Divorce is tricky and time-consuming. But, because it is something so personal, some people will think they can handle it on their own or with minimal help from a family law attorney, especially if the divorce is in the early stages, but this is not in your best interest. If you are a CEO, executive, an angel investor in Silicon Valley, a high-earner in the tech world, or something similar, it’s advised that one does everything one can to protect yourself and your assets, net worth, and more.
There is a lot to consider in any divorce, but this is especially true for executive-level employees, founders, entrepreneurs, and more. Let’s take a look at some things you should expect and consider in this type of divorce.
What to Consider in Divorce for Founders & CEOs
While divorce is difficult no matter what, the problem becomes even more problematic when it involves high-level employees, company founders, executives, and more. Because of the assets they have likely acquired over their time in business, the division of property and finances can become incredibly nuanced. Let’s take a look at what you may see in high-profile divorce cases.
One aspect of divorce, especially for entrepreneurs and those at the executive level is community property. This refers to real estate and property that was acquired while married. In the absence of a prenuptial agreement, these properties will likely have to be divided equally among the divorcing parties. It is more complicated when those assets include interests in businesses where a spouse was instrumental in the business formation and development. It is also more complex where a spouse was compensated with a pay package which included a large portion of non-salary compensation.
Meanwhile, if a business is founded during a marriage, it is likely considered one of the largest assets in the marriage and will have to be divided in the divorce. Unfortunately, a working company is a hard thing to liquidate in a case like this. Luckily there are options that divorcing spouses can look to make the process easier, such as an analysis by a qualified forensic accountant. This professional can be jointly retained or each party can retain their own expert. Other experts that may be important include business valuation experts, executive compensation experts and tax planning experts.
Often, an Employee Stock Ownership Plan (ESOP) is at issue in a divorce proceeding. It is a specialized way that a party acquires community or marital ownership or interest in a business. Generally, if rights under an ESOP accrued during the marriage, it is considered marital property. Similarly, other things like stock options and restricted stock options (RSUs), are in place to try and retain employees for a long period of time, but they can come up during a divorce proceeding.
Like ESOPs, RSUs reflect valuable compensation earned during the marriage that the community shares in. Because spouses are required to fill out financial disclosures, RSUs can be considered valuable assets and may be looked at when dividing property and assets between spouses.
For founders of companies, founder shares of company stock that were created during the marriage are considered marital property and will need to be considered in the financial disclosures portion of the divorce proceedings. Pre and post IPO company positions have different nuances that must be carefully navigated.
All of this can get pretty muddled and confusing, but the process can be much easier with the right legal counsel. Not only will the breakdown of assets be confusing, but the whole process can be incredibly time-consuming. It is not uncommon for divorce proceedings to take multiple months — indeed, it cannot be completed in less than six months. For some, this is too much of a time commitment, and it can be better left in the hands of a qualified professional.
While it may feel like an invasion of privacy to let a litigator into these types of discussions, the attorney-client relationship is purely professional and full disclosure will be in your best interest.
Get Help with Divorce Law Today
Some statistics show that the divorce rate is higher for executive employees like CEOs.
If you need expert assistance in the divorce process or another aspect of family law the experienced attorneys at Silva & Associates can give you the legal advice you need.
Give our team a call today or fill out a contact form to set up a time to speak.