Newsletter Divorce

Valuation of Closely Held Businesses in Divorce Proceedings

Generally, divorce cases involving thorny property issues can be complicated to resolve. This especially is true when the marital estate includes a closely-held business. A closely-held business usually presents one of two scenarios in the divorce context. The business may be tied to one spouse who is responsible for the business’s success. Distribution of the business to one spouse often creates asset allocation and business valuation issues. It presents the problem of valuing the business and structuring the parties’ assets and liabilities in order to provide the other spouse with a comparably valued property distribution. If the business depends on the operating spouse’s good will and management, which many closely-held businesses do, then the true value can suffer under the emotional stress common in divorce even if the business is distributed to the key-person spouse. A business having one value when operated by the key-person spouse can have a far different value when distributed to the non-operating spouse.

Uniform Premarital Agreement Act

A premarital agreement, also known as a prenuptial or ante-nuptial agreement, is an agreement made between the parties in anticipation of their marriage. Such agreements can cover issues such as property division upon divorce, as well as child custody, child support, and alimony. Although premarital agreements have been increasingly embraced for their ability to resolve complex property and support issues without resort to trial, the lack of uniform language included in such agreements has been noted as potentially problematic.

Fault-based Divorce: Cruelty

There are two basic approaches to divorce: fault-based divorce and “no fault” divorce. Most states permit a “no fault” divorce on the grounds that the marriage is irretrievably broken. Some states still require a fault-based divorce, some allow no-fault divorces, and a few states permit both. The fault grounds or reasons for divorce vary from state to state. Cruelty is a specific fault ground for divorce in most of the states that allow fault based divorces. Prior to the introduction of no-fault divorce grounds, cruelty was the most frequently used reason in seeking a divorce.

Temporary Counsel Fees in Divorce

Courts may grant interim attorney fees, while a divorce case is pending, to the spouse who lacks control over the marital assets that will be used to pay the fees. Granting interim relief in a divorce proceeding serves to promote fairness and impartiality by enabling the dependent spouse to maintain or defend the divorce action without being placed at a financial disadvantage. The dependent spouse often can secure attorney fees for appeals as well. Temporary counsel fees often can be estimated by using “rule of thumb” or local custom.

Alimony: Temporary Support

Temporary alimony is the same as temporary spousal support, and both provide sustenance to the dependent party through the course of a divorce case. During the proceedings, the dependent spouse and the parties’ children may require financial support, and courts may grant temporary support for that purpose. Dependant spouses can seek temporary support during legal separation as well.