Divorce lawyers are paid big bucks to help divide the assets between husband and wife during a divorce, but one of the most valuable assets is left out of the mix. Who gets to keep the mutual friends? Many couples often find it difficult or nearly impossible to maintain mutual friends following a divorce. The good news is that by setting boundaries with friends, it may be possible to minimize the damage to your close friendships and hold onto the ones that really matter. Divorces are overwhelmingly challenging, and losing your friends is just another loss that’s difficult to deal with. While it may be easier part ways with some friends, there may be others that could turn into a very tough tug-of-war. Creating boundaries with friends may seem like yet another relentless task in the divorce process, but it is essential part of the process if your friendships are to survive.
Setting Boundaries with Friends
While you may rely on your best buds for a listening ear and a shoulder to lean on, it isn’t fair to your friends to bash your ex if they are still friends with her. Doing so can quickly create an awkward situation that may prevent your friendship from continuing. Setting boundaries with friends following a divorce should include an agreement from both parties that no ill words will be spoken about the other partner. Let your friends know that it is okay for them to stop you if you start going down that path. While it is okay to discuss what you are going through, don’t attempt to force your friends to take sides.
Speaking About the Divorce
Divorces can be messy and emotional. You may discover some less than pleasant truths about your wife or things may happen during the divorce that are uncharacteristic of your wife. Just because you are hurt or angry, it doesn’t give you the right to spread personal information around. Setting limits with friends helps to create rules on what can be shared about the divorce. Sharing too much can be hurtful to your ex and hurtful to your friends who still love and care for her. A good rule of thumb is that if you wouldn’t have shared the information before the divorce or in front of your ex, don’t share it with them after the divorce. You will want the same curtesy from your ex.
Who gets to go to Dave and Sally’s wedding? Who can still attend Wednesday happy hour? It can be extremely awkward and uncomfortable for divorced couples to end up at the same social event, especially in the early stages after splitting. While it may have been a no brainer to invite both of you before the divorce, mutual friends need to know how it is going to work following the split. Discuss this with both your ex and your friends and come up with some guidelines. Whether it comes down to taking turns or giving both you and your Ex the option to attend knowing the other may be present or leaving the decision in the hands of you and your Ex, the key is communication. The last thing you want to do is show up to the wedding and see your Ex with another man if you aren’t ready to witness that. And if you know that the two of you cannot get along, it is best for everyone involved to not put yourself into that situation if you can avoid it.
Know that it will get easier over time, and perhaps there will be a future time where you do feel comfortable in social settings with your Ex. This doesn’t have to be a permanent arrangement.
No matter how clear the communication was in the beginning, emotions are a big part of any divorce and will likely pop up at some point. You may feel hurt that your friends are spending more time with your Ex than you. Or you may resent them for inviting her to a particular event instead of you. Whatever the case may be, there may be some backlash, and your friends might find themselves on the brunt end of it.
Setting boundaries with your buds and others up front will help prevent these negative feelings or at least help you deal with them when they come up. Let your friends know that both parties will try their best not to drag them into any negativity towards the new friendship arrangements.
Accepting Lost Friendships
The truth is that some of your friendships will naturally end after a divorce, and that’s okay. Don’t try to maintain them all. Perhaps your Ex was closer to certain friends or had friendships long before your marriage. Perhaps some of the friends began through your Ex’s family. These friendships are sometimes better off left with your Ex.
On the other hand, some of your friends may find it too uncomfortable to be friends with both parties after a divorce. Remember that this is awkward for them too. They may naturally pick one side or perhaps both friendships will fade following a divorce. Lost friendships are expected and aren’t a reflection on you.
Recognize When Enough is Enough
No matter how hard you try or how much you want to make it work, sometimes sharing mutual friends creates more stress and tension than is worthwhile. You may feel more negative emotions and experience more unpleasant memories than you wanted to by being around people who used to be a part of your marriage or you may find it difficult to follow the boundaries you set up.
You have to be real with yourself and recognize when enough is enough, at least for awhile. You may need to distance yourself in order to heal for some amount of time before coming back into a friendship. If this happens to you, be honest and open with your friends. You aren’t abandoning your friendship, but you need to prioritize yourself during this trying time in your life.
Make New Friends
Just because you and your Ex have agreed to continue your relationship with mutual friends, do not close yourself off to new friendships. While your mutual friends are important, your life is changing and new friendships may help you adapt to your new lifestyle. Talk to new people, put yourself out there and accept invitations as they come along. New and different people can breathe new life into you and help accelerate the process of starting new.
Setting Boundaries and Sticking to Them
Setting boundaries with friends is the easy part. The more difficult part is sticking to them. Your brain knows these boundaries are logical and necessary, but your emotions may get the better of you and make it difficult to maintain these boundaries. You may feel tempted to ask your friends about your Ex’s personal life or bash her for being late to pick up the kids. It is expected that you’ll slip up every now and then, but start building a healthy habit to respect these boundaries from day 1 … no matter what you feel or how tempting it may be.
Nearly every aspect of your life will look different following a divorce, and the friendships you once shared with your Ex are no different. Couples who’ve had a tight circle of friends may find it even more difficult. With the correct approach and mindset, you may be able to retain the friendships that you built during marriage. Setting boundaries with friends and sticking to them is essential. Be honest with your friends and yourself about your situation and your emotions, plan accordingly and, above all else, remain respectful of your Ex.
Talking about prenuptial agreements may seem like the least romantic discussion to have with your bride to be in the weeks or months preceding the big wedding day. I get that. Who starts to plan for a divorce before even saying “I do?” The thought of mentioning the words to your starry-eyed lover may send shivers up your spine, but with more than half of marriages in our country ending in divorce, it may just be the smartest conversation you ever choose to have.
Prenuptial contracts aren’t just for celebrities and millionaires. They make sense for a lot of everyday couples, and they by no means increase your likelihood of getting a divorce.
What are Prenuptial Agreements?
Prenuptial agreements (commonly referred to as prenups) are legal contracts made by a couple before they get married covering the ownership of assets should the marriage end in divorce. Without an official prenuptial agreement, the state will determine who owns everything following the divorce, up to and sometimes including the property and assets you owned before you were marriedWho Needs a Prenuptial Agreement?
Couples all over the financial spectrum are turning to prenuptial agreements, and they are becoming increasingly popular. There are many situations that a marrying couple may benefit from a prenup. Here are just a few:
You have children from a previous marriage or relationship.
- If this isn’t your first marriage or if you have children from another woman, you can use a prenup to spell out legally what those children will receive in the case of your death or divorce. Without that agreement in place, your spouse may be entitled to claim a large percent of your property which would leave your children with much less. If you have children from another woman, a prenuptial agreement may be the only way you can protect their inheritance.
You (or your fiancée) has debt.
- Debt is an unfortunate reality for many people. Whether you or your fiancée is carrying debt from a previous marriage, college education or another reason, that debt could be at least partially transferred to you in a divorce. Prenuptial agreements protect you from your partner’s debt and vice versa.
You own a business.
- Divorces can get messy when it comes to the division of a business. Your spouse may get rights to part of your business in the divorce, including the right to sell her portion to the highest bidder. Prenuptial agreements can lay out exactly what rights your spouse has to your business (if any) should your marriage fail.
You (or your spouse) sacrificed your career to support your partner.
- If you or your future wife has chosen to give up or modify your career to support the other person, a prenuptial agreement can ensure that you (or your spouse) be compensated in a fair manner following a divorce.
You want to avoid arguments in the case of divorce.
- We all know that divorces are commonplace, and we have all heard the horror stories that ensue when couples fight over money, property and other assets. Prenuptial agreements can help you avoid arguments and potentially lots of money and time in court by making these decisions before the start of heated divorce battles. A prenup can help you get back on your feet a lot quicker if a divorce occurs.
What Prenups DO NOT Cover
Prenups are for property issues in the case of divorce. They do not cover personal preference such as which partner will clean the toilet or pick the kids up from school. And if you try to include such items, the court may throw out your entire agreement. Requirements for prenuptial agreements vary from state to state, and you should always check with your local laws or with an attorney to make sure your prenup is valid.
In most states, a prenuptial agreement will not hold up in court if it:
1) Encourages divorce or incentives divorce
2) Waives right to alimony or spousal support
3) Determines child custody or child support
4) Was not officially agreed to by both spouses in writing
If you are considering a prenuptial agreement, you may want to speak with a family law attorney to make sure your agreement meets the letter of the law. There are many qualified attorneys in most areas, so take your time and find one that meets your needs.
How to Talk to your Future Spouse about a Prenup
No one likes to talk about divorce, especially before you even get married. You may be dreading the conversation with your bride to be, but it doesn’t have to lead to an argument. Here are a few tips to having a successful conversation regarding the decision whether to have a prenuptial agreement.
- Start early. While you may not want to bring up the prenuptial agreement discussion on the same day you propose, don’t wait until the night before the wedding either. If you want a prenup, bring it up early. It may take some time to address and maneuver through the emotional and technical issues that come up. Take the pressure out by starting the process early.
- Decide the terms of the prenup together. If you come to your spouse with a pre-drafted prenup, she may get defensive right away. Instead, treat the document like a collaboration so that both sides are on equal ground. After all, this is an opportunity to discuss what each person expects from the marriage.
- Be honest. If there is something you want from the agreement, own up to it. By being honest, not only are you more likely to get what you want but you also choose to start your new marriage off with trust. Explain the history or your beliefs that make you want the specific terms you desire. The more transparency and honesty you portray, the smoother the process is likely to go.
- Listen to your fiancee’s thoughts and concerns. Your partner will probably have a slightly different perspective than your own. Being open and truly sensitive to her needs will make the prenup process (and marriage as a whole) better. Listen with your heart and be creative about solutions to any disagreements.
- Be flexible. Your life today may look a lot different than your life the day you choose to get a divorce. Make sure your prenup is flexible enough to account for anything that may happen in the future. For example, your spouse may give up her career to raise children or take over most of the business responsibility. Come up with terms in your prenup that allow for change.
A prenuptial agreement may be the last thing on your mind as you prepare for an upcoming marriage. These agreements tend to come with a negative connotation – as if you are giving up on your marriage before it even starts. However, divorce is a reality for more than 50% of marriages in America today, and prenuptial agreements are becoming more popular than ever.
Think of them as an insurance policy. You have it for protection, but you hope you never have to use it! In fact, discussing a prenuptial agreement is one way to start your marriage off with open communication. You never know – it may just put your marriage at better odds of never needing one!
Divorcing an addict comes with its own set of unique challenges, and requires specific strategies to address them. In the first part of this series, we discuss the prevalence of addiction as a leading factor in divorce, strategies for filing for divorce from an addict, and custody involving substance abuse. We continue with two remaining issues: Division of Assets and Alimony.
Division of Assets in Divorce with an Addict
Divorce laws are mandated at the state level. This means the laws in one state can be different than laws governing divorce in the neighboring state. It is crucial to always check with an attorney in your state of residence, or do your own research on your state laws, before taking action.
The Issue of Economic Impact
In many states, courts do not consider fault when making a judgment on division of property. However, in some states, a spouse’s behavior during the marriage is relevant, and a judge will consider a spouse’s substance abuse when dividing the marital estate. The legal category of fault that would apply if your spouse is an addict is “marital misconduct.” Currently, a majority of states will consider marital misconduct only if it has an “economic impact” on the marital finances.
There are a smaller number of states that are allowed to consider marital misconduct, such as the behavior of an addict, regardless if the misconduct had a negative economic impact on the marital estate. In states where martial misconduct is admissible as a consideration, the court has the discretion to award a larger share of the marital estate to the sober spouse.
Legality of Fault
Alcoholism itself is not usually considered fault. Since the medical community increasingly views alcoholism as a physical disease, it does not constitute a “moral failure” alone. What can be considered fault is the “economic impact” of the disease of addiction. Again, this is the fallout from an alcoholic’s chaotic behavior on the marital family and estate. DUI convictions, inability to stay employed, crashing cars, spending copious amounts of money on alcohol and alcohol induced spending binges can all be negative impacts that constitute fault under “marital misconduct.”
Generally, when divorcing an addict, drug abuse is viewed the same as alcohol abuse. Addiction itself is not likely to constitute fault, but in many states where fault can be introduced as a factor in division of assets, the court is free to consider any negative consequences of the addiction on either you and your family or the marital estate.
Simply put, the tangible effects of alcohol or drug abuse are a legal consideration in states where it is permissible to consider marital misconduct. For example, if your ex’s alcoholism limited her ability to contribute to the marriage financially and her behavior under the influence of alcohol had substantial negative consequences on the marriage, you would have a case to introduce marital misconduct with economic impact.
An addiction that will result in public scrutiny, possibly ruining your ex-wife’s reputation, career opportunities, and even putting her at risk for criminal prosecution, can be a handy bargaining chip in asset negotiations. Your ex-wife may agree to forgo a humiliating court battle and settle on favorable terms. It is advisable to discuss this option with your attorney. Not only will it save you time and money to keep the fight out of the courts, but it will keep any kids involved in the marriage from additional trauma.
Alimony and Addiction
Unlike with child support where the formulas for payments are clear and quite rigid, in most states, the amount and duration of spousal support payments are under total discretion of the judge. In fact, only about a dozen states even have general guidelines for calculating alimony. While a sympathetic judge could admonish your ex for the damage she caused with her addiction; there is no way to predict the outcome of a decision that is wholly in the hands of a judge. It is advisable to discuss with your attorney if it may be a better tactic to try and negotiate with your ex directly so you can avoid the risk of an unfavorable judgment.
While most states do not set guidelines for judges in determining alimony, there are a few factors that are commonly used to calculate a starting figure. The judge then factors in other circumstances of the marriage and arrives at an amount and duration for payments. Let’s look at some of the factors that come into play when divorcing an addict.
1. Need and Ability to Pay
If the court decides your ex-wife is entitled to support, the next step is to ascertain her need and balance that with your ability to pay. To do so, the judge may take into account:
- how the property is being divided in the divorce
- the standard of living during the marriage, and her ability to maintain that standard without your support
- each spouse’s separate income, assets, and obligations
- the length of the marriage (used more to decide how long support should continue and not the amount)
- whether you both lived together before you were married and whether the period of cohabitation should be included in the length of the marriage
- each spouse’s age and health
- the needs of the children, and if child care responsibilities affect your ex-wife’s ability to return to work
- whether the dependent spouse left the workforce to be a homemaker or raise children
- how long the dependent spouse has been out of the workforce and her marketable skills
- contributions that either spouse made to the other’s training, education, or career advancement
- Any assets that may be forthcoming in the future (such as a large inheritance)
- any additional factors the judge finds pertinent to the case
2. Earning Capacity
Beyond considering your actual income, a judge may examine your general ability to earn money. Let’s say you have a medical degree, but you gave up practicing medicine to pursue your passion for writing science fiction novels. The judge can “impute” to you the higher income of a medical professional with your same training. You would then be ordered to pay support in the amount consistent with your earning ability, and not with your actual income as a self-published novelist. The rationale for considering earning capacity is to avoid punishing one spouse financially for the other spouse’s decision to voluntarily choose a lower standard of living.
Just as with division of assets, fault can be considered in some states. You can argue that fault should be considered even if you did not file for divorce on the grounds of fault. If the court sees it your way, it can reduce support payments.
A judge may take a spouse’s addiction into account when determining alimony if she has depleted the marital assets to maintain her addiction. As with division of assets, a substance abuse problem gives you the upper hand, and often addicts will agree to terms which favor the sober spouse to stay out of court. While addiction does not automatically inhibit your ex-wife from receiving an equitable share of marital assets in a marriage, or from receiving a judgment for alimony, it may be taken into account and reduce the share of assets and alimony, perhaps considerably.
Divorcing an Addict in Treatment
Divorcing an addict can be tricky when it comes to support. In some rare cases, a sober spouse could be required to pay alimony to an addicted spouse to help with her treatment expenses. For instance, if her addiction was deemed to be the result of a mental illness, or to have led to a mental illness, you as the sober spouse may be ordered to pay any additional costs of treatment not covered by disability benefits.
Since in most states, alimony is based on a number of factors that are used to determine your wife’s needs against your ability to pay, if your ex-wife’s treatment needs are extensive, but your ability to pay is limited, that will be taken into account and help balance each other out.
Discuss options with an attorney, and you can likely figure out a settlement that will help your wife get back on her feet, and able to get and hold a job of her own, while ensuring the money will not be spent on alcohol or narcotics. Helping your wife overcome her addiction with a professional recovery program may be your best bet for ensuring that she can become economically independent, and even be able to help support her children, lifting the burden solely off you.
Wherever you live in the country, these online resources can help you find support and information for dealing with your wife’s addiction. You do not have to go through this alone.
(c) Can Stock Photo / Bialasiewicz
Divorce is often a two-way street. Even if one person initiates it, both parties are usually aware that there are major issues in the relationship. But that doesn’t mean no one has ever been blindsided by divorce.
In fact, if you feel like your divorce came out of nowhere, you’re in the same boat as many men who were unaware their marriage was in trouble. Two-thirds of divorces are initiated by women, and the men don’t always see it coming. If you were blindsided by divorce, here’s some advice to live by.
The First Stage of Being Blindsided by Divorce
If your wife files for divorce out of the blue, you probably feel like you were hit by a train. You may not know how to respond, and it will be tough to come to terms with your new reality for a while. You may start begging her to change her mind or blaming yourself for every little mistake you’ve made in the relationship. You’ll likely feel confused, shocked and betrayed, and it’s going to take some time to get back on your feet.
Every one of the strong emotions you’ re feeling are normal, and it will take some time to get your bearings. To be living happily one moment and all the sudden be hit with life-changing news would take a toll on anyone, but there are things you can do to help yourself through this troubling time and come out even stronger than before.
Think Back to Warning Signs
You may feel like you got blindsided by divorce, but take some time to reflect on your relationship to see if there were any warning signs. Did you and your spouse ever talk about the negative aspects of your relationship? Every marriage has its ups and downs, but when the going gets rough, communication is everything. It’s key to holding a relationship together. If you and your ex never talked about your problems and let the issues build up inside of you, that could lead to toxicity in your relationship.
Other warning signs could include your spouse finding excuses to spend less time with you, a lack of intimacy, or increased criticism. Disagreements over little things, again and again , a lack of respect and overly defensive engagements are also signs your marriage was heading downhill. Reflecting on the warning signs will help you come to terms with your divorce as well as help you in your future relationships.
Lean on Your Support Network
You’re going to need your support network more than ever when you’re blindsided by divorce. Lean on friends and family who are always there to support you and know how to have your back. Sure, it’s tempting to turn to someone who bad mouths your ex, but it’s much healthier and productive to stay away from them and spend time with encouraging people who will help you get back on your feet.
If you have a therapist, call them as soon as you can. And if you don’t, look into getting one ASAP. You’ll likely be dealing with a lot of emotions you don’t know how to handle, and although your friends are there for you, they may not know how to respond or give advice if they’ve never been through your situation themselves. A therapist can help you get back on track and deal with your overwhelming feelings.
Do Your (Attorney) Homework
You’re probably going to need an attorney to deal with your divorce, but hold off on hiring the first one you meet. You may just want to get it over with , or you may be scared and want to grab the first one you come in contact with, but make sure to do your homework. The first lawyer you consult may not be the right one for you, and when you’re dealing with a life-altering event like divorce, you want to make sure you’ve got the right person behind you. Make sure they aren’t just telling you what you want to hear, so you’ll hire them. They have to give you good advice, listen to you, and have your best interests in mind at all times.
Be Aware of All Financial Changes
Being blindsided by divorce is tough enough as it is without the financial changes that come along with it, and the last thing you want is to have your finances out of whack without being prepared. With attorney fees, court costs, and other expenses, divorce is expensive in itself, but you need to be aware of financial changes that come with a divorce.
Your tax filing status changes after a divorce, and you’re likely going to need to find a new place to live. If you were paying off a mortgage, car loan, or shared debt, make sure those is sues get addressed in your divorce settlement. Remember that as long as your name is still attached to a financial obligation, you have to be ready for anything. If you have kids, you need to work out child support, and a splitting of assets means rethinking your retirement plan.
Keep It Off Social Media
Social media has become somewhat of a public diary, and it can be tempting to tell everyone on your Facebook page what a horrible person your ex is because you were blindsided by divorce. Don’t be that guy that gets in serious trouble down the road. Keep in mind that anything you say on social media can be used against you in your divorce case.
Not only that, your friends, family and acquaintances on social media will look at you in a different light. Some may comment with encouraging words, but let’s face it, no one likes to see people airing their dirty laundry on social media.
It’s easy to vent and say bad things about your ex-spouse when you first get hit by divorce, but you’ll probably regret it down the road. The bottom line: if you want your divorce to go smoothly, keep quiet on social media.
Divorce Isn’t Always a Bad Thing
When you’re blindsided by divorce, it can feel like the world is crumbling beneath you, especially if it came out of nowhere. One day you see yourself as a happily married man, and the next you’re looking for a lawyer and figuring out when you’ll have to go to court. But most marriages don’t just end for no reason, and even if you feel like it came as a surprise, you were likely aware of some of the problems in your marriage beforehand.
Look at your divorce as an opportunity. Maybe there’s an activity you always wanted to get into or a different career path you wanted, but you got sidetracked when you got married. Divorce is a very good time for self-reflection and digging deeper into what you want your ideal life to look like. Take the opportunity to follow your passion and start fresh! It may not be a quick turnaround, and it will likely take time to get back on your feet, but when you look at it as an opportunity rather than a loss, you’ll bounce back much faster.
(c) Can Stock Photo / diego_cervo
No one believes divorce is easy. Parting ways, rebuilding, and adjusting to a new normal is a turbulent process. When a family business is involved, the complexity is amplified. In addition to separating home and family life, your split goes one agonizing step further, to include your career.
Divorce involving a business partner brings extra issues that need to be addressed. Depending on the level of mutual civility, the specifics of your business, and your priorities, you and the ex can come up with an agreement that leaves your livelihood, if not your heart, in good shape.
Let’s take a look at the issues.
Common Issues with a Family Business
1. Is it in writing?
If you have a clear agreement in writing things will go more smoothly. This is why the mantra of lawyers is “get it in writing”. When you set up your family business did you file a certificate of incorporation, create bylaws and a shareholder’s agreement? If your business is structured as a general or limited partnership, do you have a partnership agreement? If you are a limited liability company, do you have an operating agreement?
If so, these documents will help determine legal ownership of the business, who runs the business, what happens to profits and losses, and other matters covered in writing. Make sure everyone is aware of these contractual agreements to help streamline the process should the courts get involved.
Many family businesses start without proper documentation. Probate and Family Court have the power to step in and fill in the blanks. Their power extends to dividing the business as a marital asset.
2. Are the roles well defined?
Small businesses and startups usually require entrepreneurs to wear multiple hats. This can muddy the waters when deciphering what responsibilities and roles you and the wife played in the business, especially if there is no documentation defining clear duties and titles.
Do you believe your wife is an administrative assistant who supported the day to day operations and she sees herself as head of operations? Even if job titles were agreed upon, titles only go so far. This can be one more point of contention in overall divorce negotiations, where spouses often have differing perspectives on how family and business worked in the marriage.
3. How do the books look?
Running a family business is hard work. It’s common for bookkeeping to take a back seat to more urgent priorities in a bustling business where you are both owner and operator. When outside parties delve into them to do a valuation or to determine how much cash flow is available to pay child support, things can get messy if the books are not complete and accurate.
Did you frequently mix personal expenses with business expenses? It’s not uncommon for a family business, and it’s also a recipe for confusion. As a couple, did you mix your business and personal assets for a business loan? Again, this adds a layer of complication.
Options for Disposition of the Family Business
Now that we covered some of the major issues, let’s talk options.
Co-ownership is an option when both parties want to keep the business intact. In this scenario, the business does not become a communal property asset to be split. Instead, you and the ex-wife own an interest in the business, as partners.
If you and your ex-wife can be civil and put aside your personal grievances for the sake of the family business, this can work. If seeing your ex on a daily basis will cause undue stress or hinder you from moving on, this choice is not ideal. Be honest about what how it will affect you, and the business. If your divorce is mutual, amiable, and you can trust your ex, this may be the right move for you.
2. A buy-out
A second possibility is one spouse buys out the other spouse’s interest. One spouse then continues to own and operate the family business while the other is free to move on and invest in a new venture. The advantage to this option is a clean break from your ex-wife. In an acrimonious divorce, especially one where there is no mutual trust left, this may be the best strategy. Feuding exes trying to run a business together may run it into the ground.
The buy-out can be a simple cash sale, or it can be swapped for community property. For instance, the husband agrees to give up the ownership of the family home to his ex-wife, and she gives him the family business in exchange. The disadvantage to a buy-out is that one spouse must have the money, or the assets, to afford the transaction.
A third option is to sell the business and divide the profits. This decision offers a clean split and puts money in your pocket at a time when you probably need it.
There are a few downsides. Depending on the nature of the business and the current market, it may take a while to find a qualified buyer and close the deal. You could take a hit if you sell too early. Maybe there’s a new product about to launch or big investor coming in, but if you sell before it happens, you take a substantial loss.
When deciding to stay or go, take into consideration what your life will be like after the sale. Are you emotionally tied to the business? Does it give you a burning purpose that gets you out of bed in the morning, excited to start your day? Is it more than a job; is it where you have the majority of your friendships and the foundation of a rewarding career?
Also consider that when couples stop being life partners they sometimes form a better working relationship as co-owners. If you and the ex-wife can honestly talk, problem solve, and make decisions when it comes the family business then maybe selling isn’t the best strategy. Either way, this decision requires lots of thought on both sides.
Business Valuation for Divorce
Let’s say you decide that you can’t work with your ex-wife, your next decision is whether you want to sell, buy out your ex, or let her buy you out. Whichever you choose, you must determine the value of the family business and what each partner owns of it.
Who owns what?
Ownership of a family run business falls into two categories, community property (meaning it’s owned equally between the spouses) or separate property (owned by one spouse because it may have been owned before the marriage or bought with separate property money, such as from an inheritance). Of course, the laws vary by state, so it is best to consult a lawyer where you live.
Main factors which determine community versus separate property:
- Date of the marriage and date the business was founded
- Source of the funds used to start the business
- The financial and labor contributions of each spouse to the business during the marriage
Community interests may include:
- Joint funds invested in the business, whether startup capital or additional funds invested later to grow the business
- Financial appreciation in the value of the business during the marriage, especially as a result of joint financial or labor contributions
- Each person’s contributions to the business, especially when those contributions played a role in the operation or growth of the business
Community versus separate interest is not black and white, it’s a fuzzy grey area. It’s best to seek advice from an attorney and financial specialist in your state.
What is the business worth?
Valuing a business is substantially more complicated than appraising a residence. A business appraiser first collects all the relevant information, which includes everything from financial statements to tax returns, and your books. The appraiser selects the appropriate valuation method for the type of business and applies it to the information gathered.
There are three generally accepted valuation methods:
- The market approach where the business is valued in comparison to similar businesses that have recently sold.
- The income approach which estimates the value of the business by converting projected profits or cash flows into a value. This is generally based past and current profits.
- The asset approach which values the assets and liabilities of the business.
Choosing an Appraiser
Choose a professional business appraiser you and your wife can trust. The safest approach is to go with a Certified Business Appraiser (CBA) or Accredited Senior Appraiser (ASA). There are other certifications, but these certificates have the most rigorous requirements, by far. Appraisers who have reached this level of expertise can be found at the American Society of Appraisers (ASA) and the National Association of Certified Valuators and Analysts (NAVCA).
The cost of an appraiser will run from about 3,000 to 12,000 dollars. The type and size of the business and the level of service (the depth of analysis and reporting) all factor into the cost. To help save time and money it’s wise to be organized and gather all your documents in advance.
In an acrimonious divorce, there may be little trust, in which case you and your ex may request separate appraisals. This doubles the cost and may take longer. To save even more time and money, try to agree on an appraiser you both feel comfortable with.
More Knowledge Equals Less Risk
Divorce involving a family company is serious business. While the information covered in this article is meant as a starting point to familiarize you with the general ins and outs, it by no means replaces legal advice. If you are considering co-owning, buying out your spouse’s interest, or selling your business, the first step is to research the exact laws in your state and seek competent professional advice. Being un-informed makes any divorce risky business.
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Anyone who has headed down the road to divorce will agree that the entire journey is full of emotionally charged issues. Aside from the children and the associated custody decision, the real estate decision about what to do with family home is usually one of the top issues fighting for second place.
In terms of divorce advice for men, Guyvorce always recommends that as much as you need a qualified attorney to help you through the legal process of divorce, you need a qualified real estate professional to help you through the decisions surrounding the family home.
Options for Dividing the Family Home
In simple terms, there are normally three options for how to divide and settle the family home.
- One spouse keeps the house, the other moves out. This option is usually the one that we see in the movies. It generates great visions of drama, with the potential for a lawn full of clothing and stuff. However, in reality, it can make sense. One spouse may clearly be able to continue owning and managing the house and associated payments or they may be the obvious choice for primary custody of the children. If the kids have spent years in the family home, you both may agree their best interest is served by continuing their residence in that home for stability. No matter the reason, the other spouse usually is entitled to some other property as a tangible asset of equitable value to their portion of the home’s value at the time of divorce. Your attorney will provide you the best options for this offset.
- Sell the house and divide the proceeds. For many, especially the dual income families, the cost of the mortgage, utilities, and home maintenance was managed through both incomes. Once the marriage goes away, and there is a need for two residences, the old family home becomes unaffordable for one. This is especially true for those households that managed the family home on a single income.
- Continue to own the home jointly, then sell and settle the profit division later. This option is becoming much more common as a result of the housing bubble rupture a decade ago. For many families, selling the family home is not an option if the house is underwater, meaning the couple owes more on the home than it is worth. For many, they become landlords, renting the home for a period of time while the rent helps buy down the debt as the property value recovers. At a certain point, the financial situation resolves and the home can be sold.
Making Informed Decisions
Take a look around your home. You see the familiarity, feel the sense of security, and understand the relief that comes when you arrive home from work. With those feelings, you can understand why choosing your path from the options above can be emotionally charged and difficult. That’s the main way a realtor can help you make the best decision. Don’t continue to fight it out between the two of you. Bring in a qualified realtor to give you the best advice for you both. Remember, if you can’t decide together, the court will decide for you. That path will come with a sizable legal bill and time, so you should try to reach a common agreement, even if between your attorneys, without handing the decision to the judge.
Even when selling a home while happily married, the process is lengthy and full of potential slip ups if you try to do it on your own. Missing a few key steps could keep you legally tied to that property, negatively impacting your ability to buy another home later on.
Financial Reasons for Hiring a Pro
During divorce, one poor decision can easily lead to another, making it even more vital you bring in a professional to make sure you have dotted all the i’s and crossed all the t’s. While not all inclusive, here are four important financial reasons you need a hire a professional to guide you through the real property division:
- Closing the mortgage for both spouses. After divorce, you both will likely want to own another home. If you aren’t removed from the current mortgage correctly, you will have that debt on your credit report. The best case outcome will be you will have to find your ex, hire an attorney, and show through much paperwork that you do not have any financial ties to that home. The worst case outcome is you will be denied the loan for your new home. Save yourself the pain and get a realtor to help.
- Clearing the deed. Just as the mortgage, there is a separate process to making sure you are clear of the title and not legally tied to the property. If this action is not handled correctly, you may find yourself owing taxes on a home you thought was off your books, or potentially liable for another’s injury that occurred on this property. Why set yourself up for this nightmare when a qualified realtor can clear it for you?
- Capital gains exclusion protection. This one is huge and often overlooked. When you sell your home, and make money, you may owe capital gains tax. Then again, if you lived there long enough, you may not. And if divorcing, how do you divide the gains and the exclusion? Not sure of the answer? You aren’t alone. But your real estate professional will help you identify the documentation you may need during tax preparation to satisfy the IRS.
- You can also check with the IRS and try to figure it out yourself, but that is NOT recommended!
Added Benefits of Hiring a Realtor
Beyond the financial protection advantages of bringing a real estate professional onto your divorce team, they also will be able to provide you guidance and support relative to your current sale and future property decisions.
- Emotion-free sale price establishment. Setting the sale price for your home is loaded with emotion, even when married. Add divorce to the equation and you can quickly see the arguments starting. A professional takes away that problem. They know your area, know the nuances that affect pricing, and will tell you what the right price is to sell your home. You don’t want it on the market forever, you need it gone and off the books. They will get you to closing.
- Sheltering you from quick sale temptation. There are two dangers here. First, is from one of the spouses, the one that wants a quick divorce and doesn’t care about the bottom line. They just want it sold. The other is from buyers who learned about the divorce and think they can low ball the offer. In either case, the realtor adds the unbiased layer to negotiate a fair price.
- Understanding of the area to help you find your next home. When your home sells, where are you going to live? What is your budget? Your professional isn’t just there to sell your home, but they can guide you to the right area and home for your needs when you make a fresh start. On your own, you may miss a neighborhood or an option that would have been perfect.
About That Commission
Some sellers shy away from realtors because of the commission. These commissions are usually between 5-6% of the home sale. During divorce, though, keep in mind that the commission is applied to the final sale price, so the division of the profit occurs after all expenses, including the commission.
If you’re still worried about the commission, many real estate professionals cite studies that show homes sell for far more than the commission when listed and worked by a realtor. Others suggest that it depends on the type of property and location, and the Realtor vs. FSBO numbers are skewed by lower-priced sales of mobile homes and condos.
In a divorce, the benefits of using a realtor outweigh the small percentage of commission on the sale. The professional will sell your home at the right price and handle the details. You paid for that service. You got sound advice, a fair price for your home, and are able to focus your energy on the myriad of other divorce issues on your plate. You will be free to live your new life without real estate worries hanging over your head.
Tips for Choosing Your Real Estate Agent
A quick internet search will show you tons of qualified professionals from which to choose. In your effort to narrow the search, you may get frustrated, or tempted to go with a recommendation from family or friends. Don’t jump to a conclusion too fast. The circumstances are different now, so you need to pick based on a focus on your upcoming divorce. Stick to these characteristics and you will be on the right path with the right professional.
- There are two facets to experience. The first is overall experience as a real estate professional. Secondly, you are looking for experience working with divorce situations. Some realtors have this listed on their website. You can narrow your search via the web by including divorce in your search.
- Divorce training. Similar to experience, there are specific seminars or training sessions that realtors can attend to help them work with divorcing couples and their property. If you find a large field of realtors that cite divorce experience, see if any cite relevant training to narrow the search further.
- Sales record. You want a realtor that knows how to make money selling houses. Sales record is really what counts. Look for someone who has a proven track record of sales, including sales in your neighborhood’s price range.
- Knowledge of the area. Remember, you are hiring this professional to help you sell your current marital home, but you may also want them to help you find that next home for your new life. Both areas require a solid understanding of the local market.
- Demonstrates no bias. More than likely, your professional will be working with both you and your ex to sell the home. You have a right to expect neutrality from your realtor, and so does your ex. So don’t plan to let your cousin’s husband handle the sale.
- Rapport. Just as with your lawyer, you need to be concerned about whether your realtor “fits” with you. You will be working with them often, reviewing many details about your home, and seeking a common approach to moving the home on the market. If the realtor doesn’t “fit” with you, the relationship and result will be unfavorable and stressful for you.
Emotions are going to wrap their way around so many decisions during divorce. Don’t let the headache of dividing the family home unnecessarily consume precious energy. Hire a realtor, get that burden off your shoulders and move on to the next issue.
What happened to the family home in your divorce? Tell us in the comments below.
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