Valuing Partnerships and Professional Practices in a Divorce

How is a share in a partnership valued in a divorce? How are professional practices valued in a divorce?

People facing a divorce are often concerned about their financial futures. One such financial concern regards how shares in a partnership are valued in a divorce. Parties may also wonder how professional practices are valued in a divorce.

Say, for example, that Taylor and Alex have shares in a financial management business. Also, Taylor owns a medical practice. Now that they are divorcing, Taylor and Alex want to know how their assets will be divided, and specifically, how the shares in the financial management business and the medical practice will be divided.

In Massachusetts, assets are divided on an equitable basis.[1] A judge’s decision as to what is equitable will not be reversed unless “plainly wrong and excessive.”[2] A court may assign all or any part of the estate of the other, including, but not limited to, retirement benefits, military retirement benefits, pension, profit-sharing, annuity, deferred compensation, and insurance.[3] The definition of estate is broadly defined, however.[4] In fact, Massachusetts courts allow the division of premarital property and post-marital property on a case-by-case basis.[5] With regard to the division of shares in a partnership, courts will generally interpret G.L. c. 208 § 34 to include partnership assets within the scope of the possible assets that may be divided in a divorce.

Shares of a partnership and business practice interests are part of the marital estate and may be valued by a valuation expert to assess the market value of the asset. A professional practice, like a medical practice, is considered in Massachusetts to be subject to division during the divorce process.[6] Massachusetts courts may order one of the parties in a divorce to relinquish their share of ownership in the business and receive payment either as a lump sum or in a series of installment payments. A court may order that the business be sold and the spouse receives the profits. One spouse could buy-out the business from the other spouse or offset the business with other assets.

During the valuation process, there are generally three valuation methods: the market approach (estimates business value by comparing the business to a similar business that is recently sold); the income approach (estimates business value by converting economic benefits into a value); and the asset approach (estimates business value based on the assets and liabilities of the business).

In the above example, Taylor and Alex have several possible options afforded to them. A Massachusetts Probate and Family Court will divide the estate equitability based upon the parties’ needs and what is most equitable based on their individual case.

Want to speak with a divorce lawyer about your case? Shedule a free consultation with our office and you’ll learn how the law applies to your facts and circumstances. Call 978-225-9030 during regular business hours or complete our contact form online, and we will get back to you at our earliest opportunity.

[1] Adams v. Adams, 459 Mass. 361, 371 (2011) (citing to Bowring v. Reid, 399 Mass. 265, 267 (1987))

[2] Adams, 459 Mass. at 371 (citing to Redding v. Redding, 398 Mass. 102, 108 (1986))

[3] M.G.L. c. 208 § 34

[4] Rice v. Rice, 372 Mass. 398, 400 (1977) (holding that an estate is all property to which the party holds title, however acquired.)

[5] Moriarty v. Stone, 41 Mass. App. Ct. 151, 156 (1996) ; Brower v. Brower, 61 Mass. App. Ct. 216, 218 (2004)

[6] Goldman v. Goldman, 28 Mass. App. Ct. 603, 613 (1990).

Prenuptial Agreement Requires Meaningful Choice in Giving up Rights During the Marriage

Generally, in order for an antenuptial agreement, commonly known as a prenuptial agreement, to be considered valid and enforceable in Massachusetts, the agreement must meet the following elements:

  • in writing and signed by the parties;
  • signed voluntarily and under no signs of duress or fraud;
  • made after full disclosure of the parties’ assets;
  • the prenuptial agreement must be fair and reasonable, and enforcement must not be against countervailing equities;
  • the parties must have adequate opportunity to consult with independent counsel;
  • the parties must understand and clearly indicate the rights which they are contracting away; and
  • the parties must not relieve themselves of their legal obligations during the marriage through the agreement.

One ground for contesting a prenuptial agreement is on the basis of an invalid waiver of marital rights, such as the right to alimony or property. In essence, this means that each party must have the ability to exercise a meaningful choice in giving up his or her rights under the marriage. Each party must understand what rights they are giving up, and each party must exercise his or her choice to do so.

In an important recent case, Eyster v. Pechenik, the court invalidated a one-page prenuptial agreement, drafted by the husband and signed by the parties, in which the parties waived their right to the property of the other spouse. Eyster v. Pechenik, 71 Mass. App. Ct. 773 (2008). The agreement made no mention of alimony or support. The court invalidated the agreement, holding that no meaningful waiver was present. In doing this, the Court also contrasted the facts of the case from the seminal case of  DeMatteo v. DeMatteo, 436 Mass. 18 (2002). The court stated:

“In DeMatteo, the waiver was clear and comprehensive… In the present case, the agreement contained no waiver of the wife’s rights. In DeMatteo, both parties were also represented by independent counsel…Here, neither side consulted a lawyer. The significance of the legal advice in DeMatteo was noted repeatedly by the court.…Also unclear is the parties’ understanding of the terms of the agreement and their effect, and the parties’ understanding of their rights in the absence of the agreement. See DeMatteo, 436 Mass. at 29, 762 N.E.2d 797. This was not “the case of [an] agreement[ ] concluded without the assistance of independent legal counsel for each party, [in which] the agreement states, in language easily understandable by an adult of ordinary intelligence with no legal training, … the nature of any rights or claims otherwise arising at dissolution that are altered by the contract, and the nature of that alteration.” ALI Principles § 7.04(3)(c). Rather, the agreement contains no discussion of marital rights nor how such rights are altered. Furthermore, the provisions of the agreement are sketchy. Assets acquired after marriage other than gifts or inheritances are not clearly addressed or resolved by the one-page agreement, particularly when the document is read from a lay person’s perspective.” Eyster, at 784-785.

One infamous recent case involved the widow of the late John Belushi, who remarried and moved to Martha’s Vineyard. Pisano v. Pisano, 87 Mass. App. Ct. 403 (2015). Prior to her second marriage, she and her husband executed a prenuptial agreement in which they waived their rights to the other spouse’s property in the event of a divorce. Although the agreement referenced alimony, it did not include a specific waiver as to the alimony clause. The husband claimed that the agreement was invalid and that he did not specifically waive his rights to alimony, as “the agreement contains no waiver of the parties’ rights to alimony upon divorce, that the waiver of the parties’ claim to the other’s separate property does not constitute a waiver of the parties’ alimony right on income from the separate property, that the judge failed adequately to distinguish between a waiver of a property interest and a waiver of alimony (which constitute two separate and distinct rights), and that the ruling resulted in effect as an unknowing and involuntary implied waiver of his alimony rights under G.L. c. 208, § 34, contrary to established law and the public policy of the Commonwealth[.]” Pisano, at 411.

The court disagreed with the husband, holding that the overall waiver of rights in this case was sufficient to waive alimony. “While the premarital agreement, as the husband states and as the judge noted, does not contain a waiver of alimony per se, against the backdrop of the parties’ intent to protect their separate property (including income streams), and the above discussed language of paragraph 7 as it pertains to awards of alimony, we think the judge reasonably and properly construed the agreement to limit the husband’s claim for alimony in the manner we have previously described. We also agree with the judge that the modification of rights under G.L. c. 208, § 34, does not, in the circumstances, act as an “unknowing waiver” of the husband’s alimony rights.” Pisano, at 414.

In another unpublished case, Roof v. Abelowicz, the parties entered into a prenuptial agreement: the husband wanted to preserve his estate for his minor children from a previous marriage, while the wife wanted to retain her interests in real estate. Roof v. Abelowicz, 91 Mass. App. Ct. 1112 (2017). At the time, the parties’ assets were roughly equal, but by the parties’ divorce, the husband’s assets had significantly appreciated. The wife sought to invalidate the agreement and claimed that she was not fully aware of her rights at the time of signing. The court disagreed and held that the agreement was valid. “In this case, the terms of the agreement provide guidance as to the parties’ understanding. The tenth clause of the agreement contains an explicit waiver provision, providing that each party entered into the agreement with advice of counsel of their own choosing. Additionally, both the wife and the husband had been previously married and divorced, and, therefore, had previous experience with their rights under the law,” the court noted, also bringing up an email by the wife in which the wife clearly stated that she understood what she was contracting to. Roof, at 2.

Want to speak with a divorce lawyer about your case? Shedule a free consultation with our office and you’ll learn how the law applies to your facts and circumstances. Call 978-225-9030 during regular business hours or complete our contact form online, and we will get back to you at our earliest opportunity.

 

Massachusetts Long Arm Statute in Divorce and Custody Cases

Jack and Jen were married in Massachusetts and lived together as husband and wife for four years, during which they had one child, Jonah. Jen has left the marital home on her own. Jack wants to file for divorce, and he also wants custody of Jonah and wants Jen to pay child support. The wrinkle? Jen has just moved to California, and Jack is unsure how to begin the process. Should he file for divorce in Massachusetts, or consider hiring an experienced family law attorney in California? And how might the child support order be affected by the parties’ continental divide? We’ll need to look to the Massachusetts long arm statute to see if Massachusetts has personal jurisdiction over both parties before proceeding.

First, Jack may file the divorce action in Massachusetts based on Jack’s domicile, as he has lived in Massachusetts for more than one year. In addition, the cause of action for the divorce also took place in Massachusetts. In order to serve Jen with process, Jack may turn to two resources: Rule 4(e) of the Massachusetts Rules of Domestic Relations Procedure, and the Massachusetts Long Arm Statute.

Rule 4 (e) deals with service of process in divorce cases. Service of process allows the defendant proper notice of the divorce action against him or her. The section of the rule authorizes service of process in the following manner:

When any statute or law of the Commonwealth authorizes service of process outside the Commonwealth, the service shall be made by delivering a copy of the summons and of the complaint: (1) in any appropriate manner prescribed in subdivision (d) of this Rule; or (2) in the manner prescribed by the law of the place in which the service is made for service in that place in an action in any of its courts of general jurisdiction; or (3) by any form of mail addressed to the person to be served and requiring a signed receipt; or (4) as directed by the appropriate foreign authority in response to a letter rogatory; or (5) as directed by order of the court. [1]

The Massachusetts Long Arm Statute [2] also provides Jack with an important remedy: it describes the circumstances under which a Massachusetts court may exercise jurisdiction over a person who has engaged in certain business or actions in the Commonwealth. Personal jurisdiction, which allows the court to bind a defendant to the court’s orders, is available under the Massachusetts Long Arm Statute in divorce cases. Specifically, the statute applies to anyone who was “maintaining a domicile in this commonwealth while a party to a personal or marital relationship out of which arises a claim for divorce, alimony, property settlement, parentage of a child, child support or child custody; or the commission of any act giving rise to such a claim[.]”[3]

The same section of the Massachusetts Long Arm Statute will apply to Jack’s claim for child support against Jen. So long as Jack continues to live in Massachusetts, he may petition the Massachusetts Probate and Family Court for child support, and the Court may exercise personal jurisdiction over Jen.

Should Jack later seek a modification of the child support order (or any alimony order which may be granted), he may use the next section of the Long Arm Statute. Section (h) of the statute provides for personal jurisdiction over a defendant “having been subject to the exercise of personal jurisdiction of a court of the commonwealth which has resulted in an order of alimony, custody, child support or property settlement, notwithstanding the subsequent departure of one of the original parties from the commonwealth, if the action involves modification of such order or orders and the moving party resides in the commonwealth, or if the action involves enforcement of such order notwithstanding the domicile of the moving party.” [4]

Another important law to aid Jack with the enforcement of any child support order he may receive is the Uniform Interstate Family Support Act. First, this law provides the court which issues the order with continuing jurisdiction:

A court of a State that has made a child support order consistently with this section has continuing, exclusive jurisdiction over the order if the State is the child’s State or the residence of any individual contestant or the parties have consented in a record or open court that the tribunal of the State may continue to exercise jurisdiction to modify its order, unless the court of another State, acting in accordance with subsections (e) and (f), has made a modification of the order.[5]

Second, the Uniform Interstate Family Support Act provides that a state’s child support order will receive the “full faith and credit” of every other state—in other words, other states will be able to enforce the order. In Jack’s case, this gives the California courts the power to enforce any child support order rendered by the Massachusetts courts.

What to speak with a family law attorney about your case? Schedule a free consultation with our office by calling 978-225-9030 during regular business hours or complete our contact form online, and we will get back to you at our earliest opportunity.

[1] Mass. R. Dom. Rel. P. 4(e)

[2] Mass. Gen. Laws ch. 223A, s. 3

[3] Mass. Gen. Laws ch. 223A, s. 3(g)

[4] Mass. Gen. Laws ch. 223A, s. 3(h)

[5] 28 U.S.C. 1738B

Stages of Development and the Custody Order

How do the stages of child development impact the custody order?

Whether a child is an infant, an eight-year-old, or a teenager, the court will establish custody orders with the “best interest of the [dependent] child” as the priority and focus. [1]This standard, known as “best interests of the child” standard, is established by courts to make decisions for the child’s betterment, from the child’s perspective. Id.

In Massachusetts, the rights of the parents to the custody of their minor children are generally equal.[2] Courts are concerned with the happiness and welfare of the child, including understanding the ways in which the child’s present or past living conditions affect his or her physical, mental, moral, or emotional health. Id. If custody of a child is contested, the parties should submit a custody implementation plan setting forth the details of their shared custody including, but not limited to, the child’s education, the child’s health care, the parental procedure to resolve disputes between the parties, the parties’ visitation periods, and more. Id. The court may accept the plan established by the parties, modify it, or reject it completely.

Although it is possible that one parent may “offer some extraordinary advantage to the child that makes [a change in the child’s living arrangement] worth the risk,” Massachusetts courts have held that “if the child has been living with one parent for some time, the child’s needs are being adequately met under that parent’s care, and that parent is capable of continuing to care for the child, it is not in the child’s best interests to disrupt that successful arrangement.”[3] If, however, a court determines that it is in the best interest of the child to re-arrange the child’s legal and physical custody, a judge may do so.

As a result, the stages of a child’s development are often varied and complex. No two children are alike, and judges will look to the facts of each case to determine the best interest of the child, including the theoretical and actual milestones of a child’s development and how each parent could impact that child’s growth, happiness, development, and welfare.

If you have any questions about custody issues, you may schedule a free consultation with our office. Call 978-225-9030 during regular business hours or complete a contact form here, and we will get back to you at our earliest opportunity.

[1] Mass. Gen. Laws. ch. 208 § 28

[2] Mass. Gen. Laws. ch. 208 § 31

[3] In re Custody of Kali, 439 Mass. 834, 844 (2003)

Valuing Automobiles and Personal Items During Divorce

During the divorce process, most parties want to ensure that the end of the marriage won’t result in the end of their preferred lifestyle. How are automobiles treated during property division? How are other personal items of value, such as jewelry and antiques valued in a divorce?

Say, for example, that Alex and Jamie were married for twenty years and have filed for divorce. They appreciate their belongings and want to know how their material items will be divided. Alex is a collector of antiques and also owns two expensive automobiles. Jamie drives the family van and also owns jewelry. Because they cannot agree on the division of their property, they want to know how the antiques, vehicles, and jewelry will be divided by a Massachusetts family court during the divorce process.

If the parties in a divorce agree to their own division of property, the courts in Massachusetts will usually support the fair and reasonable distribution of their agreement related to the property division. However, if the parties cannot agree, Massachusetts courts will make the determination as to how assets should be divided. This division is known as an “equitable division.” Equitable does not necessarily mean that each party is entitled to “equal” or 50/50 division of assets. Instead, the courts will use several factors to determine the fair division of assets. Although the list is not exhaustive, courts determine what is fair by examining the following factors[1]:

  • length of the marriage;
  • conduct of the parties during the marriage;
  • age, health, station, occupation, amount and sources of income, vocational skills, employability, estate, liabilities and needs of the parties;
  • opportunity of each for future acquisition of capital assets and income;
  • amount and duration of alimony;
  • present and future needs of dependent children of the marriage; and
  • contribution of each of the parties in the acquisition, preservation or appreciation in value of their respective estates and the contribution of each of the parties as a homemaker to the family unit.

If one former spouse believes that she is entitled to more property than a judge initially awarded, another judge may order that without a clear and adequate explanation for the amount of property awarded between the parties, the division of property may not be equitable.[2]

If they cannot agree, Alex and Jamie would experience the Massachusetts court-imposed “equitable division” standard. Their twenty years married, their conduct during the marriage, and the personal items and property shared between them, including the antiques, cars, and jewelry, would be evaluated and divided.

The value of the personal items is dependent on the circumstances which arrant division of property in recognition of the marital partnership concept [. . .][3] Therefore, Alex’s and Jamie’s tangible property could be valued at a fair market value rate, which means that the amount that the property would sell within an open market. If the amount of an item cannot be determined, a judge could look to professional appraisals, receipts, and other material documentation to reach the property monetary amount.

If you have any questions about the divorce process or assignment of property, you may schedule a free consultation with our office. Call 978-225-9030 during regular business hours or complete our contact form online, and we will get back to you at our earliest opportunity.

 

[1] Mass. Gen. Laws ch. 208 § 34

[2] Bowring v. Reid, 399 Mass. 265, 268 (1987) (remanding a decision so that a judge may articulate the rationale for the Section 34 alimony and property awards, especially because the plaintiff alleges that the defendant was unfaithful and abusive and the plaintiff’s contribution to the marriage, her needs, and her sources of income were not considered.); See, Redding v. Redding, 398 Mass. 102 (1986).

[3] Davidson v. Davidson, 19 Mass.App.Ct. 364, 370 (1985) (citing to Inker, Walsh & Perocchi, Alimony and Assignment of Property: The New Statutory Scheme in Massachusetts, 10 Suffolk U.L.Rev. 1, 8 (1975))