Dividing Difficult Assets & Debts

Having a lot of money and assets is so much fun until you get divorced.  Then, the weight of your riches can be an albatross.  That’s why using professionals like forensic accountants, real estate attorneys, and experienced family law attorneys are expenses that are necessary for financial survival.

The biggest assets in a divorce are the family business, real estate, retirement plans, and financial investments.  What we learned from this podcast:

1. All businesses are not divided in the same manner.  There is a difference in valuation between service business and business with hard assets like equipment and machinery.  Additionally, the value of a business category changes with time.  Some businesses organically go out of business, being replaced by new technology.  Forensic accountants will help with business valuation.

Questions that come up in the settlement talks:

(a) If the family business pays for personal expenses with business income, how is the actual income of the business owner established?

(b) If the business takes in significant cash that goes unreported with the IRS, and both spouses sign the income tax report, can that income be changed for the purpose of establishing the owner’s income for required child or spousal support?

2. Real Estate can be complicated depending on how it was purchased, when it was purchased, if it was inherited, and what its current market value is.  Then there’s the added concern that the spouse who is keeping the family residence may not be able to financially maintain it.

Questions that come up in the settlement talks:

(a) One spouse contributes nothing financially to the family residence while the other spouse uses monies made from his/her job to pay mortgage and property taxes, etc. during the marriage. Is this asset still divisible by both spouses?

(b) The house is inherited mortgage-free by one spouse, and both spouses pay for remaining expenses like property tax, home owner’s insurance, and general maintenance. Is the house community property?

3. Retirement and Pensions are probably the easiest assets to divide unless you’ve borrowed against the asset during the marriage.  People don’t realize that the money borrowed can be in part owed back to the other spouse if this asset is a community property one.

4. Debt is also divisible between spouses.  If there is a large amount of debt, the value of the assets may be diminished if debt has to be paid before assets are divided.

I live in Beverly Hills, one of the high asset capitals in the United States.  But every upside has its tough side.  But, hey, 90210 is still the best zip code for interesting divorces.  Some problems have their silver or gold linings.