Michael D. Moberly
I suspect, of the approximately 50+/-% of marriages in the U.S. today, which, for various reasons, end in divorce – dissolution, there are valuable intangible assets that could (should) be subject to valuation and division, similar to other physical-tangible assets. In this regard, on occasion, I am engaged by law firms to conduct intangible asset (operational familiarity) training, ostensibly to be applied as entrees to reengage existing or engage prospective clients. In one instance, it was a boutique law firm primarily focused on intellectual property and complex transactions, however, to my puzzlement, a senior partner of the firm specialized in divorce and dissolution of marriage.
Divorce attorney reputation as being an aggressive negotiator and tactician…
This attorney had developed a very lucrative practice (reputation) for being an aggressive tactician representing spouses in high earning households. In a significant percentage of instances, the dissolution process would involve detailed and contentious negotiations regarding the division of (primarily) tangible-physical assets, i.e., cash, properties, businesses, and portfolios of investments. Not in frequently, adult children of the parties held positions and/or played various contributory roles in one or more of the entities being contested which added onerous complexities to the asset division process.
I learned that, in a substantial percentage of instances, for various reasons, it was the exception, certainly not the rule, for a pre-nuptial agreement to be in place specifying which and how assets were to be divided, in case of divorce, death, etc. What’s more, of the couples who did have some variant of a pre-nuptial agreement in place in advance of filing for divorce, the contents of virtually all, focused on the division of tangible – physical assets with no specific-distinguishable mention of intangible – non-physical assets.
Pre-nuptial agreements minimize entrée to…
Generally, pre-nuptial agreements, among other things, serve to minimize standing and/or entrée to contest the division of assets differently from what has been stipulated. In high income earner households, when a pre-nuptial agreement does not exist, does not address intangible assets, and/or is not periodically revised-updated to identify – include (newly developed – acquired, valuable, competitive advantage driving intangibles, the circumstance may be summarily pre-disposed to protracted negotiations to resolve the conflict.
In my view, especially in circumstances where there may be multiple, revenue – competitive advantage driving intangible assets in play, absent a pre-nuptial agreement that addresses prior, current, and future intangible assets, an attorney would be remiss to not aggressively try to leverage such omissions to benefit their client.
An intangible asset strategist…
Being an intangible asset strategist and risk specialist, I found these oversights noteworthy, especially in-light-of the economic fact that 80+% of most company’s value, wealth creation, competitiveness, and sustainability today lie in – emerge directly from intangible assets. In other words, intangible assets are playing increasingly dominant roles in business development, value, revenues, competitiveness, and sustainability. Identifying, unraveling, and assessing the origins, contributors, and contributory role and value of intangible assets is precisely what I do.
Divorce attorney’s not recognizing intangible assets…
So, why are so many divorce attorneys not recognizing the practical relevance of achieving operational level familiarity with (clients) intangible assets as being integral to their practice specialization? The answer is not necessarily straight forward, but, through my lens, it is due in no small part to…
• physical – tangible assets represent the proverbial ‘low hanging fruit’ to most any negotiation, i.e., they are conventional, relatively quick-easy to recognize, acknowledge, and agree upon by parties, and can be valued with the believable presumption of objectivity, whereas
• attorneys not recognizing the relevance of seeking – securing operational level familiarity with intangible asset sides of clients’ businesses and assets relative to their specialization advancement needs, i.e., developing, extracting value from, distinguishing and assessing the contributory role and value of intangible asset inputs to create sources of revenue, competitive advantage, wealth, and sustainability.
In instances of divorce among high end household earners, there may be various investments, real properties, businesses, and partnerships in play to a marriage dissolution in which intangible assets comprise large percentages. To be sure, there are valid arguments to be made that each spouse, and perhaps even children, variously shared – contributed to making specific and legitimate contributions to familial (earnings, business) wealth particularly in contexts of social and/or relationship capital, i.e., business prowess, strategic planning, reputation, decision making, and building and sustaining relationships. Each, in its own way, legitimately contributes to the value – wealth accumulated, and are types – categories of intangible assets.
Therefore, it is prudent and legitimate to include any-all intangible assets when negotiating marriage dissolution settlements. For example, a spouse’s, or other’s contributory role played in these and other matters, as it relates to asset’s sustainability, profitability, and even resiliency, etc., can be objectively valued. In these contexts, foreseeing the value and competitive advantages of intangible assets a business may develop, acquire, and exploit at the beginning of a marriage to its dissolution, would be not be challenging to project and incorporate as a part of a prenuptial agreement prepared years previous to commencement of a dissolution of marriage.
…the person who elects not to read has little or no advantage over the person who cannot read! (Variously attributed to Samuel Clemens, adapted by Michael D. Moberly)
September 11, 2017 email@example.com ‘A business intangible asset blog where attention span really matters’!