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The importance of a family business valuation during divorce

| Aug 16, 2018 | High-Asset Divorce |

Every divorce in Arizona requires full disclosure of marital assets before proceeding with the property division process. When a marital estate includes a family business, the process becomes more complicated. A current valuation of the business must be completed. The couple will probably need to retain an independent party who can to examine the books and other assets to establish the value.

Whether the appraiser uses the asset, market or income approach to calculating value, they could scrutinize financial records, interview managers and tour facilities. The efforts of this independent party might uncover attempts by one spouse to hide assets or inflate expenses. This could deny the other spouse an equitable divorce settlement.

After determining value, the former spouses must sort out issues such as whether one or both of them had ownership. Ownership by one person prior to the marriage might reduce the value assigned to the marital estate. A divorce that might require one party to pay spousal support could raise concerns about double dipping. This occurs when a spouse receives a portion of a business’s value and maintenance payments. Negotiations might resolve this issue and protect one party from unfairly compensating the other person.

A person confronted by a high-asset divorce might want legal advice in addition to recommendations from a financial adviser. An attorney might inform a client about rights to certain property. This legal support could empower the client during negotiations. After the former spouses reach an agreement, an attorney could write a detailed settlement document that potentially covers immediate and long-term issues. If disputes persist, then an attorney could petition a court to recognize the needs of the client. An attorney could present documentation that supports the client’s position and potentially counteract claims by the other party.