...About Property Division


My Ex and I had a business.  How do I know what is marital property and what is separate property in terms of its value?


Carolyn’s Answer: Valuing a closely-held business or professional practice can be a very important part, and difficult part, of your divorce case.  In addition to being a Family Law Specialist, I am also a North Carolina Certified Public Accountant and a business valuator, myself.  So I can help, particularly, on your case with the business valuation issues.  Now, let’s look at what a valuation expert does.  A valuation expert will gather materials on your business; perhaps make a site visit, perhaps not, depending on the rules of engagement; and then they will look at three approaches.  First, they will look at the asset approach.  The forensic person will look at the assets minus the liabilities and look at net worth.  Frequently this method, though, is not used in a closely-held business in a divorce case if the business is ongoing.  The second approach is the income approach.  The income approach can look at cash flows, income, that sort of thing, and then apply a capitalization rate.  Finally, the market approach.  The business valuator will look for other businesses similar to yours that have actually sold, and will look at how much they sold for, and what the conditions of the sales were.  After the valuator has done the three approaches, the income, asset, and the market approach, they will apply discounts.  Those discounts can be very important for fair market value.  That would be a discount for marketability.  Closely-held businesses aren’t sold every day, so that should have some kind of discount.  Or, if you’re a minority owner, a minority discount.  After the application of the discounts, the business valuator will reconcile the methods, and then you will have the value of the business for the divorce case.  Frequently, both sides will have an expert if the case is tried, but hopefully, your case will settle in mediation with some negotiation on the work of what the business valuator did.  For this or any other family law matter, please contact us here at Woodruff Family Law Group.  
 – Carolyn Woodruff is a Family Law Specialist, North Carolina CPA, and Certified Business Valuator


What does “Equitable Distribution” mean?

Adam’s Answer: Assuming you have not executed a premarital agreement which specifically pertains to Equitable Distribution, North Carolina law will divide your property pursuant to Equitable Distribution. What is marital property?  Simply put, is all assets that are obtained after the date of marriage and prior to the date of separation. However, this does not include inheritance or gifts from other family members, unless those items were co-mingled or mixed with marital property. This also does not include items that are received prior to the date of marriage, or after the date of separation again, unless those items were co-mingled or mixed. A simple example of marital property is a 401 K plan that is earned during the marriage—that is, after the date of marriage and prior to the date of separation. For example, if an employed spouse earns $200,000 annually and invests in a 401 K after the date of marriage and prior to the date of separation, that property becomes marital property. North Carolina Equitable Distribution statute presumes that $100,000 of that plan is to be distributed to the unemployed spouse while $100,000 remains with the employed spouse. This distribution is achieved through a Qualified Domestic Relations Order, better known as a Q-DRO or a QDRO (Qua-dro). QDROs are important because they allow the transfer of those funds to be achieved tax-free.  For more information on QDROS, please see the Woodruff Law Group’s website at woodrufflawfirm.com. 
 – Adam Furr is an attorney with Woodruff Family Law Group


I own a medical practice.  What should I consider when it comes time to divide our property in the divorce?


Carolyn’s Answer: Professional Practices bring challenges to your equitable distribution. If you’re a doctor, a dentist, a lawyer, an accountant, or the spouse of one of these professional people, you will need to have a business valuation done in all likelihood in your divorce. I’m a North Carolina Family Law Specialist, a North Carolina CPA and a business valuator. While we will likely hire an expert for your case to establish the value, we’ll be sure to look at the particular nuances of your particular professional practice to make sure that it is handled properly for you in your divorce. We have a video FAQ on business valuation.  I ask that you review that, it will tell you a little bit more about the process of a business valuation.  For this or any other family law matter, please contact us here at Woodruff Family Law Group. 
 – Carolyn Woodruff is a Family Law Specialist, North Carolina CPA, and Certified Business Valuator


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