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Specialty tag(s): Divorce for Business Owners, Divorce

Should I Restructure My Business or Create a Trust to Protect My Assets in a Divorce?

Chandler Rice Winslow | January 30, 2024

two men looking at papers at a conference table

Building a business is hard work and sacrifice. It is natural to be concerned about the impact of an imminent divorce on your company’s future, especially given that the division of assets can significantly influence your professional life and financial stability. That’s why so many entrepreneurs wonder, “Should I consider restructuring my business or creating a trust to protect its assets during the divorce?”

While this is a logical question to ask, the answer is no. Choosing either of these options in direct response to a divorce can have severe legal ramifications for you and for your business. To explore the legal options available to business owners who are worried about the future of a business when a divorce is imminent, it is important to consult with attorneys who have the depth and breadth of knowledge to address such complex matters.

The Legal Consequences of Restructuring Your Business or Creating a Trust During Divorce

Business restructuring is a common practice typically used to improve operations or profitably—  there is nothing inherently wrong about business restructuring on its own. But if believe that your marriage is ending, it is essential to consider the timing of your decision to make any big changes to the structure of your entity. If restructuring happens during divorce proceedings (or right before initiating the proceedings), it can be viewed as an attempt to hide or shield assets from the division process, resulting in legal complications and disputes. Whether or not the restructuring is appropriate, it can lead to investigations, allegations of fraud, drawn-out legal battles, and severe court-imposed penalties.

Similarly, transferring business assets into a trust can offer protection, but the timing of the transfer is crucial. A transfer close to or during divorce proceedings may be viewed as fraud designed to deprive the other party of their rightful assets.

When Should I Consider Restructuring My Business or Creating a Trust?

The best time to consider restructuring your business or creating a trust is before the onset of a divorce. Proactive and early planning before any signs of marital problems helps to avoid the appearance of ill intentions, allowing for a non-confrontational environment to discuss asset division if necessary. Proactively implementing these changes can help to ensure that your business interests are secure in the event of a future divorce.

Are There Any Other Legal Strategies I Can Use to Protect My Business Assets During a Divorce?

If there are no signs of divorce on the horizon, pre- and post-nuptial agreements can be effective ways of protecting your business and its assets. These agreements allow couples to determine how business assets will be divided if a divorce occurs, helping them to avoid lengthy and contentious disputes. A carefully structured agreement can solidify intentions for the business, protect against future claims, and preserve family wealth tied to the business.

If you are currently involved in a divorce, avoid restructuring your business or creating a trust to shield your business assets. You may be able to achieve a favorable outcome through Collaborative Divorce or mediation. These approaches use cooperative, solution-oriented processes designed to reduce conflict and maintain a degree of control over the outcome for both parties.

In a Collaborative Divorce, both parties work with attorneys in a non-contentious setting to reach a mutually beneficial resolution. Collaborative Divorce attorneys are skilled in navigating these delicate negotiations, advocating for fair asset division while prioritizing their clients’ best interests. The process allows for privacy and direct communication and can specifically focus on complex business interests if the situation requires it.

Mediation conducted by a neutral third party can also help resolve divorce disputes. The mediator, often an experienced attorney or retired judge, facilitates discussions and offers creative solutions to points of contention, including those involving business assets, that might not be available in traditional litigation.

Contact Family Law Attorneys with Experience in Divorces that Include Complex Property Division

The family law attorneys of Goranson Bain Ausley have the knowledge and insight needed to walk business owners through the process and nuances of divorce when complex and high-net-worth assets are involved.

Our team is dedicated to safeguarding your business assets through meticulous planning and strategic execution. By employing proactive measures like pre- and post-nuptial agreements or engaging in Collaborative Divorce or mediation, we can help to preserve and protect your interests. Schedule a consultation with us to find out more today.

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