If you start or own a business while married, then the value of that enterprise is generally taken into account when you divorce, barring a prenuptial agreement that dictates otherwise. If you owned the business while still single, then any appreciation in value can be treated as a marital asset, while a business started while married could be treated as marital property in its entirety.
The COVID-19 pandemic has negatively impacted a lot of small businesses in and around New York. In March, the government ordered the shutdown of all nonessential businesses that could not transition their operations online. This means that hundreds, if not thousands, of small companies have been closed for weeks, which is sure to have a detrimental effect on their value.
How does this affect your property division?
If you filed for divorce before the lockdown and the presumptive valuation date of the business was the date your action commenced, then you may find that the company is worth a lot less by the time the crisis passes. When such a large asset has depreciated greatly in value due to the coronavirus, which was not known or could not be known at the original valuation date, it can lead to an inequitable result when marital property is being divided.
Fortunately, courts have a certain degree of discretion when applying New York’s equitable distribution principle, and many states have case law involving a court-ordered change in valuation date in the interests of fairness.
In Torres v. Schripps, the New Jersey Appellate Divisions supported the trial court’s changing of a business valuation date because the company had changed after the plaintiff left it and the defendant admitted that he was not yet familiar with its daily operations. The judge had concluded that the plaintiff should not be held responsible for losses experienced after he departed, particularly when those losses resulted from the defendant’s inexperience.
In your case, the divorce court judge may reach a similar conclusion. Your business shut down and lost value for reasons beyond your control. Although the outcome won’t be known for certain until the courts reopen and your divorce is finalized, your New York divorce attorney can advise you on how to request a valuation reconsideration.
To support the outcome you are looking for, be sure to save all documentation pertaining to the closing of your business. The havoc wreaked by the pandemic is unprecedented in recent history, and both civil and family courts across the nation will be struggling to make decisions regarding its effects. Your divorce attorney will provide you with the best guidance given your current circumstances and help you protect your rights as your divorce action concludes.
Jayson Lutzky is a Bronx, NY divorce attorney. He has over 36 years of legal experience and has handled many complex divorce cases over the years. If you have questions about a case, then call his office at 718-329-9500 to set up an appointment. Visit www.MyNewYorkCityLawyer.com/Divorce to learn more.