#divisionofproperty

When spouses are going through a divorce, one thing that always must be addressed is property division.  However, when one or both spouses own a business, or even have an interest in a business, property division can be much more complicated.  A common question spouses ask is: Do I have to give my spouse part of my business in our divorce?  In Massachusetts, the short answer is No, but the answer isn’t that simple.   Under the property division statute in Massachusetts, Massachusetts General Laws chapter 208, section 34, the Probate and Family Court must consider the following factors in dividing the marital estate:   length of the marriage, the conduct of the parties during the marriage, the age, health, station, occupation, amount and sources of income, vocational skills, employability, estate, liabilities and needs of each of the parties, the opportunity of each for future acquisition of capital assets and income, and the amount and duration of alimony, if any, awarded under sections 48 to 55, inclusive. In fixing the nature and value of the property to be so assigned, the court shall also consider the present and future needs of the dependent children of the marriage. The court may also consider the contribution of each of the parties in the acquisition, preservation or appreciation in value of their respective estates and the contribution of each of the parties as a homemaker to the family unit     Also, the appellate courts have routinely stated that property division includes any assets of each spouse, regardless of whether the assets are titled in only one spouse’s name, in both spouse’s name, or in one spouse’s name jointly with another individual.  This typically means that a business interest, even if it is only in one spouse’s name, is a marital asset that will be divided one way or another.   However, the next step is to determine how much that business (or the spouse’s business interest) is worth.  That almost always requires a business appraisal by a financial expert qualified to conduct business appraisals for a divorce.  Many spouses think that this is something their own CPA can do, but oftentimes CPA’s will not qualify as an expert for business appraisal purposes in the eyes of the Probate and Family Court.  Thus, the spouses must either each hire a business appraiser to conduct an appraisal of the business, or the spouses can agree to hire one business appraiser to conduct a joint appraiser.   Once the business appraiser conducts his analysis, he will give the spouses and their attorneys two numbers: 1) the value of the business (or spouse’s business interest); and 2) what is a “reasonable compensation” for that business owner spouse for purposes of calculating child support and/or alimony.  With these two numbers in hand, spouses and their attorneys then have to figure how what, if anything, is the non-business owner spouse entitled to from the value of the business.   This does not mean that the non-business owner spouse will actually obtain an ownership interest in the business.  Rather, the business owner spouse will then have to pay the non-business owner spouse a certain dollar amount for property division based upon the value of the business.  Depending on how much is left in the marital estate (above and beyond the value of the business) this can sometimes be done with a trade off of assets where the non-business owner spouse receives a greater share of the other assets.  However, when there are not enough assets for a trade off, then the business owner spouse typically is given time to essentially “buy out” the non-business owner spouse from the value of the business.  This is typically done in a weekly or monthly installment payments over period of time.  These payments are not considered alimony, but rather property division payments.   The amount the non-business owner spouse receives from the business depends on the factors outlined in Massachusetts General Laws chapter 208, section 34.  The non-business owner spouse is not automatically entitled to 50% of the value of the business.  Depending on the statutory factors, the non-business owner spouse may receive less than 50% of the value of the business.   Thus, in Massachusetts, a business owner spouse does not have to actually give the non-business owner spouse a portion of the business, but the non-business owner spouse will likely be entitled to a monetary compensation based upon the value of the business.     Read the full article

Q: I’m getting a divorce.  Who gets the house when the divorce is finalized? A: The short answer is, it depends.  There are many factors that must be considered in determining who gets to keep the marital home during a divorce.   Q: What factors are considered in determining who gets the marital home in a divorce? A: One of the biggest factors is finances.  If either or both spouses want to keep the marital home, the court will consider whether he/she can afford the operating costs of the marital home.  Also, the court will consider whether the spouse who wishes to retain the marital home can afford to buy out the other spouse based upon the remaining equity in the marital home.   Q: How does a spouse buyout the other spouse’s equity in the marital home? A: This can be done in a few ways.  First, the spouse who retains the marital home can take out a mortgage, or refinance the existing mortgage and take out additional cash, to pay the other spouse his/her equitable share in the marital home.  Another way this can be accomplished is by ensuring the spouse who is not retaining the marital home get a greater share of other marital assets (such as cash accounts or retirement accounts) to offset his/her equity in the marital home. Q: What if one or both of the spouses cannot afford to buy out the other spouse’s interest in the marital home? A: If one spouse cannot afford to buy-out the other spouse from the marital home, but the other spouse can afford to do so, the spouse who can afford to buy-out the other spouse is typically permitted to do so.  However, if neither spouse can afford to buy-out the other spouse’s interest in the marital home, then the court will typically order that the marital home be sold.   Q: What if neither spouse can agree who can keep the house? A: If neither spouse can agree as to who will keep the marital home, the court, rather than picking one spouse to keep the marital home, will require that the home be sold.   Q: What if I had this house prior to my marriage? A: If you bought the marital home prior to when you were marriage, the same rules will typically apply.  However, if the house is sold, or your spouse is entitled to some equity from the home, you will likely be given a credit for any funds (including the down payment) you put into the house on your own prior to it becoming the marital home.   Q: We have agreed to sell the house.  Will we equally split the proceeds? A: Again, the short answer is it depends.  Because Massachusetts is an equitable division state, there is no law requiring that spouses receive a 50/50 split of marital assets.  Although a 50/50 split is not uncommon, it is not required.  Therefore, when the marital home is sold, first any mortgages, home equity loans, and liens on the home will be paid.  Then, any closing costs and taxes will be paid at closing.  Then, any net proceeds will be divided between the spouses.  How this gets divided will depend on many factors, including, but not limited to: Each spouse’s contribution towards the purchase and upkeep of the marital home (financially and through “sweat equity”) Whether marital funds were used to purchase the home, or if one spouse used his/her own funds to purchase the home. How are the other marital assets being divided, and who gets what share of the other marital assets Were there any liens on the marital home that pertained to just one spouse that had to be paid at closing (e.g. lien from a creditor, tax lien, etc.) Q: Our house is going to be sold for a loss.  Who is responsible for covering that loss? A: Like many of these questions, the short answer is it depends.  Sometimes spouses are equally responsible for the shortfall, and sometimes one spouse is responsible for all or most of the shortfall.  It will largely depend on the factors listed above.   Q:We still have young children, and I want them to grow up in this house.  Catn they? A: Yes.  It is possible to negotiate that one spouse stays in the marital home with the children, until they are older (i.e. graduate from high school or college).  Once the children are grown, the spouses can agree to sell the marital home at that time, or they can agree in the beginning that the spouse who stays in the home can buy-out the other’s spouse’s interest in the home, but can have additional time to do this, since the children are also staying in the home. Q: The divorce was just filed.  Will one of us have to move out? A: It is not uncommon for one spouse to move out of the marital home after the divorce is filed, but while the divorce is still pending.  However, at the same time, some spouses choose to continue to live in the house together, whether for the sake of the children or for financial reasons.  This is determined on a case by case basis. It will depend, in part, how well the spouses still get along.  If the spouses are continually fighting, then the court may decide it’s best for one spouse to move out.   Have any further questions about property division? Call the attorneys at Amaral & Associates, P.C. Read the full article