How Are Businesses, Trusts, and Investments Divided in Divorce?

How are complex assets like businesses, trusts, and investments valued and divided during a divorce?

In a BC divorce, dividing complex assets like businesses, trusts, and investments involves specialized valuation techniques to ensure an equitable split. Under the Family Law Act (FLA), accurate valuation is essential, and in many cases, financial experts are consulted to ensure a fair process.

Key Steps in Valuing and Dividing Complex Assets

• Professional Valuation. Complex assets require professional valuation to establish fair market value. Business appraisers, forensic accountants, or financial experts are often engaged to assess the value of a business, investments, or trust interests.
• Equal Division Principle. Generally, assets acquired during the marriage are split 50/50 under the FLA, though unique considerations may apply to certain complex assets.
• Excluded Property. Assets owned prior to the relationship or received as gifts or inheritances may be excluded. Only the increase in value during the marriage is typically shared.
• Tax and Liquidity Concerns. Many complex assets, like trusts or businesses, come with tax implications and liquidity issues. These factors often influence how the assets are divided.

How Specific Assets are Valued and Divided

1. Business Interests

   • Valuation Process. Business appraisers analyze factors such as revenue, profits, market conditions, and industry benchmarks. Different methods, including asset-based and income-based approaches, may be used.
   • Division Options. Courts may award the business to one spouse with an equalization payment to the other, as splitting the business operationally is generally impractical.
   • Protecting the Business. If the business must remain operationally intact, alternative strategies, like buyouts or structured settlements, are considered.

2. Trusts

   • Valuation Complexity. Trust valuation depends on the terms, type (e.g., revocable or irrevocable, discretionary or nondiscretionary), and beneficiary structure. The value and accessibility of trust assets can vary, making valuation complex.
   • Division Approach. The spouse's interest in the trust is assessed. If the trust is excluded property but has appreciated in value during the marriage, only the increase may be shared.
   • Expert Involvement. Trust and estate lawyers or accountants often assist to navigate the trust’s specific structure and tax implications.

3. Investments and Pensions

   • Valuation of Investments. Investment accounts, stocks, and other financial instruments are typically valued based on their current market value.
   • Pension Division. Pensions require actuarial valuation to determine their present-day value. BC law allows for pensions to be divided, either by assigning a portion of the benefits or using an equalization payment.
   • Tax Considerations. Investments often carry capital gains taxes. Division methods should account for these liabilities to avoid unexpected tax burdens.

Process for Dividing Complex Assets in BC

1. Identify Excluded vs. Family Property. Determine what portion of each asset is family property (to be divided) and what is excluded.
2. Engage Experts for Fair Valuation. Specialists, such as business appraisers, forensic accountants, and actuaries, are essential for high-value, complex asset valuations.
3. Negotiate or Mediate. To maintain privacy and control, mediation or collaborative law can be beneficial for high-net-worth couples managing complex assets.
4. Consider Equalization Payments. Rather than splitting assets directly, one spouse may receive a payment that reflects their share of the marital property’s value.

Special Considerations for Complex Assets

• Liquidity. Assets like businesses or real estate holdings may not be easily divisible. Liquidation or other creative solutions may be necessary.
• Future Benefits. If one spouse has deferred benefits, such as from a trust or pension, the division may include a share of future payouts.

Seek Legal Assistance

Dividing complex assets in a BC divorce requires careful planning and expertise. For guidance on navigating business, trust, or investment divisions, Mills Family Law, a knowledgeable Vancouver family lawyer, can ensure your interests are protected. Call us at 778-945-3003 or fill out our web form to get started today.

Related FAQs

• How is property divided in a divorce in BC?
• How are high-value real estate properties handled in Vancouver divorces?
• What happens if we cannot agree on how to divide our property?

Relevant Legislation

For more details on property division, see the BC Family Law Act, Part 5, covering family and excluded property in BC.