Attorney
Do you remember the old children’s song about a couple sitting in a tree K-I-S-S-I-N-G? It’s very clear that “first comes love, then comes marriage,” but it provides no guidance on when starting a business should occur.
Maybe it’s time we cut the part about diapers and pins and instead warn people that the commingling of assets will bite you if it ends? Or maybe not. But we need to find some way to raise awareness among New Mexico business owners about the impact of our state’s community property law.
As a seasoned family law attorney, Bob Matteucci has worked with too many business owners who did not fully understand the automatic transfer of wealth that occurs when a couple says “I do.” He understands their pain and shock at divorce better than most because he is a former business owner and divorcee himself. And it motivates him to do everything he can to help families with businesses weather the divorce process and set themselves up for success in the future.
Yours, Mine, and Ours
Under New Mexico’s community property law, any business interest acquired or grown during the marriage will, most probably, be presumed to be marital property, the value of which must be divided 50/50 during a divorce.
You might notice that this does not explicitly include businesses formed before the marriage. But it might well. Businesses that were owned before the marriage are technically separate property, but that is just to start. If the business grew during the marriage, if marital funds or labor contributed to its success, or if your spouse worked in the business — even informally — there’s a good chance a portion of that increased value is community property.
Contributions and Comingling
Here’s where things get tricky. Courts in New Mexico don’t just look at who controlled the business’s checkbook or was on its payroll. They look at contributions and commingling.
Contributions:
- Did your spouse take care of the kids so you could grow the business?
- Did they work a salaried job while you reinvested profits?
- Did they help you build connections or manage stress?
- Did they organize the company holiday party?
- Did they do some of your bookkeeping?
Those non-financial contributions make it difficult to claim the business remained separate property throughout the marriage.
Comingling:
- Were marital or joint assets used to:
- Pay business expenses?
- Make capital improvements?
- Pay down business debts or apply for a loan?
- Did you ever reinvest your profits instead of paying yourself?
- Did you deposit business profits into a joint checking account?
This mixing of funds is sometimes referred to as transmutation. It quickly turns what was formerly separate property into community property.
Serving Families With Dignity & Compassion
You may have taken the risk, signed the lease, and built your brand well before you tied the knot. But once you walk down the aisle, what’s yours can quickly become what’s ours. That’s all well and good until the fairy tale ends, and you realize you may soon be K-I-S-S-I-N-G 50% of your business goodbye.
If this is the situation you are in, it is time to set up a meeting with Attorney Bob Matteucci. He is well known for helping business owners from the Albuquerque area navigate divorce without dismantling the companies they’ve built.