How do I protect my assets if I get divorced?

Divorce and separation can have a profound and far-reaching impact on a business and other major assets.

In many cases one spouse has built up a substantial company without any input from the other. This can lead to complex issues around the valuation of business assets, as well as arriving at a financial settlement.

50:50 split is the starting point – not necessarily the end-result

Asset protection is crucial to the future of a business, with implications for the livelihood of the workforce as well as the owners.

The legal starting point in divorce cases is a 50:50 split of the couple’s assets, including business ownership. However, this can be contested – especially if the business was owned by one spouse before the couple were married, or if the marriage was short.

Why cash in the bank is not always a good thing

Asset protection involves specialist solicitors working closely with accountants to arrange a business’ affairs in a way that delivers maximum benefit to the client. Frequently this means adjusting the balance of cash assets and non-liquid assets in a business.

Having large sums of money sitting a bank can leave a business open to attack by a disgruntled spouse, because the funds are more easily accessible. Conversely, non-liquid assets – such as plant and machinery – cannot easily be turned into cash and provide greater protection.

There are many ways solicitors and accountants can increase or decrease liquidity in a business to protect a client’s interests. This does not always mean reducing liquidity. In some instances, a client may prioritise keeping the family home and cash in the business can be used as part, or all of the settlement.

The vital importance of asset valuation

A lot of the work we do involves establishing the true worth of assets. There are different valuation techniques, such as the net asset method and the price/earnings ratio. However, valuation is an art rather than a mathematical formula.

For example, a business may be worth £5m on the balance sheet, but this information may not be accurate, due to recent commercial developments. In addition, whatever business assets are worth on paper is often different to what they will raise at a sale – an expensive and lengthy procedure in itself. So seeking specialist professional advice is always recommended.

If you would like to discuss this or any other family law matter, please contact our Family team on 01772 258321 or at damian.baron@harrison-drury.com