| Carol Ann's Newsletter July 2015 Table of Contents 1. Divorce & Real Estate Part I 2. Respect client confidentiality 3. From the desk of Carol Ann 4. How Do We Divide the Family Business? 5. Divorce Humor 6. Thought for the Day 1. Divorce & Real Estate Part I by Gregg A. Greenstein, Esq. Question: I will be entering into a listing agreement with a married individual who may soon be getting divorced. I also have a listing with a couple who is now getting divorced. What issues might arise? Our expert, Gregg Greenstein gives us the answers with a volume of information that will help your clients! Go to: http://frascona.com/resource/gag_dre1.htm 2. Respect client confidentiality Don't cause this problem! Some time back, a divorce client called our office with the following complaint. The client (we'll call her Alice) called a certified divorce professional to get information about how the professional worked. Alice did not leave her name or number because she didn't want to take any chance that her husband would find out about the call. Imagine her surprise when the professional called her back a few days later to ask how she was doing. The professional obviously had caller ID and, in this case, grossly violated a clients' privacy and confidentiality. 3. From the desk of Carol Ann Just want to share with you our marvelous vacation! We just returned from our third riverboat trip in Europe. The first one a few years ago was on the Rhine from Amsterdam to Basel, the second was on the Elba from Prague to Berlin, and this one was on the Danube from Nurnberg to Budapest. So relaxing and wonderful. I really recommend it. 4. How Do We Divide the Family Business? Whenever one of the marital assets in a divorce is a business, there are challenges in dividing this asset. A business can be anything from dentistry, medicine or law, to real estate, or a home-based business. It can be a sole proprietorship, a partnership, or a corporation. A. Value the Business Becky and James were getting a divorce after 35 years of marriage. James owned a heavy construction business. He agreed to split the assets 50/50 and said that the CPA at work valued the business at $300,000. Becky told her attorney, "I used to keep the books in the business for James, and we took in more than a million dollars each year. Do you think it would only be worth $300,000?" Fortunately, Becky's attorney insisted that she have the business appraised. The appraisal cost Becky $4,300, which made her very nervous to spend so much money. But the appraisal valued the company at $850,000 so her investment of $4,300 netted her $275,000 more than she would have received with the $300,000 valuation! In a divorce situation, it is almost mandatory to have the business appraised. Becky was right to question the value of the business when it was figured by the CPA at her husband's business. There are Certified Business Appraisers (CBAs) who value businesses. To earn this designation, appraisers must pass a rigorous written exam and submit appraisals for review by a committee of experienced peers. B. Dividing the Business There are three options when deciding how to divide the business. Either one spouse keeps the business, both spouses keep the business, or they sell the business outright. 1. One Spouse Keeps the Business.
In Becky and James' case, it was pretty clear that the business was run by James and he would keep the business and buy out Becky's interest or give her other assets of equal value. If there are no assets large enough to give her, they could write up a property settlement note and he would pay her over time. If Becky owned shares of the company, the company could buy back her shares over time. However, care needs to be taken when buying out shares of stock. If there has been an increase in the value of the stock, Becky could be liable for capital gains tax. If James bought her shares directly, it would be considered a transfer of property "incident to divorce," which is not a taxable issue. The basis would go with the stocks and would not be recognized until the stocks were sold by Becky later on. 2. Both Continue to Work in the Business.
On the other hand, it is much more difficult to divide a family owned business where the husband and wife have worked next to each other every day for years. They both have emotional ties with the business. In addition, if they try to divide the business, it may kill the business. Some couples are better business partners than marriage partners, and are able to continue to work together in a business after the divorce is final. However, this won't work for everyone! 3. Sell the Business.
Another option is to sell the business and divide the profits. This way, both parties are free to look elsewhere for another business or even to retire. The problem here may be in finding a buyer. It sometimes takes years to sell a business. In the meantime, until the business is sold, decisions need to be made as to whose business it is and who runs it. 5. Divorce Humor Sir, if you were my husband, I would poison your drink. Madam, if you were my wife, I would drink it. - A conversation between Lady Astor and Winston Churchill Marriage is great, but I wouldn't recommend it to single people. - Unknown Adam and Eve had an ideal marriage. He didn't have to hear about all the men she could have married, and she didn't have to hear about the way his mother cooked. - Unknown 6. Thought for the Day There are only about a half dozen things that make 80% of the difference in any area of our lives. - Jim Rohn |
