While a primary focus of many divorcing couples is usually on establishing which assets are separate property and which are community property, high net worth couples typically have more complicated financial issues to address. Decisions will need to be made with care and with regard to current and future circumstances. When a business is part of a divorce in a community property state such as Arizona, careful financial planning will be required before filing for a divorce.
The appreciation of an existing business during the marriage — or the value of a business established after the date of the marriage — is typically regarded as community property, absent a prenuptual or postnuptual agreement to the contrary. The first step in protecting this asset, or any business, in a divorce is typically to obtain a formal valuation of the business. A business that existed prior to marriage will typically be evaluated as of the date of the marriage, and also at the start of any divorce proceedings.
Spouses can negotiate the possibility of removing one spouse from the business operations. There are various ways to achieve such a removal, such as one spouse buying the other spouse’s community property interest in the business. Removing one spouse offers greater protection for the business. A common method to achieve this is to utilize marital property or assets to reach an agreement. This may include one spouse ceding his or her share in stocks, real estate, retirement plans or cash in exchange for the other spouse’s interest in the business.
Another option may be to sell minority shares in the business to an outside investor or in the form of employee stock options. The income may be used to fund the purchase of the other spouse’s share of the business. These decisions are typically complicated and may affect the post-divorce lives of both spouses. The services of an experienced Arizona high net worth divorce attorney for each spouse may be invaluable along with other professionals, such as accountants, appraisers and financial advisers.
Source: investorcentral.us, “How can I protect my business from my spouse during a high net worth divorce?“, Accessed on July 15, 2015