Attorney
When Bob Matteucci was running his family’s retail shoe business, Q4 was the busy season, but it was also inventory time. All hands were needed on deck to walk the shelves, check serial numbers, find the pallet of stock that should have been put out in August, and reconcile what’s on the floor with what’s on the books. It was tedious work, but by January you knew exactly where the business stood and were ready for the new year.
Dividing a family business in a divorce calls for a similar top to bottom assessment. The trucks, tools, equipment, and inventory that keep a business running are often among a couple’s most valuable assets. Taking stock of what you’ve got and figuring out how much it is worth is the first step toward a divorce settlement that lets both spouses move forward on solid financial footing.
Start With a Full Count
New Mexico is a community property state. In general, this means assets acquired during the marriage belong equally to both spouses, no matter whose name is on the title or who runs the shop. Equipment bought before the marriage, or with one spouse’s inheritance, may be separate property (or may have a community lien against it), but only if the paper trail supports it. The value of all that community property, if not the items themselves, usually is divided 50/50 at divorce.
So, the count goes beyond what’s sitting in the warehouse. It’s a record of what the business owns, when each item was acquired, how it was paid for, and what is still owed on it. Putting together a clean list early on makes everything after it faster and less expensive.
Book Value Isn’t Market Value
Unfortunately, putting a clean list together isn’t as simple as pulling out the books or glancing through your tax returns. And this is where many owners get tripped up.
Your tax return may show a two-year-old service truck depreciated to almost nothing. That’s smart tax planning, but the truck still runs, still earns money, and would still sell for $40,000. In a divorce, what matters is what an asset is actually worth, not what the depreciation schedule says.
The reverse happens too. Specialized equipment bought for $250,000 might bring a fraction of that at auction because only a handful of buyers need it.
Inventory raises its own questions, since seasonal stock, slow-moving parts, and nearly obsolete goods rarely sell for what they cost.
This is why appraisals matter, and why it matters to read them closely. Bob Matteucci was raised to run his family’s retail business and holds an MBA from Tulane. He can run the numbers himself, but one of his real strengths is testing an appraiser’s work. Did the appraiser use liquidation value for a business that will keep operating? Were the comparable sales truly comparable? Was the equipment actually inspected? Small assumptions can easily move the total by tens of thousands of dollars or more.
What Keeps the Doors Open?
Value to the business can also go beyond a number on a page. Some equipment is essential, like the ovens in a family bakery, the excavator for a grading contractor, or the lifts in an auto shop.
If essential items like this are split up or sold off, the business stops producing the income both spouses may be relying on to raise the kids or retire comfortably. Bob gets this. He’s not going to support a settlement that handicaps your future. And this means you have to get a little creative.
Let’s say the spouse who runs the business keeps the operating equipment and inventory because that makes sense in the long run. For the divorce to go through, the value of those items needs to be offset with other assets, such as a larger share of retirement savings or home equity. If that’s not possible, Bob can help you craft a plan that uses business debt or operating income to fund a buyout or make spousal support aka alimony payments over a period of time.
When the Count Stalls: Bob as Special Master
Sometimes spouses agree on nearly everything except the inventory. The records are incomplete, one spouse doesn’t trust the numbers, or two appraisals land $1,500,000 apart. Meanwhile, the stock ages and the business loses value.
In these situations, the judge can appoint a special master, a neutral professional who can step in and handle the situation like a judge cannot. Bob regularly serves in this role. He can oversee a physical inventory, coordinate and review appraisals, recommend how equipment should be allocated, and supervise a buyout or sale. He doesn’t represent either spouse. His job is to get the facts straight and keep the case moving.
Bob is candid about when a special master is worth the cost. As he puts it, if he’s hired to count the forks in a couple’s kitchen, nobody benefits. Figuring out how much life the forklifts in a family business have left in them is a different story.
Serving Families with Dignity & Compassion
If you’re wondering how your business equipment and inventory will be divided at divorce, it helps to talk to an attorney who has been in the back office and on the sales floor himself. Bob Matteucci is that attorney, and he’s ready to help you. Please contact him today to set up a meeting and discuss your case.