Dear Vanessa,
My wife and I are separating after 20 years of marriage, and our biggest dispute is about my business.
I founded a packaging company before we got married. It was very small at the time, but I worked hard to grow it. I now employ 14 people, and my accountant estimates the business could be worth about $2 million.
My wife has never worked in the company. She held a part-time job and took on more of the childcare when our children were young, while I carried the financial risk of running the business.
She now believes the business should be included in our property settlement.
The problem is that I don’t have $1 million in cash to pay her. Most of my wealth is tied up in the company.
I’m 52, and the idea of taking on a massive loan makes me feel ill.
I want to reach a fair outcome, but how can someone who has never worked in my business have a claim over its value?
Money educator Vanessa Stoykov (pictured) discusses Mark’s letter on her new vodcast, Money Dilemmas
Leading family law barrister Tahlia Ferrari (pictured) discusses the dilemma with Vanessa
Am I being unreasonable?
Mark
Dear Mark,
I can understand why you feel frightened. You have spent 20 years building a company, employing staff and taking financial risks. Now you are worried that your divorce could put everything you have built at risk.
But there is an important distinction to make. You may own and operate the business, but that does not automatically mean its entire value will be treated as yours alone when the marriage ends.
I recently discussed your circumstances with leading family law barrister Tahlia Ferrari on my new vodcast, Money Dilemmas.
Her advice should offer some reassurance.
Tahlia explained that there can be practical and creative ways to structure a divorce settlement without forcing a viable business to collapse.
“You don’t want to kill the goose that lays the golden egg,” she told me.
That is an important point. If the business fails, everyone could lose out, including your wife.
One possible approach, Tahlia explained, would be for you to retain the company while your wife receives a larger share of other assets, such as the family home or superannuation.
This does not mean you keep everything. It means considering the couple’s complete financial position rather than simply splitting every asset down the middle.
Tahlia also said she had never had a client lose their business as a result of a family law matter. That is encouraging, although every case depends on its own facts.
There is another key issue to consider: your wife’s contribution to the marriage is not measured only by her income.
The law can recognise the role she played in raising your children and managing the household while you concentrated on growing the business.
Your first practical step should be obtaining an independent business valuation, preferably from a valuer you both agree to. An estimate from your accountant may not account fully for liabilities and other factors that affect the company’s true value.
You also need to consider the cost of a prolonged legal battle.
Tahlia told me she has seen legal bills range from several thousand dollars to more than $700,000, depending on the complexity of the case and the level of conflict.
That is money which ultimately benefits neither of you.
What stayed with me most was Tahlia’s advice about making important decisions while emotions are intense.
“We need to set you up for the rest of your life, and this decision really matters,” she told me.
That is a message I wish everyone going through a divorce would keep in mind.
It is easy to focus on what feels fair in the moment, but the choices you make now may shape your financial security for decades.
My advice is to seek sound legal guidance, understand the available options and try to negotiate a settlement instead of allowing the dispute to become a costly fight.
You built a business, while your wife helped build a family. Both contributions deserve to be acknowledged.
I discuss Mark’s dilemma in greater detail with Tahlia on Money Dilemmas, including business valuations, property settlement options and costly mistakes to avoid.
If you are considering divorce, or know someone who is, this is an important conversation to watch before making major financial decisions.
Watch the full episode here.
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