Divorce – Dissolution of Marriage; What About The Intangible Assets?

There’s little question, in many U.S. marriages that result in divorce or dissolution…there may be a reasonably successful business or professional practice involved.  This may include a spouse who has played a supportive, contributory, perhaps significant – beneficial role.

In these circumstances, it should come as no surprise, to learn…valuable intangible assets could – should be in play and subject to valuation, and possibly (monetary) division as part of a negotiated settlement, ala division assets.  For example, not in frequently, spouses, adult children, etc., have held positions and/or played various contributory (intangible) roles, sometime unpaid, in a business entity now being contested.

What are intangible assets – https://kpstrat.com/wp-admin/post.php?post=12170

Circumstances such as this should not be construed…as being shockingly dissimilar to the (presumably equitable) division (distribution) of physical-tangible assets in divorce – dissolution proceedings, i.e., children, property, vehicles, cash, pets, etc.

On occasion, I have been engaged by professional services firms to…conduct intangible asset (operational familiarity) training.  Ostensibly the training outcomes are to be applied as entrees to reengage existing or engage prospective clients about (new, additional) services to be rendered, ala their intangible asset.

After all, it is an economic fact that 80+%…

  • of most company’s value, sources of revenue, competitiveness, and sustainability lie in – emerge directly from intangible assets, primarily variations of intellectual, structural, and relationship capital.

One example of (intangible asset) training I conducted…for a boutique law firm in a large mid-south city, which was primarily focused on intellectual property and complex transactions, however, to my puzzlement, a senior partner of the firm had developed a very lucrative practice in divorce and dissolution of marriage.

Attorneys – law firms that specialize in (marital) divorce – dissolution of marriage…not infrequently, develop – acquire reputations-expectations for being aggressive negotiators and tacticians. In this instance, representing parties in high earning households.

I respectfully endeavored to engage this attorney and his paralegal team…in both the basics and nuances of intangible assets and their potential relevance to unraveling – assessing the parties contributory role and value of intangibles.

In a not-significant percentage of instances…the parties seeking a divorce, including attorneys, overlook, haphazardly investigate, and/or exhibit outright dismissiveness regarding any ‘jointly developed – produced’ intangible assets as constituting a viable – legitimate product of their marital union which has an assessed value.

Instead, the parties, due in large part to their unfamiliarity with the intangible asset side(s) of business…rather blindly assume the dominant focus of negotiating the valuation-division of their assets to be primarily about what’s tangible – what’s physical.

In not inconsequential percentage of instances of high net-worth marriages…for various reasons, it is the exception, not the rule, for a pre-nuptial agreement to be in place specifying which and how, primarily tangible 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…not infrequently, the content focused primarily, if not wholly, on the division of tangible – physical assets with no specific-discernable mention of intangible – non-physical assets that could be in play.

Obviously, one intent of executing a pre-nuptial agreement is to minimize standing and/or entrée…for contesting the division of assets differently from what has been stipulated in the agreement.  For high income earning households, not recognizing newly developed – acquired intangibles, the contestants may be pre-disposed to protracted negotiations to resolve the conflict especially with respect to the value – ownership rights – division of those intangibles.

In circumstances where there may be multiple, revenue – competitive advantage driving intangible assets in playabsent 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.

As an intangible asset strategist…I find such oversights especially noteworthy since intangibles 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 operationally familiar with the contributory role and value of intangible assets…are obliged to obtain familiarity to make intangibles integral to their practice specialization when – where the circumstances are evident, e.g.

  • 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 intangible asset sides of clients’ businesses and asset portfolios relative to their specialization needs may not be serving their high net worth clients well as they should.

In divorce – dissolution proceedings among high income households…there may be various investments, real properties, businesses, and partnerships in play in which intangible assets comprise large percentages of those assets assessed value.

Through my lens, there are reasonable 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.

For example…business prowess, strategic planning, reputation, decision making, and building and sustaining relationships, etc.. Each, in its own way, arguably, may have legitimately contributed to the value – wealth accumulated as types – categories of intangible assets.

Therefore, it is prudent and necessary to avoid excluding any – all intangible assets…when negotiating marriage divorce – dissolution settlements.

Again, for example, a spouse’s, or other’s contributory role…insofar as it relates to asset’s sustainability, profitability, and even resiliency, etc., can be objectively valued. In these contexts, foreseeing the (potential) 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 negotiate.

Michael D. Moberly  September 11, 2017  St. Louis  [email protected]  the ‘Business Intangible Asset Blog’, since May 2006, 650+ published posts ‘where one’s attention span, businesses intangible assets, and solutions converge’.

Readers are invited to explore other blog posts, video, position papers and books at https://kpstrat.com/blog


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