Professionals of all types face some very specific challenges when they go through divorce. Determining the marital value of a professional practice or other small business — and then coming up with a distribution scheme that achieves an equitable split while keeping the business intact — is often a tense and complicated affair. Fights over business assets and ownership are very disruptive and can lead to lost profits and even closure. That is why taking steps to protect your business early on is of such crucial importance.
All marital assets are subject to equitable distribution under Florida law. However, most people may not realize what will be considered a marital asset, such as:
- Most assets acquired during marriage
- The appreciation in value of preexisting assets due to the efforts of one or both spouses
- Real and personal property held jointly or individually, if acquired during the marriage
What this means is that your professional practice — or some portion of its value — may be considered a marital asset even if you established it prior to being married. There are some exceptions, however. For instance, if the sole value of the practice is personal good will of the professional, then that value may not be divisible in equitable distribution. But this would not apply if the business has a value other than just the good will of the professional individual.
The best way to avoid being hemmed in by the valuation of a professional practice during divorce is through a comprehensive pre- or post-nuptial agreement (sometimes referred to as antenuptial agreements, pre-marital agreements or marital agreements). Such an agreement establishes property rights in advance, making distribution more predictable and avoiding the protracted litigation that marital estates with complex assets can often generate. While there is no way to guarantee the enforcement of such an agreement by a Court in the future, if one doesn't have such an agreement, then it definitely will not be enforced. So it's much better to have the agreement with the strong possibility of it being enforced than to have no agreement at all. Consulting a Jacksonville family law attorney in advance to create a pre- or post- nuptial agreement can save you a great deal of time and money should a divorce occur.
Jacksonville, Florida family law attorney Shane Herbert also contributed to this blog post.