Family business? Pay close attention if you divorce

 Posted on July 30, 2020 in High Asset Divorce

A family business can be a great source of income for the household, but it is an asset that could potentially cause issues if the husband and wife decide to end the marriage. This is more common when one spouse handles the financial aspects of the company. Sometimes a spouse will decide that they need to make it appear as though the business isn’t as profitable as it truly is. Among divorce attorneys, this is known as "sudden income deficit syndrome."

The spouse who isn’t knowledgeable about the business’ finances is likely going to be at a disadvantage when they’re trying to work through the property division part of the divorce. This division is supposed to be based on an accurate account of the marital finances. When one spouse is hiding income from the family business, the information used to make financial decisions in the divorce isn't accurate.

Learning that the company isn’t as profitable as they thought is often a shock to the spouse who wasn’t familiar with the business’ finances. For a person in this position, determining what to do next while the marriage is ending can be a challenge. One option that you have is to add a forensic accountant to your divorce team. This individual can review various records and look in different places to try to figure out what’s going on with the company.

Your goal during a divorce is to walk away with a fair settlement. If you realize that your ex is manipulating the company’s financial records, discuss this with your attorney. It might impact what options you have as you’re trying to work out the property division settlement.