Attorney
If you own a business or professional practice, you’ve likely thought about what will happen to it someday. Maybe you dream of your child or grandchildren taking over. Or perhaps you plan on handing things over to a partner or buyer, whose stewardship of the business will allow you to retire comfortably. A divorce doesn’t have to destroy those plans, but it often will unless addressed directly.
Bob Matteucci understands this better than any other divorce attorney in the Albuquerque area. Before he became an attorney, Bob was the fourth generation of his family to run its retail shoe business. He was also the last.
Bob’s experience with the divorce process is a large part of the reason the business never passed to a fifth generation. It’s also the reason Bob decided to go to law school. He wanted to become the lawyer he wishes he’d had access to: someone who understood both the legal process and what is really at stake when the owner of a family business gets divorced.
Why Divorce Reaches Into Succession Planning
The problem with most succession plans is that they assume ownership is more concrete than it actually is. They assume the person or people listed in the legal paperwork are the only ones who have a say in how the business will be handed off to the next generation.
New Mexico’s community property laws complicate things. Under them, ownership is a much more flexible concept than you might assume. They presume that any business interest acquired during the marriage belongs to both spouses, regardless of whose name is on the paperwork.
If a business interest existed before the marriage, it may still be considered marital property (or have a community lien against it) even if a second spouse’s name was never on it. If the business grew during the marriage because of the work the named owner put in, or if company and household money were mixed together, the un-named spouse may have a claim to part of that growth.
Our law does this in order to protect supportive but lower-earning spouses. Those people who make the business run smoother by managing the household, raising children, or working in the business without a paycheck. Their financial future depends on the business’s success as much as the owner’s does. A settlement that ignores those contributions rarely holds up, and fighting over it usually costs both sides more than resolving it.
Many owners learn all this for the first time mid-divorce, and it’s often where succession plans begin to strain.
Planned Buyouts and Ownership Transitions
Timing is often the biggest risk. If you’re partway through buying out a parent or senior partner, the divorce has to account for that debt, the payment schedule, and what’s already been paid. If you planned to sell to a child or key employee in a few years, the cash needed to pay your spouse’s share now can compete with the cash that deal depends on.
The goal is usually to keep the business intact and operating, which means compensating the other spouse without forcing a sale. That might involve offsetting the business with other assets or structuring payments over time.
Buy-Sell Agreements Matter, But They May Not Settle Everything
If you have partners or co-owners, you probably have a buy-sell or operating agreement in place. These agreements often restrict transfers to outsiders, including a former spouse, and may set a formula for valuing an owner’s interest.
These agreements protect the company from ending up with an unexpected co-owner, but they don’t control how your divorce will shake out.
The price or valuation process outlined in the agreement isn’t necessarily what will be used to divide the marital estate. A formula written ten years ago may have little to do with what the business is worth today, and a court can look beyond it. Reviewing your agreement early, before positions harden, tells you where you stand and what your partners will expect.
Estate-Related Planning Needs a Second Look
Divorce also affects the documents surrounding the business. Your spouse may be named as a successor manager, an agent under a power of attorney, or a beneficiary on life insurance that funds a buy-sell agreement. All these documents will need to be updated when the divorce is finalized so they do not create problems down the road.
Serving Families with Dignity & Compassion
Succession planning and estate planning are not one-and-done deals. Divorce is one of the big reasons why.
When you realize your business may have more owners than the paperwork suggests. Or you’re worried the cash on hand isn’t going to be enough to keep the business running post-divorce, Bob Matteucci is here for you.
He’s been in your shoes (pun intended), and he’s ready to help you find a path forward that protects your family and your business. Contact him today to talk through your options.