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Dividing A Business In Divorce

Dividing A Business In Divorce

Because divorce is so grueling emotionally, it can sometimes be hard to take a step back and clearly see the negative implications that it can have upon our lives beyond an emotional standpoint. Business owners, for example, actually have quite a bit to lose in divorce cases and can even end up in hot water with the IRS. Dividing property can be a complicated process, and it’s important that you have an experienced attorney with you every step of the way. They can work with you and the court to ensure that your business remains intact and that you fully understand any potential tax considerations as a result.

Marital Assets vs. Separately Owned Assets

In the state of Alabama, the courts will treat almost all property that has been acquired after the marriage took place as marital property. Note that this is true even if the property in question was not purchased jointly. It can be difficult to determine what assets are owned by which party in a divorce, therefore the courts tend to just divide property in a way that they deem is fair amongst both parties. That means that, in general, property is considered marital assets and is subject to division by the courts.

One exception to the above rule happens to be business assets. Unlike the majority of property, business assets that were acquired before the marriage began or after it ended are excluded from court property division as they are considered separately owned assets. If the assets in question were used to benefit both individuals during the marriage, however, then they might still be considered marital assets.

It is vitally important that you retain the services of an experienced divorce attorney in Alabama who understands how the courts determine what is marital property versus what is separately owned assets, and how to ensure that your business remains in one piece as much as possible. The skilled lawyers at Lloyd & Hogan, Attorneys at Law, can help you take care of your business assets during your divorce case, and will be able to explain potential tax implications you might face as a result of the court’s ruling.

Tax Implications / Considerations

When property is divided during a divorce, it is important to do your best to ensure that the transfer occurs under conditions that do not equal gift tax liability or taxable gain. Failing to do this could end up costing you or the other party significantly, depending upon the value of the property in question. As long as the property is incident to your divorce, however, you should be able to transfer it without the loss or gain of the assets being recognized as a taxable loss or gain.

Another tax consideration to keep in mind is transfer taxes. Depending upon when the transfer takes place, it is possible to avoid gift tax. Sometimes the property must be transferred only after the divorce decree has been entered in order to ensure that you can avoid transfer taxes, however, so it is important to know how the law applies in your specific situation. A knowledgeable attorney can help you better understand the potential issues you are facing.

Keep Your Property Safe

Whether you are taking part in an amicable divorce or a contested one, it is possible to keep certain safeguards in place to help protect your business assets. Note that the this can apply to both parties involved. While most individuals will immediately think of the individual who is “losing” business assets to their ex-spouse when it comes to safeguards, the spouse receiving assets or income derived from a business can benefit from safeguards as well. Namely, there are ways to help protect the payee from the financial insolvency or death of the payor.

Finally, it is important to remember that all property must be disclosed in a divorce. That means that you cannot hide your business assets and doing so can result in serious consequences. Instead, reach out to an attorney who understands how divorce law works, how the courts tend to rule and divide property, and how to best ensure that your assets remain as whole as possible without breaking the law in the process.

If you are contemplating or in the middle of a divorce, you should reach out to attorneys who can help ensure that your rights are upheld. Lloyd & Hogan, Attorneys at Law, can help. We offer free consultations and are ready and willing to hear about your case. Contact us today for more information.

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