Everyone is feeling the impact of today’s economy, and those going through divorce are no exception. When couples divorce, their marital assets must be valued and distributed. Who can afford to take the beach house that is worth less than the outstanding mortgage? What value will be placed on a spouse owned business that was once profitable but is now fighting to stay afloat? Because no one can confidently predict when the economy will rebound, business in divorce settlements must be carefully structured to fairly value and distribute marital estate assets to each of the spouses.
A divorcing woman, over the age of 50, who has relied primarily on her husband for her lifestyle and financial future needs to receive low risk, income producing marital assets as part of her settlement.. For example, receiving all or part of 401K plan benefits is safer than receiving a speculative real estate investment.
When business owners divorce, they often worry about what value will be placed on the business, especially in today’s economy. It is critical that the family law attorney representing the divorcing business owner understands and has experience in cases where a business must be appraised. A competent business appraiser must be retained, and the attorney needs to know which appraisers have the proper certifications and experience in litigated cases. Often competing appraisals, prepared by unqualified business appraisers will be hundreds of thousands of dollars apart. When the business is one of the most valuable assets in the marital estate, it is critical it be appraised correctly. A business that is undervalued or overvalued will result in an inequitable distribution of the marital estate between the spouses.
In analyzing the distribution of property in divorce, one spouse may be more willing to accept financial risk with the expectation that an asset will appreciate in the future. For example, if one spouse can afford to maintain the expense of a beach house purchased during the marriage, the beach house may appraise at an all time low in this economy but will likely increase in value as the market improves.
The current state of the economy does impact property division and business valuation in divorce. However, a thorough analysis of the property to be distributed including proper valuation, consideration of risk and potential tax consequences can lead to a fair and equitable distribution of the property to the divorcing spouses.
Who gets the family business in a divorce? Will I continue to co-own it with my spouse? Will I have to buy out his or her interest? How will my business be valued? Will I need to hire an expert? In this episode, host Jaime Davis and her law partner Nicole Taylor discuss the answers to these questions and more concerning what happens to the family business in a divorce.