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Broken heart, divided gold: divorce and family businesses, part 2

"Keep me searching for a heart of gold," sang Neil Young in an indelible 1970s rock song.

But what if your heart is broken and your gold - in the sense of financial resources - has been poured into a family business? How do you divide interests in that business with your spouse in the event of divorce?

There are many challenging valuation issues that can arise when making such divisions. In this part of our two-part post, let's consider a few more of the considerations involved.

In some cases, it may be tempting to simply offload the valuation questions to an expert. Keep in mind, however, that expert opinions may be all over the map when it comes to business valuation.

If your divorce is a contentious one, it may also be difficult to agree on which expert to use. It is quite possible, then, to have dueling expert opinions - one on each side - with the court left to determine the value.

As we noted in the first part of this post, questions of timing can be very important in dividing interests in a family business in the event of divorce. There are instances, for example, when a business was actually started before the marriage, but increased in value substantially after the marital knot was tied.

When that happens, is some of the increase properly considered community property?

Arizona has had several litigated cases that addressed this question. Such cases pose valuation issues of a two-fold nature. This is because it is necessary to not only to determine the value of the business at the time of divorce. It is also necessary to determine the value when the parties were married.

In short, there are a host of valuation issues that can arise with family businesses in the event of divorce. It makes sense to consult an attorney to become better informed about where you stand.

For more information, please visit our page on community property.

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