Divorces involving substantial assets, commonly referred to as high-asset divorces, add an extra layer of complexity to an already intricate process. If you are in the midst of a divorce in Alexandria, Virginia, and either you or your spouse own a company or business, the intricacies intensify.
Understanding high-asset divorce
A high-asset divorce typically involves shared assets exceeding $1 million, but the marital assets extend beyond the straightforward division of tangible possessions. Instead, the focus often shifts to the valuation of marital assets, introducing nuances to the concept of equitable distribution.
Property division
Virginia follows an equitable distribution model, aiming for a fair rather than strictly equal division of marital property. Determining fairness involves considering various factors like the marriage’s duration, each spouse’s contributions, etc.
Marital versus separate property
Before any division occurs, the court categorizes property as either marital or separate. Marital property encompasses assets acquired during the marriage. In contrast, separate property includes assets owned before marriage or acquired during marriage through gift or inheritance.
Classifying companies or businesses
Determining whether a company or business is marital or separate hinges on factors like when and how it was acquired and operated. If one spouse owned it before marriage, it might be deemed separate unless the other contributed significantly during the marriage. For businesses initiated or acquired jointly during marriage, they typically fall into the marital property category, barring any prenuptial or postnuptial agreement.
Valuing companies or businesses
Once classified, the company or business undergoes valuation for equitable distribution. One valuation method is the income approach, which is based on expected future earnings and cash flow. Next, is the Market Approach that compares the business to similar ones sold in the market. And, there is the Asset Approach, which evaluates the business based on its assets and liabilities.
Division options
Post-valuation, the court determines the division method. It can order the sale and proceeds division. This is ideal when neither spouse wishes to retain business ownership post-divorce. Though, if that is not the case, one spouse can buy out one spouse’s share.
Yet another option is co-ownership. This is suitable when both spouses aim to maintain joint ownership amicably.
