Closely-held businesses and divorce, Part 1

On Behalf of | Nov 18, 2011 | Property Division

Many people invest heavily, in different ways, in their marriages and in their businesses. When one of those investments fails, it can start to drag the other one down. In this blog post and the next one, we will look at ways to protect a closely-held business from being lost when a marriage breaks up.

One of the first things to consider when facing the prospect of a divorce property division that involves a business is: to what extent is the business marital property? Under Pennsylvania law, the general rule is that an asset that a spouse acquired during the marriage is marital property, and an asset that a spouse owned prior to the marriage is separate property.

As one might expect, there are exceptions to these general rules, as well as different ways to interpret them. Some of the exceptions include the following, which remain separate property even if they were acquired during the marriage:

  • A gift from a third party
  • An inheritance
  • Damages for pain and suffering that were won in a lawsuit

When it comes to businesses, if the business was started during the marriage it is probably going to be considered marital property. If the business was established before the marriage, then the value of the business at the time of the marriage is going to be considered separate property. An increase in the value of the business during the marriage will generally be regarded as marital property.

The reason the previous paragraphs equivocate so much on the issue of marital versus separate property is that the issues involved can be complex and open to different interpretations. A Pittsburgh property division attorney will be needed to help determine the best course of action. The information here is meant only to give a general background of what the marital-versus-separate property issues will be.

In the next post, we will look at some more ways that divorce affects the division of a business.

Source: Forbes, “Five Steps a Woman Can Take to Help Her Family-Run Business Survive Divorce,” Jeffrey Landers, Nov. 15, 2011


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