Divorce can be a financially challenging time for anyone, but for individuals with businesses or business interests, the process is even more complex. This can include tangible assets such as property, cash, or monetary accounts, and intangible assets such as intellectual property, customer lists, or contacts.
Preserving business interests in high asset divorces requires carefully planned strategies. Protecting business interests, as well as other high-value assets during wealth redistribution must include proper asset valuation, negotiation techniques, and previously established agreements and arrangements to mitigate the impact of divorce on business continuity.
How Divorce Affects Valuable Assets
Divorce commonly requires one or both parties to relinquish some of their assets. In some cases, these assets are owned by one party but used by the other. In other cases, one party owns a large portion of the couple’s wealth, requiring the higher earner to divest some assets to support the lower earner while they become self-established.
If one party owns a business, the business is not necessarily exempt from redistribution. However, an experienced attorney can help preserve the business’ viability and prevent the court from forcing an unfavorable outcome. It is essential to start with an accurate valuation of the business with a professional appraisal or a financial audit.
Professional Appraisal
In order to reduce the potential impact of a court judgment liquidating business assets, owners should begin their asset protection process by conducting a professional appraisal.
This allows the business to accurately demonstrate what it is worth, preventing the court from incorrectly valuing the business and demanding a higher value from it than is reasonable.
Financial Audit
A financial audit can more accurately demonstrate the actual value of the business. This can also establish the amount of money necessary to continue business operations with minimal disruption.
Strategies for Asset Protection in High Asset Divorces
Once the value of the business and assets are established, there are several key options available to preserve business interests during divorce if maintaining the business is the end goal.
Discuss any option you are considering with an experienced attorney and a tax professional to better understand the implications on your specific situation.
Prenuptial or Postnuptial Agreement
If a legally enforceable pre- or postnuptial agreement exists, it will come into effect during divorce. Presentation of this document will be required to demonstrate whether or not the business was formerly agreed upon as an untouchable entity.
Regardless of what may have been included or excluded, not all agreements are enforceable; any pre- or postnuptial agreement should be reviewed by an attorney as part of the proceedings.
Structured Settlements
Should the business require liquidation in order to pay a portion of the divorce asset reallocation demands, one possible option is to petition for a structured settlement agreement.
With this, business owners may liquidate their assets gradually over time, reducing the immediate impact on the business. Depending on your situation, this may have tax implications and should be reviewed with a tax professional.
Alternative Asset Allocation
Another option for preserving business interests is to sacrifice a non-business asset in an agreement made by both parties. If the other spouse is due an amount of value from the business, it may be possible to negotiate by providing another asset such as a house, car, or account of comparable value. Having an accurate valuation of any item being redistributed is essential.
Non-Marital Proof
Not all business assets are eligible for redistribution in divorce. A non-marital asset is an asset that an individual owned before the marriage was legally approved. The value of a business at the time of marriage may not be eligible for redistribution, making only the assets gained after the marriage available for reallocation.
Business owners must be able to prove the value of their business prior to the marriage with thorough documentation and evidence. In doing so, the amount that the other party may claim as their share of the business profits may be limited.
Leverage Milstein Siegel to Preserve Business Interests During High Asset Divorces
A business asset reflects an individual’s time, money, and effort. A marital divorce can be ruinous for a business without the proper strategy. The attorneys at Milstein Siegel can help you preserve your business assets and keep the company operational during the divorce process, helping to mitigate the financial impact.
Contact Milstein Siegel to schedule a consultation to discuss your options.
