“Til death do you part” isn’t always brought to its intended conclusion. Some 50 percent of married couples in America end in divorce — a dismal rate. But when you have a business, you have no time to dwell on the unfortunate end to your once fairy tale story.
Your most precious financial asset needs protection. You’ve spent time and energy developing it, and you want to see it last longer than your marriage. So when you’ve reached that point when the marital relationship has no other solution, which legal option do you turn to: a legal separation or divorce?
Contracts and Pre-Marital Assets
Both legal options outline how you and your spouse may resolve issues on division of assets, child support, spousal support, debt and other relevant matters, including your business. That is, if your company is fair game; it’s a business you and your spouse built during the marriage, making it marital property.
If the business existed before the marriage, it may be considered separate property. But if its valuation goes up during the marriage, that increase may be deemed marital property.
The distribution of your business will also depend on your location. Some states, like California, Texas and New Mexico are community property states and 41 states are equitable distribution states. If you live in any of those places, the court will consider earning power, involvement in the business and length of marriage in the settlement.
You can ensure protection for your business and keep it as your sole asset by getting a lawyer to draft a prenup. Asset protection has more power when you anticipate the risks. Although some people may consider prenups a kind of romance killer, it’s an effective way to avoid a complicated legal separation or divorce.
Ironclad prenups tend to override community property and equitable distribution state laws. It’s the least costly way to shield your company in the event of a divorce because everything is laid out. Just make sure that you and your would-be spouse have adequate legal representation during the drafting of the prenup. Otherwise, the legal document is invalid, and you may face a long and expensive legal battle over the rights to and ownership of your company.
Divorce vs. Separation
The meaning of divorce isn’t similar to the meaning of legal separation; although both will mean living apart, one ends the marriage and the other places it on hold. The similarities can be traced to how each is approached. You’ll need to go to court so that your decision as a couple is legally binding. This means working with lawyers.
Lawyers are necessary even when the decision to cut ties as a married couple is mutual. Not all states have the same laws, from property distribution to custody, and attorneys are your best advisers to getting the best possible outcome. So when you’re in New Mexico, for example, work with experienced divorce attorneys in Albuquerque, not out-of-town legal hotshots.
With legal separation, you still retain some of the financial benefits as a married couple. This will apply so long as you’ve been husband and wife for 10 years, which is a requirement for getting Social Security benefits, and that you haven’t remarried at 62.
You’re not likely to receive such financial benefits in getting a divorce, but you’re free to remarry.
The decision to go with divorce or a legal separation will depend on your situation. Along with some guidance from your lawyer, work it out with your spouse in a calm and rational manner. That way, you’re not only looking out for your business but also for the welfare of your family — however far apart you are from each other.