently addressed this nuance in Gillum v Gillum . Arkansas law has long recognised a distinction between “enterprise goodwill”, which is a divisible marital asset, and “personal goodwill”, which is tied to the individual owner and non-divisible. Historically, this distinction was litigated primarily in the context of professional practices, such as law firms, medical clinics or accounting partnerships. The rationale was that a professional’s clients are attached to the indi ‑ vidual, not the firm. However, Gillum expanded this analysis to commer ‑ cial ventures, clarifying that the “key person” defence is not limited to licensed professionals. In Gillum , the court addressed the valuation of a healthcare admin ‑ istrative business. The husband sought a division of
the business’s value, arguing that because the busi ‑ ness generated substantial income, it must possess divisible value. The wife, conversely, argued that the business had “negative” value due to significant debts and that any positive cash flow was attributable solely to her personal relationships and reputation. The Court of Appeals affirmed the trial court’s finding of zero divisible value, establishing a rigorous “sale ‑ ability” test for enterprise goodwill. The decision clari ‑ fied that to prove enterprise goodwill exists, the claim ‑ ing spouse must provide evidence that the goodwill could be sold or marketed to a third party as a busi ‑ ness asset, for a price exceeding its tangible assets without a non-compete agreement from the owner. Gillum serves as a cautionary tale for the non-owner spouse (the “out spouse”) in a high-asset divorce. It rejects the assumption that income equates to value. A business may provide a substantial lifestyle for the family, funding homes, travel and investments, yet still be worthless for the purposes of property division in divorce if that income stream is dependent on the owner’s active participation. Divisibility of Intangible Assets, Including Transferable Rights and Licences While Gillum restricted the value of certain business interests, other recent decisions have expanded the definition of marital property in unique ways. An exam ‑ ple is found in Waldrip v Waldrip , which addressed an asset of particular cultural and financial importance in Arkansas: University of Arkansas Razorback Founda ‑ tion priority points. In Waldrip , the husband argued that his priority points, which determine eligibility for purchasing prime seat ‑ ing and luxury suites at sporting events, were a per ‑ sonal privilege rather than a divisible asset. The Court of Appeals disagreed. Citing the fact that the parties had contributed over USD650,000 in marital funds to accumulate these points, the court held that the points were marital property subject to division. This ruling is significant for high net worth individu ‑ als who often hold intangible assets or “privileges” such as country club memberships, season ticket licences or exclusive rights of access. Waldrip signals
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