New Mexico is a community property state, which means that the overall value of both assets and debts incurred by a couple while legally married will be divided equally between them upon divorce. Some property, however, can be considered indivisible and must be handled separately, which means that some assets will be divided fairly but not always in the ways expected.
What is indivisible property?
Indivisible property is property that cannot be easily divided between a divorcing couple. It can include property like a family business, intellectual property rights and some types of investments. In cases where either party in a divorce believes that some of their assets are indivisible, a thorough review should be conducted by an independent financial specialist so the assets can be appropriately categorized for later judicial review. These assets may include:
-Family businesses
Family-owned businesses sometimes cannot be divided because of the way in which they are structured and the potential impact on their future viability should ownership be divided during a divorce [1]. Often a creative solution will be required, such as a buy-out, in order to proceed. The business should be independently valued and considered alongside any other community property to determine the most appropriate way to proceed.
-Intellectual Property (IP) rights
In cases where either or both parties have trademarked a logo, patented a product or own a copyright, this is known as having intellectual property rights and these cannot easily be divided. It will be necessary to have such IP independently valued, and the divorcing couple will need to agree on how to achieve fair compensation. This may require licensing agreements to be negotiated or for the party that retains the IP to pay their ex-spouse royalty payments or, more likely, obtaining an equivalent value from other assets that are more readily divisible.
-Complex investments
Some investments may have complex ownership structures that do not lend themselves to division. In this case, it may be necessary to sell or transfer shares to obtain the equity value, or a trade-off may be agreed in which one party retains their property and agrees to rescind other assets of a comparable value.
Seek legal advice
Although it is essential that potentially indivisible property is properly valued by a financial expert, couples planning to divorce should also enlist the services of a law firm that is experienced in handling all aspects of divorce law in Santa Fe (https://kufferlaw.com/santa-fe/divorce-attorney/).
Our family law attorneys will be able to help clients understand their rights and obligations, guide them through the complexities of valuing their assets and property, and help them to reach a mutually acceptable settlement.
How to overcome the challenges of indivisible property
– Is ownership already addressed?
If a prenup or postnup already exists, it may contain provisions regarding the division of specific assets, so it is essential that existing documentation is reviewed before proceeding with division discussions. The existence of such documentation can simplify the divorce and division process and avoid the need for costly legal or financial interventions [2].
– Open and honest communication:
It is important to maintain open lines of communication during a divorce, but when negotiating settlements involving indivisible property, it is crucial. The couple must discuss all areas about which they feel particularly strongly, highlight their priorities and concerns, and work together to achieve a fair compromise.
Cooperating in such discussions can ease the burden of dividing community property without unduly jeopardizing the future wealth and happiness of either party. Working together to achieve a fair outcome can also shorten the legal process, reduce the likelihood of disputes, and ultimately minimize the cost of divorce.
– Get accurate professional valuations
Do not be tempted to guess at the value of your property as inaccuracies can have permanent legal ramifications, even when these inaccuracies are not malicious or intentional. At best, inaccurate financial reporting can introduce time and cost delays into the divorce process. Moreover, if financial information is deemed to have been deliberately misrepresented, the party that provided the valuation may be subject to financial and legal penalties.
For this reason, it is important that appropriate appraisers, such as financial analysts or business valuation experts, are hired to provide an unbiased assessment of the value of the indivisible property.
To discuss your personal circumstances or apply for a prenup or postnup agreement to protect your business, investment or IP in the event of a future divorce, contact the Law Office of Dorene A. Kuffer today.
Resources:
[1] https://www.divorcemag.com/blog/how-will-a-family-business-be-affected-by-a-divorce
[2] https://kufferlaw.com/blog/prenuptial-agreements-in-new-mexico/