Different properties and businesses can be determined to be marital assets or non-marital assets in a South Carolina divorce. Marital assets are divided by the family court, but non-marital assets are not. Marital property will usually include anything that was acquired during the course of the marriage, and non-marital property will include those assets that were acquired prior to the marriage by just one of the spouses, with some exceptions. Marital assets will be divided accordingly by the family courts. The same is true of business assets which are determined to be marital assets, and are handled in a similar manner.
Exceptions to the Marital Property Rule
In general, any and all property that is acquired during the marriage is marital property. However, as we’ve already pointed out, there are exceptions. Most property that is received by one spouse through inheritance or a gift will be considered as non-marital property. If a gift is from someone else to both spouses, then this is marital property. If the gift is from one spouse to the other spouse, this is also marital property. The exceptions are typically only for gifts that are given by someone else to just one spouse and inheritances to just one spouse.
Then, there is a special exception to certain properties acquired after the marriage has dissolved and both parties have separated, but before the divorce is final. These situations have to be judged on a case by case basis, and are often addressed through a temporary order or settlement agreement between the spouses. The best way to make sure that your property is protected as non-marital property is to contact a South Carolina divorce attorney to discuss the legal issues associated with division of marital property and protecting non-marital property.
Non-Marital Property Could Turn Into Marital Property through Transmutation
In a marriage, it is very common for both parties to entwine their lives and their their assets to the point where it is difficult to differentiate between marital property and non-marital property. If you reach a point where it is not possible to trace which party the non-marital property truly belongs to or whether or not it is non-marital property, then it will become marital property through transmutation. This is commonly seen when one spouse puts non-marital financial assets into a shared account. Then, that money is added to and depleted through income and expenses until it is no longer possible to say how much is non-marital.
Then, there are non-marital assets that become marital assets when the spouse who owns the property adds the other spouse’s name to a title, deed, or account. If one spouse owns a home, prior to the marriage (non-marital property), for example, and then he or she adds the other spouse’s name to the deed, then it is now marital property. Transmutation can also happen without adding the other spouse’s name to the property if the property is used by both spouses to support the marriage or family, though this more challenging to determine.
When a Business is a Marital Asset
Once it is established that a business or other form of self employment income is a marital asset, the family court will need to figure out what the value of that business is in order to fairly divide the asset in a South Carolina divorce case.
If the separating couple can agree on the value of the business, then this will be simpler than if they cannot agree. When there is a disagreement on this subject, then one or both parties must attempt to prove the value of the business. This can be calculated based on the fair market value for stock, the value of earnings and investment, and the net asset value of the business. Another option is for once spouse to order a forensic appraisal, though this is not a popular solution because of the expense. It is less costly to determine the value of the business with a certified public accountant, depending on the case.
Some cases will employ the asset approach to valuing and dividing a business as a marital asset, which involves calculating the actual value of the difference between all assets and all liabilities. Other cases use the income approach, which calculates the expected future economic value of the business, when the relevant income from the business has not yet been earned. Then, there is the market approach, which determines the value of the business based on what the business could be sold for, generally in accordance with how the sale of a similar business would be valued. Each of these methods has its own pros and cons, and which is best suited to your case will depend on the unique nature of your business assets.
The concept of transmutation can also apply to business assets in cases where one spouse owned the business prior to the marriage as a non-marital asset, but it becomes a marital asset at some point during the marriage. In some cases, the spouse who did not originally own the business becomes so involved in the operation of that business that transmutation applies. Ultimately, this kind of issue has to be determined on a case by case basis because each divorce and every business within a marriage has its own unique circumstances.
Even though a business may be determined to be a marital asset, that doesn’t mean that it has to be divided evenly. In some cases, there will be an equal division of such assets, but in other cases, it doesn’t work that way. Sometimes, one spouse will keep the business, but will have to pay the other spouse a fair amount for their share of the business. Again, this will be determined on a case by case basis with consideration of your unique circumstances.
When it comes to valuing and dividing self employment income, things can get very challenging. Both spouses may come to a different figure when they attempt to accurately value the business. It is also possible for one spouse to try to hide some of the income from the business. The best case scenario is when both spouses can agree on the value. In any event, you will want the guidance, advice, and representation of an experienced South Carolina divorce attorney. Contact the Elliott Frazier Law Firm to learn more about the complexities of marital assets and how the law may apply to your own divorce case.