Dividing Business Assets in a New York Divorce
When we are talking about the division of assets under New York law, we are talking about the division of both debts and assets that were accumulated during the marriage. The New York domestic relations law has an expansive definition of marital property and a less expansive definition of separate property. Separate property might be a bank account that you held prior to the marriage, that remained in your name during the marriage. Or you may have used that bank account to fund the purchase of a marital residence. If that is the case, you may be entitled to a receiving a contribution.
Download Our Free Divorce Guide
When we look at dividing business assets, we look at many different components. These include, but are not restricted to, retirement accounts, IRAs, deferred compensation, real estate, brokerage accounts, life insurance cash value, jewelry, automobiles, personal property and vacation homes. All assets you have accumulated will be analyzed in the course of this process. To undertake this process, we will ask you for tax returns, bank account statements and any other documents that tell us the value of those assets.
When we undertake that process, it is sometimes important to hire outside experts. If you or your spouse have a business, we may not be able to determine the value of that asset without hiring an expert. And we do not want to guess as to the value of an asset that is important to the entire makeup of the marital estate.
We may need an appraiser to appraise real estate; we might need an estate expert to appraise other personal property assets. Your attorney will discuss all of these issues with you when they go over the list of assets and when they undertake an analysis of what constitutes your marital estate.
How to Divide a 401K
Today, it is rather common for a large portion of a working person’s assets to be held in retirement funds. More often, we see those funds held in deferred compensation plans such as 401Ks, 403Bs, profit sharing, and other types of cash accounts. Division of those accounts is dictated by either a “simple qualified domestic relations order” or a “domestic relations order,” depending upon the type of fund.
Assuming that each party will receive 50% of the marital share – which is common – this approach simply divides the marital portion of the account into two shares. The order goes to the plan, and the plan then segregates the funds and executes a rollover of the non-titled spouse’s funds, which generally go into a rollover IRA.
Summary:
- Depending on the type of fund, division of the account will be dictated by a simple qualified domestic relations order or a domestic relations order.
Getting a Share of a Spouse’s Business
If either spouse owns a business, the proper way to determine the value of that business is to retain an expert who can calculate its value. Once the business is valued, the parties will negotiate – or the court will order – the non-titled spouse’s share. That share can range from 20% to 50%, and many factors impact a court’s decision – or a party’s negotiating position. Regardless of the amount, a specific mandate will be entered setting forth how the spouse who is not titled to the business is to be paid. If the payment is to be made over time, it may include an interest component.
Summary:
- An expert or actuary will be consulted to evaluate the value of that business before it is distributed.
Handling a Mutually Shared Business
In most instances, when we deal with a business in which both parties work, it is a business one of the parties started; or one party has more of a vested interest in maintaining the business. Depending upon the type of work done, the more interested party may be more of a principal in the business. In that case, it will be natural for that party to retain the business.
In some cases, however, the parties may have started the business together, and that presents a significant challenge. In some cases, the parties are able to continue working together, and can remain partners. It is not always advisable, but it can work because success in such a partnership depends upon the parties themselves, and the level of their acrimony or cooperation. After a high-conflict divorce, however, it will be impossible for both parties to continue running that business.
Summary:
- Usually, after a divorce, it becomes impossible for both parties to continue to run that business together.
If you or a loved one is going through a divorce, please visit www.NYDivorceNow.com or contact experienced divorce attorney, Jean Mahserjian, for the legal aid you require.
