divorce asset protection - Posted by GR

Posted by DoubleJ on July 19, 2005 at 12:14:30:

I have a “shareholders restrictive agreement” in place, but Im not sure of the divorce stipulations. Guess I should have been more involved with the setup of the company, darnit.

i would like to add that I am happily married, for the moment :-). Im only worried about 5-10 years from now when the company is actually worth some serious bling.

divorce asset protection - Posted by GR

Posted by GR on July 18, 2005 at 15:48:36:

I contracted for some properties to be flipped prior to receiving a divorce summons from my spouse. I have 3 weeks to respond. Closing for said properties would be 4 weeks. Seems like bad timing for me since I will be acquiring proceeds during the marital status and before divorce decree. Any suggestions? Thanks.

Re: divorce asset protection - Posted by Brian

Posted by Brian on July 19, 2005 at 16:42:53:

Is this a community property state?

Check with the marital property laws in your state. Some states provide that assets acquired AFTER separation, but BEFORE final dissolution would be the separate property of that individual. Of course, the source of the funds would also be an issue if they are marrital v. separate funds.

You should consult your divorce attorney if you have one, otherwise you should talk to an attorney specializing in family law and marrital asset distribution.

Re: divorce asset protection - Posted by Phil

Posted by Phil on July 18, 2005 at 17:17:38:

Well, you could set up a land trust to hide the stuff

Re: divorce asset protection - Posted by long

Posted by long on July 18, 2005 at 21:38:32:

I’m in the same predicament. I’m separate now before divorcing. How can you hide the land trust?

Re: divorce asset protection - Posted by Jimmy

Posted by Jimmy on July 19, 2005 at 07:52:45:

HIDE the contracts?

you must be kidding.

You have acquired contractual rights during your marriage. They are assets just like land or houses or mutual funds. Attempting to hide them will cause you far greater pain than the benefit you might accrue if you succeed.

All of your finances will be an open book during the divorce.

Before you do anything stupid, hire yourself a divorce attorney (aka matrimonial attorney), and get expert advice.

But here’s a thought:

check with your divorce attorney about assets acquired after the filing. If you guys are separated, your state may have rules that make any post-separation acquisitions your own. and there is no reason to hide them.

be smart.

Re: divorce asset protection - Posted by DoubleJ

Posted by DoubleJ on July 19, 2005 at 08:19:48:

What if they are held by an “S” corp, and I have a 50/50 partner as well? Would he be protected from my divorce?

Re: divorce asset protection - Posted by Jimmy

Posted by Jimmy on July 19, 2005 at 11:41:37:

Your 50% shareholding in the S corp is a marital asset. This does NOT mean that your spouse owns “half of your half” of the internal assets. However, the value of thise internal assets will be an important factual matter for the divorce process to address.

If I was in the middle of a divorce, and wanted to pursue a new deal, I would consult with counsel before doing so. If the entity in which you are wanting to do the deal is already “sanitized” and unavailable to the spouse, you have a green light. If not, I would seek counsel on the best way to do it without further enriching the spouse.

If ever there was a situation where you need good counsel, this is it. EVERY MOVE YOU MAKE WILL BE EXAMINED BY A NASTY DIVORCE LAWYER ON THE OTHER SIDE. DON’T EVEN THINK ABOUT TRYING TO CONCEAL SOMETHING. YOU WILL HE HAMMERED BADLY IF YOU GET CAUGHT.

Back to your question about protecting the other 50% shareholder----> Is his shareholding protected? YES. But might he have a new minority partner after your divorce? YES. and would this be OK with him? usually NO.

This is a situation where a well-drawn buy-sell agreement could help. I frequently put in “divorce triggers” in my agreements, which allows he other partner to buy out the poor SOB in the matrimonial jam. Such a mechanism will fix the value of the interest, and will prevent outsiders (like a spouse of an owner) from becoming a shareholder.

But if no such agreement is in place, DON’T EVEN THINK about amending your agreement now.