Sunset Family Business Radio

Recap: Marriage, Divorce and Your Family Business

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Family Business Radio’s guest on June 10, 2010 was Tamar Oberman Faulhaber, family law attorney with Vernis & Bowling of Atlanta.  Hosts Meredith Moore and Pat Romboletti held a fascinating discussion with Tamar, inspired by the sobering statistic that, while just 30% of family businesses transition to the second generation, in the event of divorce, the succession rate is even smaller with only 10% of spouses continuing to operate the family business together.

One of Tamar’s specialties is that she starts with a new client by asking what the needs and goals are at the end of the process; that is, what will improve their lives once everything is over? Beginning with the end, in other words. Once those points are articulated, then the legal strategy aligns with achieving those goals, which helps avoid getting bogged down in revenge and retribution (however human those tendencies are). In this way, the focus is on the future, rather than the past.

According to Tamar, the best thing that you can do for yourself if you are contemplating a divorce is to get educated on Georgia law and how it impacts divorce. The more you are informed about the particularities of Georgia law, the better off you will be. For instance, if someone already has a business when first getting married and there is a subsequent divorce, then only the performance of the business during the marriage (its growth or decline) is figured into the divorce settlement. Also, in Georgia, property is divided according to what is equitable, which means what is fair and not necessarily that the assets are divided in half. For alimony and child support, income is considered to be gross income from any and all sources.

Common mistakes Tamar has seen with divorces in family businesses.

• Lack of pre-planning. When there’s a new husband or wife, whether working or non-working, introduced into a family business, there are important business aspects to navigate around and through.
• To operate in panic-mode. She has seen people who go into shellshock and completely shut out their lawyers, not even sharing relevant information. “The #1 asset you have in court is your credibility,” she said. The greater the transparency, the greater the credibility.
• The unpredictability of  juries—(and in Georgia—you could easily find your fate I in the hands of a jury). While judges know the intricacies of what works with divorces, juries do not necessarily. They are notorious for thinking it’s all so easy—“just give him half of the business…”—and not understanding the impact on the business. Besides, juries are often expensive and are risky for both sides. And yes—the talent of your lawyer really comes into play with juries.

A typical trusted advisors team that Tamar puts together might include the client’s CPA, a forensic CPA, financial advisors, occupational therapist (to assess the ability of a person to earn a living), and a business evaluator-appraiser. “It all depends on the circumstances,” she said.

And what can you do before it gets to the divorce stage? When first entering into a marriage, it’s not just about flowers and china patterns. Be clear-eyed about the family business. Ask yourself: what is the worse thing that can happen? Talk about it, matter-of-factly and develop workable solutions. Again, think in terms of the end—but with this significant change: what do you want out of the marriage?

This entire conversation is available as a download from our website. Please do so. Tamar has a practical, pro-active and positive approach to handling divorces that we know you will appreciate.

Tamar Oberman Faulhaber, Esq., Vernis & Bowling of Atlanta, LLC, 7100 Peachtree Dunwoody Road, Suite 300, Atlanta, Georgia 30328, Phone: (404) 846-2001, Fax: (404) 846-2002, Email: TFaulhaber@Georgia-Law.com, Website: www.Georgia-Law.com