Structuring Buysells with Regards to Divorce

[Justin Bilyj]

With half of all marriages ending in divorce and litigation for business assets often getting nasty (dodgers) between couple , do you have any tips for handling this event within a buysell agreement? How to approach this? Do you have the spouse party to the agreement? Sign-off on rights to any future interests?

Ouch what a touchy subject!

 

[InsuranceMonkey]

Excellent question and my gut reaction is "State by State" the outcome can be different, due to varying State divorce laws in regards to "community property" within the marriage. I bet a solid buy-sell agreement does have a provision for a former spouse to sell any shares awarded in the divorce back to the former-spouse partner or the company/other partners.

I'd lay money down though "State by State" the answer to your question can change slightly.

 

[Josh]

Let the attorneys handle it if/when it happens.

 

[Sales71]

I think you need to review what the divorce decree says regarding the business, life insurance etc usually it states what need to be done.

The court will have specific instruction to follow based on the couple agreements.

 

[njh_lfg]

Only way around this is a post-nuptial agreement but it is subject to state laws. Good luck mentioning this and then building a relationship with the spouse.

Second Josh, let the atty handle this.

 

[xrac]

Only way around this is a post-nuptial agreement but it is subject to state laws. Good luck mentioning this and then building a relationship with the spouse.

Second Josh, let the atty handle this.

I third Josh on this.

 

[Justin Bilyj]

I am feeling that this isn't the site to be asking these questions...

 

[Josh]

I am feeling that this isn't the site to be asking these questions...

I get the feeling you just don't like the answer your hearing.

The courts and attorneys decide the way they feel like handing out the assets. As njh said, they could have some type of a post-nuptial agreement, but that has almost nothing to do with a buy-sell agreement.

If you don't mind my asking, how many buy-sells have you done in the last year?

 

[Justin Bilyj]

I had one that fell apart due to the owner that just switched gears and bought out his partner.
The reason why I ask is when your approaching a company that already had one in place, chances are they don't account for that event, chances are they aren't up to date on their buy-sell or had it reviewed, and using the divorce clause is one way to open the idea to getting it reviewed and further review funding. I just wanted to know what any pros on here would suggest on broaching the subject.
And no that's not the go to kicker question but something that is packaged together with Disability, Dissolution or death as qualifying events.
My response Josh was because I feel this website doesn't have many people with experience in the advanced markets that I can further learn from, just newbs, vendors and entertainment seekers. There are exceptions to this observation.

 

[DHK]

We are not attorneys, so we don't provide legal advice.

As such, you will need to know if you are in a community property state or not and how that would affect the agreement.

Basically, what you need are assets that can be transferred in lieu of business assets. You need something else to make the agreement EQUITABLE in the event of a divorce.

So basically, tell your client to pony up more money from some other pocket so you can have the asset of the business protected.


This is not legal advice and such advice should be sought from a licensed professional attorney in your state.
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If the business entity is a separate entity (a corp or LLC), can't the officers of that corporation obtain a loan of some kind to pay any kind of liability in the event of divorce? May be extremely difficult, but the potential is there.

So I would talk to your client & attorney about the legal structure of the business to find ways to protect it from the creditors and predators of the owners personal problems.