How the Pandemic May Distort Business Cash Flows for Divorcing Couples

Dollar sign with flowing lines, cash flow

The disruptions caused by the COVID-19 pandemic could cause one partner's assets to depreciate significantly. Assets can appreciate in rare cases. Even if the original arrangement reached a reasonable division, this distorts cash flows for divorcing couples.

In uncertain economic times, achieving an equal property division can be difficult. Due to such unexpected circumstances, the valuation of a company could change significantly within a matter of months.

This financial disparity may make a business partner feel short-changed in comparison to other marital assets that were previously of comparable value. To account for these changes, the asset allocation may need to be revisited.

Basis For Valuations

During this volatile time, income-based valuation approaches such as capitalization of earnings and discounted cash flow are most likely to be emphasized in the midst of divorce proceedings. These methods can be tweaked to account for current financial disruptions while still absorbing a forecasted return to a "normal" profit level.

Other important factors include:

  • Which spouse is actively engaged in running the business?
  • Are there other marital assets of similar value?
  • What facts were known at the time of valuation?
  • Is the divorce contested or uncontested?

Uncontested Divorce Settlements

Uncontested divorce settlements are more straightforward and less expensive. A divorce attorney ensures that parties are fairly compensated, factoring in existing debts, visitation and custody of children, and support matters. Proceeding without counsel may cause discrepancies arising along the way to remain unresolved or result in an unfair division of debts and assets.

Laws on Marital Waste

The laws of residence and divorce in Northern Nevada determine whether marital waste claims are pursuable. This simply refers to one spouse's spending habits that were not beneficial to both partners.

A divorce lawyer helps the divorcing couple understand the laws pertaining to community property. In Nevada, earnings after marriage become communal resulting in an equal division of resources regardless of percentages earned by each partner. The laws might be applicable even if one partner was a stay-at-home spouse.

In brief, uncertainties on complicated divorce concepts like business valuations are best handled by a legal professional to achieve amicable results. Legal counsel would help identify discrepancies that may arise due to the pandemics disruptions.

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