You start just like you do a low income divorce or a middle-class divorce! You first have to gather all factual information about assets and when they were acquired. You need to determine first pre-marital or also non-marital property; pre-marital is anything that was acquired before the marriage; non-marital property, also known as separate property, is something that a spouse would get by inheritance or by gift because that is not considered marital property unless that spouse who receives it chooses to commingle it with their spouse.
You first have to determine what’s in the marital estate, as we call it, and so once you’ve identified what assets are in there, that’s when you begin your analysis of what is the best way to divide this. What would be more advantageous for my client? It sometimes requires experts like a business evaluator, if there’s a family business. That’s gotten to be relatively common. I’ve done several years where we had to use a business evaluator to determine what a family business was worth so that it could be properly divided or the equity in the business could be divided to the divorcing spouses.
Sometimes you’ll need a forensic accountant. If you have a person who is hiding money or doing some creative personal accounting, you need a forensic accountant to go through and look at everything and determine especially where marital funds might have been siphoned off to end of the day here. The financial planner is also a good one that you can bring in. A financial planner and/or a CPA can be very helpful when trying to encourage a client or educated client on what is the best way to obtain wealth from a divorce, and when I say wealth, I am talking about assets and income.
If you’re representing husband who would be paying alimony, you would want your client, I’m just speaking in general terms here, to pay as much as possible in alimony because he gets a tax break and the wife has to include it in her income, so she pays taxes on it as well. By the same token, if you have a wife who is getting divorce, you might want her to have more of a property division as opposed to alimony.
But then again, you may have a wife who says “No, I want the income as alimony because if I have a regular income, then I can show that to an underwriter for a house I’m trying to buy and they’re more likely to approve me if I show that I have income as opposed to some lump sum property division”.
It can get very complicated and when you start talking about stocks and securities and things like that, and when there are tax consequences, a lot of times you do have to bring in other professionals that can properly advise you. That’s why I bring on experts in the financial arena because it does really get highly specialized with the law, with the finance and the securities.
How Does the Court Handle the Division of a Business Owned Jointly by the Couple?
The first thing you need to do is agree on what the business is worth. In a perfect world, divorcing spouses would be able to agree on what the business is worth. If they can’t, then they’re going to have to bring in a business evaluator.
In the worst cases, you have a business evaluator for the husband and one for the wife but I always encourage people to agree on a business evaluator so they’re not just wasting family money to basically come to the same results. They could just agree on hiring one business evaluator that they can trust to be neutral and then agree that whatever that person’s decision is, just representative of what that evaluator says the business is worth and then they can go from there.
I’ve had attorneys on the other side that refused to do that, so husband and wife will each hire their own business valuator which is just ridiculously expensive. Once there is a value that is placed on the business and it’s a very detailed process, there’s every financial document that you can think of that needs to be examined, tax returns, profit and loss statements, all accounting records, then the business valuator would issue a report and say that this is what the business is worth. At that point, there are a couple of things you can do.
Sometimes you can just sell the business, which would be the easiest thing, although sometimes you’re not going to get what a business is worth because it’s kind of a different type of commodity; or what is more common in the cases that I’ve been doing is usually if it’s a family business, there’s somebody that wants to keep the business.
What they would do is they will just pay their spouse out money that represents that half interest in the business and just as an example where the court might make it easier or the attorneys if they’re able to reach an agreement for this type of thing.
If there’s a business valuation and it’s determined that the business is worth half a million dollars, and let’s say that there is a marital house that’s worth half a million dollars, what might be the easiest thing is just for one person to keep the house and all the equity and then the other person to keep the business. That’s a very simplified example but what lawyers are good at or what they’re supposed to be good at is coming up with ways that simply the money exchanges so that there aren’t just so many transactions back and forth.
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