Divorce at Altitude: A Podcast on Colorado Family Law
Divorce at Altitude: A Podcast on Colorado Family Law
Intangible Property in a Divorce Raj Kukreja | Episode 219
Welcome to Divorce at Altitude, your guide to Colorado family law, hosted by attorneys Ryan Kalamaya and Amy Goscha. Each week, we dive into a topic related to divorce and co-parenting to help you navigate the complexities of family law in Colorado.
In this episode, Ryan is joined by Raj Kukuraja, a high net worth divorce expert, to explore Intangible Assets in Divorce—a complex but crucial topic for many high-asset cases. Together, they unpack the concept of intangible property, including Name, Image, and Likeness (NIL), intellectual property, personal goodwill, and more, and explain how these often-overlooked assets impact property division in Colorado divorces.
Episode Highlights:
- Understanding Intangible Property: What qualifies as intangible assets and how they differ from tangible ones, with examples ranging from intellectual property to NIL and personal goodwill.
- Valuing Professional Goodwill: How the courts assess professional practices and the role of excess earnings in determining value.
- Name, Image, and Likeness (NIL): Examining the unique challenges of valuing NIL, especially in high-profile and high-net-worth divorces.
- Case Insights & Examples: From former Broncos players to celebrity endorsements, Ryan and Raj discuss real-world examples that illustrate the complexities of dividing intangible assets.
Whether you’re a business owner or simply curious about this aspect of divorce law, this episode is packed with insights to help you understand and navigate the valuation of intangible assets in Colorado divorce cases.
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What is Divorce at Altitude?
Ryan Kalamaya and Amy Goscha provide tips and recommendations on issues related to divorce, separation, and co-parenting in Colorado. Ryan and Amy are the founding partners of an innovative and ambitious law firm, Kalamaya | Goscha, that pushes the boundaries to discover new frontiers in family law, personal injuries, and criminal defense in Colorado.
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DISCLAIMER: THE COMMENTARY AND OPINIONS ON THIS PODCAST IS FOR ENTERTAINMENT AND INFORMATIONAL PURPOSES AND NOT FOR THE PURPOSE OF PROVIDING LEGAL ADVICE. CONTACT AN ATTORNEY IN YOUR STATE OR AREA TO OBTAIN LEGAL ADVICE ON ANY OF THESE ISSUES.
Welcome to Divorce At Altittude, a podcast on Colorado family law. I'm Ryan Kalamaya. Each week, along with my business partner and co-host, Amy Goscha, or an expert, we discuss a particular topic related to Divorce or co-parenting in Colorado. In addition, we have created a short series of lessons that will take you through the legal process of Divorce and answer your questions from simple to complex. Divorce isn't easy. The end of a marriage, especially when children are involved, brings a great deal of loss and change. We hope these practical tips and insights will help you on your journey to a new. And better life. Welcome back to another episode of Divorce at Altitude. This is Ryan Kalamaya. This week, we are going to be talking about intangible property. Now for many listeners, they may not understand what exactly that means but my guest is going to explain all of that. We're going to talk about NIL, name, image, and likeness personal goodwill, business owners. And the but let me tell you a little bit about our guests. Cause I'm excited to talk with him and have someone that we haven't had on the podcast before. So we're joined this week by Raj Kukuraja. He is a partner at Buckhalter. He's a shareholder in that firm. And he focuses on representation of individuals with high net worth in ultra high net worth marital estates. And he typically or often will be dealing with business valuations. And we'll get into how that relates to this week's topic. But before I go on, Raj, welcome to the show. So one thing I didn't mention in the intro, but that we talked about before was that we both graduated from the University of Virginia. When you were on grounds in Charlottesville, did you think that you were going to be a divorce lawyer dealing with high net worth individuals in Denver and across Colorado?
Rajesh Kukreja:Yeah, so I'm one of those unusual people who actually knew what he wanted to do for a profession before he even started college. The entire time I was at UVA, I knew I wanted to go to law school. I knew I wanted to be a litigator. Did I have any idea that I was going to be doing high net worth and ultra high net worth litigation family law litigation? I probably couldn't even have told you what that was back in the late 80s and early 90s when I was there.
Ryan Kalamaya:When I was there, I played baseball and before I went to UVA, growing up in Colorado, I thought I was going to be a professional baseball player. And we'll get into why that might matter, but as soon as I got to UVA, I realized that I was not as good as what was required for the major leagues. And I played against a couple of guys, Mark Teixeira, namely he was probably the best person. He was, he played for the Yankees and the Rangers and he had certainly some name, image, and likeness. Now at the time, we did not know what that was or talk about that and we'll get into why that matters. So this week we're going to be talking about tangible and intangible assets and how those are subject to division in a divorce case in Colorado. So to lay some groundwork, what are tangible assets? So the audience understands, and then we'll talk about what are intangible assets. But to give us an idea, what are tangible assets?
Rajesh Kukreja:Sorry, yeah, it's a good place to start because the idea of an intangible asset, it's harder to understand if you don't first understand what a tangible asset is. So the easiest way to describe a tangible asset is just to describe certain categories. A house, for example, cars, investment accounts, retirement accounts, those are all tangible assets. Those are things that you can readily, have possession of in some physical way or use of, and then also depending upon the asset can be readily valued, right? An investment account, you just look at your brokerage account statement and there's the value. Retirement account statement, the same thing. A house, you have use of it, you can live in it you have possession of it, and then it based, the value is based on maybe what you purchased it for. Depending upon when you purchased it or have an appraiser come in and say, this is what your house is worth. This is what the land is worth and the bricks and the fixtures inside and all that stuff, is worth. So those are tangible assets.
Ryan Kalamaya:So the gold bar that literally that you hold, you could go to Costco and get it that's a tangible asset now would be in contrast to in intellectual. Property right, or something else that's intangible. So can you maybe explain a little bit more about intangible assets? We talked about our degrees from Virginia. That might be another example. What are other things that listeners could understand for intangible assets?
Rajesh Kukreja:Yeah, so the concept of an intangible asset is a little bit ethereal, but at its most basic level it's an asset that has value, but that lacks physical substance or is a non monetary asset. We can give you some examples of what that what that includes intellectual property. Goodwill, personal goodwill to a business and NIL or name, image and likeness are three very good examples of what that what an intangible asset is. So if we talk about intangible or intellectual property, we're talking about a patent, a trademark, a trade secret. Essentially ideas that are created that one owns, but that are of value to others. So an example would be the person who created the formula for Coca Cola. That's an intangible asset, it's a trade secret. So even though in and of itself, whatever might have been scribbled on the page or put together to figure out what that actual recipe or formula was that had value to others, specifically to Coca Cola, because they could create a product from that and sell it. So that's an intangible asset that's considered intellectual property. Another example is software code. Code is intellectual property. Software code that makes cars run, for example. Elon Musk owning the software code that makes Teslas run, for example. That's intellectual property, and that's, again, something that's created, not really physical. It's just on a computer screen, so to speak, but put to use. It has great value to the person who has that. And then one of the last examples I would give, and this one's sort of a little bit more on the cutting edge now, I would say cutting edge because I'm 54 years old, so social media still feels cutting edge to me, but social media influencers, Instagram influencers, for example, they create content, right? They're not creating a product, a physical product. They're creating content, and then they monetize that content. And some people want to be able to use it. that content to drive business towards themselves, advertisers and the like. So that's another example of intellectual property that one would consider and would have to look at as part of a divorce case.
Ryan Kalamaya:The, an example for the social media influencers, Kim Kardashian and Kanye West reportedly, went through a divorce. There was a prenup, but Kim Kardashian, you mean a lot of people it's she's famous for being famous, or there might be others. She might be famous because of a videotape, but in any event, there's value there that she can go on to a particular product and endorse it. Other. Influencers could be, Taylor Swift or Jason and Travis Kelsey. There's, we'll get into some of those issues, but people can I think understand, especially on the younger age spectrum, the social media influencers so one issue that we're going to talk about in a little bit more detail is the personal goodwill or the goodwill aspect and i'd said or listeners are familiar with our hypothetical divorce client eric wolf and him and melanie are going through divorce Eric is a business owner and so Raj, if Eric owns a company that is a software company, can you walk through maybe some of that example about the personal goodwill and the tangible versus intangible and how that would relate to Eric's software business so that people can understand that component, the goodwill.
Rajesh Kukreja:Yeah goodwill value, associated with business interest that somebody has in a divorce is one of the most common types of intangible assets we deal with in divorce cases especially in the high net worth, ultra high net worth space because you have a lot of clients have You know, closely held companies that they either created on their own or created with others and have grown significantly in value. So when we're talking about a software company, you're really talking about them creating a product, right? An intangible product, not a physical product, and not building machinery, for example but they're building a product that they use and sell to other people in order to accomplish whatever purpose it might have. In that situation, what you really got to look at is, okay, what is it that makes my software product or products that I create? worth more in the market than others, right? So it's really a comparison in terms of what is my product like? What does it do compared to other products in that similar space? Or who was my customer? Who was my customer list? And what, how does that customer list impact what my revenues are? Bottom line is, what is it that I'm doing? or my company's doing, or my software product does that generates more revenue for me than another similar software company. Here's a way to give you an example of a way that this may work, and it's not a software company. It's a little bit different, but let's talk about a dairy farm, for example, because I've got a good example associated with that. Dairy farm, you're going to have the what we call book value or the tangible assets, right? You're going to have, you're going to have the cows, you're going to have the machinery, you're going to have the buildings and the, trucks to take the milk to market or whatever. But if you are, for example, Horizon Dairy Farm, which has contracts with Whole Foods and supplies to Whole Foods versus a similarly sized dairy farm that You haven't heard of before but then also maybe supplies, grocery stores and the like. Horizon Dairy Farm because of that contract that it has and that name recognition, because you see that brand on the shelf at Whole Foods is likely to have more value, even though they're essentially creating the same product as somebody else. So that's an example of where the customer list or the contracts can add value and then create that intangible value so that their revenue is higher Yeah,
Ryan Kalamaya:when I describe it for Eric Wolf, whether he's a dairy farmer or a software owner, or someone in that capacity is Goodwill Apple. Everyone knows Apple. It's one of the world's it's the world's most valuable company at times, but it's the difference between people standing outside and camping out. In the front of the store to get the product, whether it be an iPhone or an iPad, but the fact that people are willing to line up, that is because of the goodwill, right? The people that, the brand recognition, they are buying that product because it is Apple and everyone, they wear the t shirt, they wear, they put the sticker on their car. That is the real, Intangible goodwill asset that we're talking about versus the cash in the bank or the products that they have the hard assets in that store.
Rajesh Kukreja:Yeah, so going back to Eric's software company You look at, maybe he has a contract, let's say he does HR software, and he has a contract with the state of Colorado, right? So he's going to produce all, he's going to provide all of his he's going to provide his services and software to the state of Colorado for all of their HR uses. That contract helps him as well in terms of gaining more revenue and more value compared to other HR software companies who are selling to, I don't know, to, to small law firms, for example, rather than, an entire an entire governmental organization.
Ryan Kalamaya:Rush. Can you talk to me a little bit about what Goodwill does in a professional practice? So a lawyer, architect, doctor, those sorts of professional practices, because every time Eric Wolf, that's a lawyer or a doctor, they say. I am the business or there's no value to my business. How are you walking Eric or his wife, Melanie, when, she says Eric and I had a conversation and he said, there's no value to my business. How are you explaining that to them about the goodwill component to a professional practice?
Rajesh Kukreja:I like to refer to Colorado as the Wild West in a lot of ways because there's so little law on so many important topics on many issues, including in family law, but the professional goodwill associated with professional practices is one of those areas where the law has actually developed over the last probably 30 plus years at this point in time. In the early 1990s, there were two cases that came out In Remarriage of Huff, which involved a partnership in a law practice, and In Remarriage of Bookout, which involved a physical therapy practice. And they the idea essentially was that there is, there has to be some way to monetize the value associated with a professional practice. If you look at a lawyer, for example why does one lawyer at one law firm make more than a lawyer in a similar situation at the, at another law firm, right? It's basically they bill the same number of hours. They work at the same size law firm. They, Or different size law firm, but then they do the same type of law. So why is one making 250, 000 a year more than the other? And the concept that was created is called excess earnings, which is essentially capturing that there must be some reason that this lawyer at this firm is able to earn more doing the same work than this other lawyer at this other firm who has the same amount of experience, bills the same number of hours and then they all obviously have their respective clients. So the concept was to capture that via the excess earnings methodology. And essentially what you do is you say, Here's your average lawyer who bills X number of hours in this area of law with this number of years of experience, and this is what they earn if you look at the market as a whole. So if you earn 200, 000 more than that per year, that 200, 000 is the excess earnings. And then it's multiplied. by a factor by a number that's generally it can be between 1 and 5, but generally it ends up in being between 3 and 4 that recognizes the market the profession the market that they're in the risk associated with their specific type of practice, et cetera. So that's how that's cap that's how that's captured. And that's right
Ryan Kalamaya:In the Huff case, it had a factor of three and often we get into experts and we've had various hosts or guests rather that talk about the valuation component in that, as you said at the very beginning, this is one of the most hotly contested issues is that valuation in particular, the goodwill, because, there's not, Often a dispute about how much money is in the bank. What are the credit cards that are owed for the business? Cause those are the tangible assets. There could be a dispute if it's a landscaping company on how much are the dump trucks and the backloaders and all of that, the equipment, but it's that personal goodwill because the the discount rate or the multiplier can really be a huge factor. And, so can you explain how generally before we move on to NIL? Because again, that's really the wild West, which we'll talk about. But Raj, What can you, for listeners that haven't heard our other episodes on business valuations, how do we value, how do Colorado courts and divorce lawyers like you and me, how do we value that personal goodwill? What are the different methods and approaches that are taken in valuation? Specifically when it comes to good will.
Rajesh Kukreja:Yeah generally speaking when you were talking about business valuations in divorce contexts, we're looking at three different approaches and it, can depend upon what type of asset you're valuing, but you've got what's called the market approach, you've got the income approach, and you've got the cost approach. The market approach essentially is not necessarily for a professional practice, but because you can't necessarily sell those, depending upon what the the work is that you do, you and I as lawyers can't really sell our practices but the market approach could be actually if we want to talk about the dairy farm, for example, okay if we go back to that, or we talk about, we could talk about Eric's software company what would somebody pay for that? Going out and seeing basically what similar sales out in the marketplace are or have been in the recent past associated with those companies helps to value Value the business as a whole And what that's doing is actually giving you one value that's the total value but realistically speaking What you're really talking about is still tangible and intangible value Because you're still going to have a tangible value or book value which is going to be just the hard assets, right? What's the cash in the bank? What equipment do you own? What debts do you have that you have to pay? Whatever that ends up being on your balance sheet, so to speak, is going to be the book value or the tangible value. And the rest of it is intangible value and somebody's looking at that saying I can buy this person's business And I can make x amount of money every year based on that so i'm going to invest At this amount of money in that business to get this income stream in the future. So that's the market approach the income approach is actually a little bit more like what we talked about in terms of the professional practice which is what money is being brought in? And then how do you? Basically, how do you monetize that on a sort of go forward basis or a basis over time to decide really what the property value is there?
Ryan Kalamaya:And I think for listeners, they may, have a hard time or that rather to dumb it down. Apple, the company, whatever that stock trades at, that is the market approach and inherently the intangible value of the brand is baked into that price that people are willing to pay. And same thing, Nvidia, for example, they've got a market lead on their software that are not necessarily software, but the hardware for the server and the microchips that they're producing. And so that. Those are publicly traded companies. It is worth what it's worth in terms of the market that particular day. But then the income approach and the excess earnings that you mentioned at Huff, that is almost always used when it comes to in particular, a professional practice, the mark or the cost approach or the asset approach, at least in my experience, Raj, is the real estate. that owns the commercial building, the business that owns that building, it's worth what the building is. And they're like, we work, for example, there might be some intangible value there in addition to the the assets, the hard assets, but really mostly it's that, that cost or that asset approach. Do you agree with that?
Rajesh Kukreja:Yeah. And the WeWork example actually leads me down the road of something else, which is like basically a commercial appraisal process, which is you're taking different approaches. What's the actual. property worth itself versus how much income can it generate. So if the income that it generates is higher than just the land value or building value itself, you've got that value, which is an additional sort of intangible value.
Ryan Kalamaya:And you mentioned the fact that multiplier of three or four, and generally speaking for professional practices, that's pretty consistent with what I've seen. And, but for listeners that a software business, for example, generally speaking, those are going to be higher multiples because they often will have higher profit margins because the value is in that patent or that idea, the intellectual property, and generally people make more money off of that. Whereas the dairy farm usually will have a lower multiple or a landscaping business, something that's super capital intensive will generally have a lower multiple. And I think people it's helpful for people to understand that these experts that we use, these valuation experts, they have access to. Databases that some of these businesses are traded or exchanged in private sales and they have access to those so restaurants, restaurants are sold and it's a matter of you know What is that industry standard in terms of is it authentic? Three EBITDA, for example. There's different things that we can go and talk about, but I think the takeaway Raj you would agree is that when Eric and Melanie are going through a divorce, they often, when they're sitting down at the kitchen table or talking about who's going to get what, they often do not really understand how Colorado views intangible. Property and that goodwill component and it is something that can really change the valuation and the ultimate result In a divorce in colorado
Rajesh Kukreja:Yeah, absolutely the the average divorcing couple sitting down at the kitchen table to try to understand what they have Really only think about the tangible assets, right? What's our house worth? What are our cars worth? What's in the bank? That kind of stuff. But yeah, you have a potentially huge swing, depending upon the valuation of a business interest can be, and that is something that we have to counsel clients on a lot and help them understand, and the spouse who doesn't own the business is excited and the spouse who owns a business is Not too happy most of the time after that conversation,
Ryan Kalamaya:right? Because then you get into the liquid versus illiquid that personal goodwill is an illiquid asset If it is worth a million dollars Then that is not a million dollars in the bank. And so when we're talking about tangible intangible It's also Brings up the liquid versus illiquid and often becomes a real issue in resolving these cases.
Rajesh Kukreja:Wait, that means I have to work how hard for the next few years to pay my spouse out for what's really mine, I think is something you hear a lot, right?
Ryan Kalamaya:A hundred percent. So let's move on and set change things up and let's talk about name, image, and like likeness. NIL what is that term referring to and how are we gonna deal with it in Colorado?
Rajesh Kukreja:So the name image and likeness, I think that, that term, that con, that, not that concept, but the term is pretty new and really goes back to what's happened in college athletics over the last few years after the U. S. Supreme Court essentially said and I'm paraphrasing here, obviously, but yes college athletes can get paid as well for what they do. And that created this this cottage industry for college athletes to be able to monetize, their reputations as players and the teams they play on, the positions they play, all that kind of stuff. But the concept itself is actually not new. It's been around for a long time. Go think about endorsements for either professional athletes or other celebrities. We have Peyton Manning, for example, who is ubiquitous here in Colorado, or I guess he's gone by Peyton Manning now from that most recent commercial. But he he shills for Nationwide. He doesn't make products for Nationwide, but his value is associated with him being Peyton Manning and Peyton Manning saying, hey, go buy Nationwide insurance, right? Another example from as recent as two nights ago is the Manning cast that Peyton does with his brother, Eli. From Monday Night Football. That was created just so that ESPN could reach a wider audience on Monday Night Football and get more people to tune in and drive more revenue from advertising dollars. The fact that Peyton and his brother are on, it's because it's Peyton, not because he's really creating something. But he's just there with his brother to help entertain. And that's another way where he's monetizing who he is as a former athlete. So that concept has been around forever. You go back to the Terry Bradshaw baby shampoo commercials from the 70s, and it's the same concept. People didn't really understand it as well, I think, until The NIL cons or the NIL term really was coined more recently and has become more prevalent in our consciousness.
Ryan Kalamaya:Yeah, they I guess a couple of examples it's always helpful and fun to, to talk about the actors that go on and they will endorse, Matthew McConaughey with Lincoln and the watches that they're associated because people like them. They bring the brand up and Shadur Sanders. I went to CU law school. grew up a huge bus fan. He is reportedly the most paid college athlete in all of college football. And it's because he's on Google commercials with Travis Hunter and both of them are getting paid substantial amounts of money. A final example is Scarlett Johansson. Her voice was reportedly, poached or used for chat GPT. And she said, she has a very distinctive voice and she said, you can't use my voice and it's the licensing. It's that aspect where you're saying you're taking something that is me and you're using it for some other purpose to attach to your product or service. And so if that issue comes up, let's say a former Bronco or Colorado avalanche, or a famous actor that goes through a divorce. We had an episode, Amy and I talked about Kevin Costner. He owns a ranch in Aspen, just up the road from where I'm recording this. He went through a nasty divorce. It was in California, but if Kevin Costner goes through a divorce, how are we dealing with that name, image, and likeness in Colorado?
Rajesh Kukreja:Yeah, that's a great question and it's a really difficult one to answer because we have no law in Colorado on how to deal with that. You'll actually, going back to California for a second though the Channing Tatum and Jenna Dewan divorce has still been going on for, I think it seems six or eight years at this point in time. And it's also, related to the intellectual property issue of the Magic Mike, franchise, so to speak. And the, basically the monetization of that and when it was created and who owns it. All of that stuff is really difficult to figure out. In Colorado, the issue is it's not just What have I made in terms of, and I would say in Colorado, I would say probably anywhere, but specifically here as we're trying to figure out how our courts would deal with this, it's not just a matter of what have you earned up to this point in time, because you're taking a snapshot at a point in time that reflects basically an entire ongoing career that involves endorsements and other work that you're doing where you're paid for who you are your name, image, and likeness. Putting your name on a car dealership or something like that or being in commercials or advertising products or what have you. But that's going to go on for a long time, right? For depending upon who you are. Peyton Manning, he's going to be with us for quite a while on TV and doing things, right? So how do we today figure out what that's worth? And that's a really tough question to answer. There's not a, there's, I was going to say that there's not a lot of direction that we have in Colorado. I think that's probably inaccurate. I think the answer is there is no direction that we have in Colorado. So we're going to be left to cobble it together. I was speaking about, I was speaking with an evaluation expert about this same issue as I was trying to think through it. And I think what we came up with was essentially the income approach to valuation, which is, what, what can you reasonably expect to earn not just what you've earned, all of that would be a factor, I think, in determining that, but what can you reasonably expect to earn as a part of your image and likeness over time. He told me that there's this sort of I can't remember exactly what the term was, but it's a bell curve, which is you're younger, so let's talk about Peyton, because everybody in Colorado likes to talk about Peyton when he was younger, he wasn't making that much money in terms of his name, image, and likeness, right? He was establishing himself and everything like that, and then as he Got more prolific as a quarterback, as he won super Bowls, his value went up significantly in that range, and it's gonna stay that high for quite a while. But at some point in time, people are not going to remember that Peyton Manning played for the Indianapolis Colts and then the Denver Broncos and won two Super Bowls. They're gonna be like, okay, yeah. So there was this old guy from years ago who did this, and his value's gonna decrease at that point in time. So trying to identify the. The life of his popularity and his celebrity is something that someone with, far more understanding than you or I probably have in terms of figuring out what, how to monetize that and how to value that, but in all likelihood because there's no of it. There's no tangible asset associated with it. It's just you, right? It's who you are as a person. I think you probably go with the income approach to capture what that value would be.
Ryan Kalamaya:Yeah, I agree. There is a market in the sense of the NIL college athletes, because those guys, they're bouncing around at Shadur Sanders. There is a market out there because they essentially have boosters or these programs that will bid on a particular quarterback or a key athlete. And so they will pay them and there's a market for, and it is based on their NIL in, in essence. But it is a fascinating topic. If people want to. Listen more, there is a related episode on this where Evan Shine, he's a New York City divorce lawyer in episode 128 we talked about Tom Brady, he was playing at the time the episode's called Tom Brady, Professional Athletes and Divorces with Evan Shine, but there might be some guidance in New York, there might be some guidance in California Raj, but. It is one of those things they, I know that California and other states, they have a different approach on personal goodwill. And generally speaking, my observation is we can, when you compare Colorado to other states is that Colorado takes a very progressive or expansive view on value and what that is worth. And the, I. There's nothing directly on point, but at least the policy or the general tenure of other cases, the Huff book out other cases, I think that there is very little doubt that the NIL component is worth something. It's more of a dispute on. How do you value it? And that gets into the income approach, market approach. There's certainly not any sort of asset approach, but that income aspect, I'm curious what your thoughts are. I, there's the intermarriage of Sewell case. We've been throwing a lot of athletes out there, but that was Steve Sewell for me growing up as a big Broncos fan, he was a tight end. And I don't know if you remember from that case, but. He went through a divorce and it was in the middle of the season. And the issue in the sewer case was, does he get a bonus for the pro bowl? And that was going to happen after the decree had entered and the, and whether or not that is, or is not property. Now that's a contractual right. It's so it's a little bit different than what we're talking about, I mean that future income. So if we're talking about. The NIL, what is the value of that income off in the future? How would you reconcile that with Sewell that stands for the proposition that earnings after a decree by a professional athlete are not necessarily it's not marital property. I'm curious what your thoughts are on that.
Rajesh Kukreja:Yeah, and Sewell, as you said, does deal with a contractual and I think that the underlying issue in Sewell, as with some other cases, is basically has the money been earned regardless of when it's actually going to be paid out? And that's, that's an interesting thing. Intellectual question in lots of different cases that we've had and probably a whole different episode Ryan, if you're going to talk about that, but there, you really do delve into that. In the NIL arena though, I think you're capturing the person's personal value and not just what they've earned during the marriage because it's not contractual in nature because it's yet to be, it's probably partially monetized, but not fully monetized. And you have this sort of actually interesting idea or question of like, when did you earn your name, image, and likeness? And how does that factor into, what's, what part of it's marital and what's not? The fact that you were a star little league player factored into your becoming, a professional baseball player, right? At some point in time. And so where do you cut, where do you slice and dice that to where, this is what, the marital component of what your name and image and likeness is. And that's a, it's a very interesting question that I assume at some point in time in the next 10 years will be in front of the Colorado Supreme Court.
Ryan Kalamaya:Yeah, and we're gonna, yeah, just the questions because, the Colorado courts, there is case, Law that a medical degree or specifically a law degree is not worth anything. So the wife saying, I helped you through law school, Eric, and now you've got this value, this degree, right? Raj, you and I have a JD and that is, is that worth something? And the Colorado courts have said, no, that is not that's not a value. So I actually, now that I'm thinking about it, my. There's, I don't know if it's necessarily cut and dry as I originally had suggested about the valuation, but there's so many issues that this brings up because if Eric and Melanie get married and Eric was a former baseball player and now he's retired. Is his name, image, and likeness, is that separate property because it was earned before the marriage or are we valuing it as of today? Those, there's so many issues that can be argued when you're talking about this intellectual property and these intangible assets.
Rajesh Kukreja:Yeah, no, absolutely. Um, going back to the professional practice comment that you made about the law degree and the medical degree, I think that is why Huff and Bookout came to be in terms of, we're not going to say that this is An asset, the degree is an asset, but there has to be some way to monetize the additional income that you're able to generate based on that. And so I mentioned that just because when we get to NIL cases and courts are figuring them out, I do think they're going to be, as you said, progressive in terms of trying to capture a value in the marital estate of that name, image, and likeness. And it's a great, it's a great question. If you, if it's a retired, if you're a retired athlete, Then you get married and you have the name, image, and likeness. The law says the increase in value of separate property during the marriage is marital. So does that value increase during the marriage? Is that marital? Like, all good, all good questions that we don't have real answers to right now.
Ryan Kalamaya:Yeah. Snoop Dogg, the guy crushed it in the Olympics and he's just the ability for him to, recreate himself over and over. If he got married when he's a gangster rapper certainly there's value there, but now he's taken on this whole new persona and the value and everything. It's just, when you go down this. Kind of chain. There's just so many different issues and it obviously depends if you're Eric or Melanie Wolf or Snoop Dogg or his wife or anyone that we've referenced. Anything that listeners might gain or that we haven't covered, Raj, in terms of intellectual property or how these particular rights are dealt with in a Colorado divorce.
Rajesh Kukreja:I think one thing I would say is that It's it's really important as you're going through a divorce to look at everything that's there because, it might at first blush look like there is no intangible property that exists, but you got to really dig in and see what the assets really are. For example, you were talking about professional degrees, okay? And then do you have a partnership interest in a business? Do you have products you've created? Questions that may not immediately be asked or that you may not think of, but when you go to see your lawyer, one of the things that your lawyer should be helping you with is to really understand what's what's at play and what could give rise to an intangible property right? And then, Once you've taken a look at that, then the question is what's the asset? How do you value it, et cetera. But it's that first step that's so important.'cause if you don't, it's like what we did in, basically learned how to do first year in law school, which is issue spot. Issue spot, right? You go in, you see what's there. Let's figure that out first, and then we can figure the rest out from there. That's the most important part for people to take away.
Ryan Kalamaya:I was sharing with you before the show I had a former professional athlete and I called a couple lawyers asking about the judge and we talked a little bit in abstract terms and one attorney said, Hey, have you thought about the NIL component? Which I hadn't. And the other lawyer through the settlement, the, that represented the wife never. Picked up on it and it was in retrospect, a huge missed opportunity for them to really add to the marital estate. The other thing I think is worth mentioning is just to remind listeners that the law on property. So 14, 10, 1, 13 it delineates, what is marital, what is separate and gets into the various factors. It doesn't say. Anything about intangible property. We rely on case law for what the Colorado courts say about that. And when we mentioned these cases, that's what we're referencing. And Raj, as you have referenced, there's a dearth of how you deal with this. And in terms of property, But there is, the economic circumstances of the parties is a factor in how a court is going to divide property. And, there might be an intangible asset that the court's going to take into consideration in dividing the marital estate as well as the contributions. And Colorado is not necessarily a 50 50 state. So it does raise those issues about, the contributions, who created this value, as well as what the prospects are going forward. And so I think that's going to be really important for courts and parties to take into consideration when they're dividing those tangible versus intangible assets or the liquid versus illiquid assets, because the that the party that has the, name, image, and likeness, are they going to be able to generate income in the future? Like the other spouses? No. But then it also gets into if there is a disproportionate, huge value to the name, image, and likeness or that personal goodwill, how much did that spouse, taking care of the kids and providing as a home keep maker, certainly there is value and they allowed or facilitate and helped encourage and supported. The celebrity or the person that has the significant goodwill, but, there are these kind of questions of, is it fair to split that equally, 50, 50. There's so many kind of issues with that. Anything, you want to comment on that with Raj on that topic?
Rajesh Kukreja:Yeah, I think what you've identified essentially is just how complex the issue can become once you identify intangible assets. Not just the question of the how you split and what's fair there in an equitable division state but the value, the valuation of it the monetization of it in terms of how do you put it on a balance sheet and then figure out how to pay the other party out for whatever their share would be for the for the share of the intangible asset. So I think it's I think it's it becomes more complex the more you have intangible assets that you're dealing with.
Ryan Kalamaya:Thank you so much Raj for the time and the insight. And if people have questions about intangible assets or issues relating to these particular topics or high net worth or ultra high net worth divorce, certainly reach out to Raj his contact info is going to be in the show notes we'll have his his email. Raj, always enjoy talking to a fellow who and, really enjoy the conversation. Thanks for joining us on Divorce at Altitude.
Rajesh Kukreja:Thank you. Thank you, Ryan. Really enjoyed the chat. Take care.
Ryan Kalamaya:hey everyone. This is Ryan again. Thank you for joining us on Divorce at Altittude. If you found our tips, insight, or discussion helpful, please tell a friend about this podcast. For show notes, additional resources or links mentioned on today's episode, visit Divorce at Altittude dot com. Follow us on Apple Podcasts, Spotify, or wherever you listen in. Many of our episodes are also posted on YouTube. You can also find Amy and. Law or 9 7 0 3 1 5 2 3 6 5. That's aaa.