Dividing High Net Worth Marital Assets When One Spouse Built a Successful Business
Special Divorce Challenges When One Spouse Built a Successful Business
“Starting your own business isn’t just a job – it’s a way of life.” – Richard Branson
Building a successful business takes time and a lot of work. Divorce, and dealing with dividing assets, is always emotional. If one of you built a successful business during the divorce, it can be even more complicated. The business owner may feel entitled to all the fruits of the hard work they put in over the years. While your dedication to support and family may be the reason the business owner was able to build a successful business. Either way, your divorce just got a lot more complicated.
For this series, I sat down with Michelle Smith, owner of Smith FSG in New York City. Ms. Smith works with wealthy couples and individuals on investment decisions, philanthropic giving, and transfer strategies. She is also a Certified Divorce Financial Planner and is one of the most sought-after divorce financial specialists in the country. As a divorce financial planner, Ms. Smith focuses on the long-term financial effects of divorce, calculating divorce payments, evaluating assets and property, and determining the future value of retirement and pension funds.
According to Smith, there are some unique challenges facing a high net worth couple divorcing when much of their wealth comes from a highly successful business that one spouse built over the course of the marriage. Aside from the division of marital property, there can be high emotions over who is “owed” what and who did the work most relevant to building the business.
During a divorce, some sort of division of marital property will happen. Marital property is generally considered any asset, property, or income acquired during the marriage, regardless of who owns it or how it is titled. If one spouse has formed and built a successful business during the course of the marriage, it may well be considered marital property.
If one spouse inherited a business or created the business before marriage, it might be considered separate property. But if the business has greatly increased in value, that additional value might be considered marital property. Obviously, it’s complicated.
Smith reminds us that one spouse building a business is never the end of the story. Often the other spouse picks up the slack at home for a hard-working business owner. Like Richard Branson said, owning a business is a way of life. But there is also a tendency for couples to feel almost panicked that some of their hard-earned money will be given away.
“How do you replace a career and a business lifetime of millions and millions of accumulated dollars? That’s a really tough one for the person that feels that they woke up and they went to work every day [and there is} often, as you know, […] a minimization [of] the spouse that didn’t have to toil and labor for it. Even though their contributions are often — one of the reasons somebody could work 20 hours a day if they were building a business or traveling all over the world if you’re working on Wall Street.”
As Smith says, both spouses contribute to a business built during the marriage in some way and it’s important to try to flip the script. Remember that the business will continue to earn money. Your earning potential isn’t ending because of a divorce.
If you’re considering a divorce but you’re looking for a more peaceful approach to divorce, contact my office for a free and confidential consultation.