Many businesses – large and small – are being impacted by COVID-19, especially those in the restaurant, hospitality, theatre, airlines, transportation, and entertainment industry, just to name a few.
If your spouse owns a business, it may be hard to value the business at this time as many businesses’ revenue has seen a significant decline. Some businesses may not recover and may end up having to close or file for bankruptcy, which will then affect the property division in your case. Some businesses may take a significant time to recover.
In these circumstances, it may be important to work with your attorney to retain a business valuation expert so that you can get a fair and accurate valuation of your community property interest.
Global stock markets have also fallen sharply in recent weeks, which will affect the values of retirement accounts. History has repeatedly shown that the market will recover after a stock market crash, but the question is when?
This may not be such a big deal if you and your spouse agree that he/she will transfer your community interest into your own retirement account. In most circumstances, a qualified domestic relations order may be needed to transfer your interest. In this instance, the value of your retirement account, assuming that you hold on to it, will increase when the market recovers.
However, if you are looking for your spouse to pledge other assets to cover your share of your community interest in his/her retirement account(s), then you may be getting the raw end of the deal since the value of his/her account(s) may have dropped significantly.
If your spouse’s compensation consists of not only a base salary but stock options or restricted stock units, the value of your community property share will be lower at this time. In such instances, you may want to consider having your spouse hold your shares in trust until such time as the market recovers.
Along the same lines, if you both own real estate together, this may not be a good time to sell since the value of your property may be lower. You may want to reach an agreement with your spouse wherein one party has exclusive use of the property until such time as you both mutually agree to sell.
You will want to have a clear agreement with your spouse as to who is responsible for what expenses. You can also both agree to rent out the property, use the rental income to pay the property’s mortgage and other expenses, if possible, and then sell at a mutually agreeable time. There is no one right answer and every situation is unique. We can help you come up with creative solutions to deal with the situations you are facing.