When you enter into a married relationship, your life becomes intertwined with your partner. No one enters a marriage thinking it will fall apart. After all, marriage is the culmination of love.
Unfortunately, almost half of all marriages do not have a happily ever after and end in a divorce. All states have equitable property distribution laws that provide a framework for how property is distributed after a divorce. This property can include assets and family businesses.
Property Classification
As stipulated under its laws, the property distribution process has three steps: classification, evaluation, and distribution. The classification part of the process involves determining properties that are subject to distribution. When navigating this process, all parties and attorneys must be involved.
Under Georgia law, property is a broad term encompassing real and personal property. Real property includes immovable assets like houses, land, and commercial property.
On the other hand, personal property is movable assets such as furniture inventory and vehicles but also includes other assets such as stock, retirement accounts, and LLC membership interests. These properties fall into marital, divisible, and separate property categories.
Marital Property
Marital property is any real or personal property acquired by the parties during their marriage. It includes business ownership interest, retirement accounts, and stock portfolios.
Divisible Property
Divisible property refers to passive appreciation or depreciation of the marital property from the date of separation to the date of distribution. It also includes passive income and property acquired during the period and through the effort of both parties while still in their marriage before the separation.
Separate Property
Separate property refers to property owned by either the parties before their marriage or properties gained as part of inheritance or gifts during the marriage.
Valuation And Distribution
After determining distributable property, the next step is valuation and distribution. “Marital and divisible property value is divided equally among the divorcing parties. However, the court may give different directions for property distribution if it deems equal division not equitable,” says attorney Allen Russell of Atlanta Divorce Law Group.
When determining if the equal distribution is equitable, the court may look at properties individually owned by the divorcing parties.
The distribution process is arguably the most complicated because both parties may fight to keep specific properties, such as the marital home. The contention usually results from the emotions that come with a divorce.
Distribution Of Business Interests
Suppose a couple acquires an interest in a business during their marriage that is not part of an inheritance or gift. In that case, the business interest will fall under marital property and be subject to distribution.
The divorcing parties can choose different options for the future of their shared interest in the business. For example, they could decide to sell the business and distribute the proceeds equally among them. Alternatively, one party can keep the business and pay a distributive award to the other party, which would create cash flow problems for the party that retains ownership of the business.
You can protect your business from such an eventuality by signing a prenup agreement if you already have a business interest before getting into marriage. Also, you could create a post-marital agreement at different stages in a marriage. When done right, prenups and post-marital agreements can help protect your business interests and prevent your partner from laying claim in a business.
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