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Divorce Money Mistakes

How do I protect the business in a divorce?
And Why?

Starters to Prevent Mistakes.

The business is often the most valuable asset in a divorce. Whether you are the spouse, who owns the business or not, protecting the business income and value is essential to you both.

Safeguard Your Business During Your Divorce. Talking to us early in the decision about business valuation is a smart start. A good start makes a difference in the end. No Company is Divorce Proof. Prudent actions can prevent damage to the company and marital net worth. 

For most divorce questions, the many laws and regulations depend on your state of residence. Ask an attorney. Understand the concepts and vocabulary of divorce. When you have the slightest doubt in what you are thinking, ask more questions. Preventing problems should be constantly on your mind. Here are two categories of law questions to get clear with an attorney.

1. What is a marital asset or property?

Understand the difference between “what is marital property (or assets)” and “what is separate property.”

2. How are business assets divided in divorce?

What is equitable distribution of marital property? Is everything Split 50 50 in a divorce? Is a trust protected in a divorce? Can the judge force me to sell the business? Small businesses are not a liquid asset easily sold. How will you settle business debts? How much could you sell the firm for?  

A business valuation for divorce is a critical part of a fair divorce settlement agreement.

Starter Questions to Answer. Who owns the business? How is the business ownership held? What is the relationship of the parties to the business operations and ownership? What data and documents of the business are available?

What the company is worth? Ask us. Your attorney is welcome to call too. We will get you started at no charge. Begin by gathering business facts and documents. Guesses are bad, and lead to costly problems. 

10 Divorce Money Mistakes

Divorce is a tedious and cumbersome process. By the time, you sign the final decree so much of the spouses’ emotional and financial patience is exhausted. Unfortunately, many financial problems will not occur until after the divorce! Problems you discover after the divorce is final can be very difficult to fix.

Your planning can prevent poor choices. A divorcing spouse will often take an unfair settlement, because they didn’t know any better and thought it was a fair settlement, was emotionally drained and just wanted the divorce to be over with, was pressured to accept the settlement, and/or did not know how to negotiate something more fair.

Do your homework. We can help with planning. An example is the list below that briefly explains 10 of over 100 mistakes in divorce financial planning could prevent. These observations might not fit to your situation, but are mistakes to check. Get professional advice from at least three sources before taking action. Ask us. We are ready to help with financial planning information for your consideration.

DIVORCE FINANCIAL MISTAKE – THE UNPREPARED START: Filing for divorce and telling everyone before you are well prepared.

CBA’S OBSERVATIONS: The divorce process is a marathon. The first marathon runner died of exhaustion. Preparing a plan prevents problems. Getting well prepared will take a few weeks, and sometimes months depending on the complexity of your circumstances.

You need the right documents to

  • set your goals,
  • build your plan,
  • and evaluate your choices. 

Start a notebook, a filing system with a Table of Contents, and to-do and done lists.

Digital and scanned copies are helpful. Take photos of assets. Thumb-drives are portable, small, and can keep work out of the computer. Back up and password protect. Protect the materials in a new personal bank lock box at a new bank. Start thinking about personal emotional support and who might be right for your professional divorce team.

Set an appointment with yourself to work on your plan. There’s a lot to do.

I suggest that you do what you can to discreetly get organized. I have never seen two divorce situations just a like. Your situation is unique. Our planning process works to prepare for your special facts.

When a business is involved, the hurdles go up a great deal. Gathering and organizing marriage and financial documents tops the startup to-do list. You are responsible for gathering data and documents, and completed forms appropriate use. Click Business Valuation Documents for the initial business request list. 

Your Best Next-StepSM is to work on the several suggestions on this page and on Preparing for Divorce.

However, when you want more help, you can set a 30-minute phone meeting as part of the Divorce Records Check, DRCSM for just $99 to talk about personal records. Call us at 513-266-3226 for details. All new divorce planning clients start here.

The Divorce Records Check, DRCSM will give you useful financial planning data and document lists to guide better preparation. Our process finds facts others miss.  In addition, the Divorce Records Check, DRCSM will help save you time and your attorney’s time answering financial questions.


DIVORCE FINANCIAL MISTAKE 1: Not understanding the tax implications of the settlement.

CONSEQUENCE: Everything will be, or has been, taxed. You cannot escape it. It is only a matter of when. Different assets are taxed by different rules. Not understanding these rules can have a serious impact on the true value of your settlement. For example, Jane gets a 50/50 split, which includes her home. She thinks she has gotten a decent settlement, because real estate seems to be appreciating greater than her husband’s investments. However, when she needs to sell the home 3 years later for additional income, she will be taxed on all the gain since the date of purchase. In addition, she will only be able to defer half as much of the capital gains because she is now single. This can easily eat up a third of her settlement! 

DIVORCE FINANCIAL MISTAKE 2: Not understanding the value of retirement accounts.

CONSEQUENCE: As I mentioned above, different assets play by different rules. Retirement accounts are interesting because they typically defer taxation until distribution. However, you often cannot touch them until age 59.5 without tax consequences. Often, the divorcing husband will keep the retirement accounts intact for him, and give the wife a different asset because she needs the income today. However, a divorce financial analyst can show you how retirement accounts can be more valuable than other assets because of the tax-free compounding and investment risks!

DIVORCE FINANCIAL MISTAKE 3: Not considering a portion of the spouse’s retirement accounts in the settlement.

CONSEQUENCE: 401(k)s and other retirement accounts are often among the most valuable assets. They are often tax-deferred, and often the company will match contributions with company dollars! Free Money! Like other retirement accounts, a 401(k) may not be touched until age 59.5 without paying taxes and a penalty.
However, most people do not know the exceptions to the rules. One of which includes divorce! A divorce financial analyst will explain to you how your spouse’s company 401(k) may be split in a divorce, and can show you exactly how much this will influence your retirement dollars years down the road!

DIVORCE FINANCIAL MISTAKE 4: Not reviewing your spouse’s previous financial statements.

CONSEQUENCE: Believe it or not, it is possible your spouse has been hiding assets from you all this time. How can you know for sure? A divorce financial analyst can review your spouse’s tax-returns, bank statements, brokerage statements, etc, from the previous 5 years to find certain patterns of behavior. Rental income, unexplained company expenses, even certain charitable gifts, may lead to hidden assets! Has your spouse’s income changed at all in the past 5 years? Is your spouse due for a raise or bonus at work? It may be possible, especially in smaller companies, the boss may sympathetically defer the raise or bonus until after the divorce!

DIVORCE FINANCIAL MISTAKE 5: Not taking ownership of the Life Insurance Policy.

CONSEQUENCE: In some settlements, the higher income earner buys life insurance with the other spouse as the beneficiary. Obviously, this insures that if something were to happen to the alimony/child support, the family income would continue. However, because the paying spouse is the owner of the policy, they can change beneficiaries at any time after the divorce. Even worse, they can decide to stop payment and cash out the policy!
We can help you check that settlement choices are informed and fair, and demonstrate how the choice can make a difference for you.

DIVORCE FINANCIAL MISTAKE 6: Taking the market value of the house as an even settlement.

CONSEQUENCE: John and Jane have a combined net worth of $1 million dollars, which includes a home that has a market value of $500,000. Just because you take the house, does not mean you are getting a 50/50 settlement. Many financial issues must be uncovered. What was the cost basis of the home? This will affect your taxable gains. When it comes time to sell the home years after the divorce, you alone could be responsible for all the taxable gains.

DIVORCE FINANCIAL MISTAKE 7: Paying the wrong amount of alimony.

CONSEQUENCE: Unfortunately, you may need to pay alimony to your spouse. It’s a good thing that alimony may be tax-deductible to the payer. However, if improperly planned, if too much is paid within too short of a time, the IRS may come after you for recapture of all the alimony you deducted! A divorce financial analyst will show you how you can structure your alimony payments to prevent tax-recapture, and how it can benefit both you and your ex-spouse. Yes, paying alimony may even work in your favor! To see how, review the Expert Valuation, How We Help Clients section on this website.

DIVORCE FINANCIAL MISTAKE 8: Not having your business professionally appraised.

CONSEQUENCE 1: Now more than ever, more families are becoming business owners. It could be an established company with employees, or a small shop across town, or even just a startup business in your basement office. When it comes to divorce, everything needs to be assigned a value. How do you value that business? Your spouse may tell you that the basement startup business is not worth a dime, since it hasn’t even produced significant cash flow. However, until it is professionally appraised, you cannot be sure of the fair value. There are certified business appraisers that will consider all variables to give you an accurate present value.
Click to see the Starting the Divorce Valuation Process, 10 Initial Data and Document Requests

DIVORCE FINANCIAL MISTAKE 9: Not taking into consideration the value of intangible assets.

Divorce Business Valuations For Litigation May Require Formal Certification.

CONSEQUENCE 1: When we think of assets, we automatically think of the house, cars, savings, investments, etc. We first think of the tangible assets. One of the biggest mistakes made by a divorcing spouse is not to consider the value of intangible assets, such as career and business assets. These are the assets tied to you and your spouse’s career and business.

Career Examples: Insurance, stock options, vacation pay, sick pay, pension plan, social security, professional contacts, job experience! It goes on and on the more, you think about it. Depending on the situation and the company, you may have a right to the benefits of some career assets. This is valuable for the spouse that neglected their career for the health of the marriage.

When a business is an asset, the intangible assets are very important. Today, as much as 70-80% of a company’s value can come from intangible assets. Valuable assets that are easily overlooked and hidden.

DIVORCE FINANCIAL MISTAKE 10: Not understanding how marital debt can hurt you.

CONSEQUENCE: Just because your spouse agreed to pay off your joint credit cards, does not mean that you are in the clear! Keep in mind that debt was under your name as well. Your spouse can choose to default on the payments, and not only will it reflect on your credit, but creditors can come after you for the remainder of the payments! A smart option is to clear the marital debt before the divorce, regardless of who put those charges on the credit cards.

Call 513-266-3226 or e-mail [email protected] we will help you with your Best Next-StepSM for free.

Money Mistake Detective

You have a valuation number. You think it's ok. But you're not sure. You have a lot on money riding on the situation. So, you want a second opinion.

We find valuation mistakes that others completely miss. 

This is made possible by

  1. over 25 years of litigation tried by fire experience, (everything, and I mean everything, done for litigation is challenged and by expert attorneys who know how)
  2. professional quality evaluation controls and reporting standards,
  3. 200 plus pages of detailed protocols and application checklists, and an extensive digital and physical library
  4. a deep understanding of the valuation calculation process
  5. and required professional standards

Your fee is 20% of your valuation's total cost with a $500 minimum. Cheap risk insurance.

See - Expert Valuation, How We Help Clients Examples

Please send OCR Scanned or Original Searchable PDF file with your check made out to David A Dinsmore.

Would it help to have a neutral expert give you a second opinion on your report?

  • You received your valuation report, and the goodwill number or something just does not feel right. You discussed the numbers with the author and you were still uncomfortable. You know you are uneasy, but cannot put your finger on why. And, you surely do not want to take the time and expense to do it over from scratch.
  • When that's your case, it's time for a second opinion. Sometimes everyone just needs a second opinion. You just want to know the reason why something is off.
  • Medical practices and groups, golf courses, golf clubs, restaurants, construction, and others in volatile industries make second opinions a popular and smart safeguard.
  • A divorce or dispute value, a purchase, or goodwill's sale price drives some of the largest financial decisions in your life.
  • The review of another's valuation report can show the weaknesses and flaws, things that can cost you money, time, and embarrassment.
  • A professional review can point you in the right direction. The critique highlights violations of valuation standards, accepted valuation principle's application, and uses over 25 years of experience to show you problem areas. Your report will show you clear reasons why to accept or reject a value conclusion.
  • Good case, the value shows a reasonable conclusion. Best case, discovering a goodwill number way off the mark safeguards you from a bad decision, and often is a cheap form of insurance.

See Expert Work: How you get help.” Some are examples of second opinions.

P.S. Yes, I use the same meticulous and exacting templated procedures on my own reports.

You are welcome to ask anything. Here are some topics and articles:
Request Examples: Your Business Mistakes Selling

"Beware of misleading business valuation information on the internet. You will find it more hazardous to your wealth than ignorance."
David Allen Dinsmore
[email protected]