Lawyer encourages trusted advisors to step in to help couples resolve issues before they go to court
How can advisors help married clients who are divorcing if there’s a family business involved?
Nathalie Boutet, owner of Boutet Family Law and Mediation in Toronto, told Wealth Professional she is seeing two kinds of situations. The first is where one person is sole shareholder or runs the business. The second is where both members of a couple are shareholders or active in the business – which is where she thinks advisors can best help.
“I think advisors can be very helpful because the couple is confused as to how to transition from being married and co-running and co-owning the business,” she said. “I’ve seen a variety of situations. Some people are getting along really well and deciding to continue running the business. But, then, it goes right down the spectrum. Others may be getting along well, but breaking the business in two, so they each can run one branch. Or you can have one person exiting and leaving the other to run the business.”
Boutet said it helps if advisors can help the couple solve the situation – since couples who end up fighting and going to court can invest too many years and dollars in hiring lawyers instead of investing in the business.
“That’s not helpful for anybody,” said Boutet, noting advisors who understand the family and business may also understand the couple’s emotions, especially if there’s fear involved. There is often fear if the business is an important, or the biggest, asset in the portfolio or is the couple’s main income.
A trusted advisor can sit down with the couple to help it reassign what the exiting spouse did or transition what needs to be done. If the advisor is more aligned with one partner than the other, which makes that latter uncomfortable, then the advisor could also offer to help that partner find another advisor.
“Lawyers don’t need to be involved if there’s maturity and cooperation between the separating spouses,” said Boutet.
However, every situation is different. Boutet recalled one bitter divorce where the wife walked out when the husband changed a business password without consulting her. She was the customer liaison, so the business was disrupted. It took a couple of years to get the business back in order, which Boutet believed could have been avoided if the couple worked with a trusted advisor.
Recently, another couple had been running the business together, but the husband had an addiction. The wife would enter the business when he wasn’t there, so she could keep her side running.
“I wouldn’t recommend that if there’s physical danger,” said Boutet, but the couple kept the conversation going and he’s now buying her out without going to court. “They were able to maintain the business and I believe their corporate accountant was very helpful, so they kept the information flowing without anyone being nervous that information was withheld. I think there were also advisors in the background who were very level-headed.”
Boutet said having that kind of support can help the couple move past the emotion to the best resolution.
“What I’m saying is don’t get into the anger with the clients. That’s not helpful,” she said. “They can speak to the lawyers, but they should also have a flow of information with the advisors and not fuel the conflict.”
Advisors can also help if one spouse owes the other money – such as a big equalization payment – which the business can’t pay right away without draining it. The advisor can work with the couple to look at the debt and liquidity, and figure out a payment plan without causing undue hardship to either party.
The lawyer still has a place.
“If someone is doing something to damage the business – not taking information out or not providing passwords to the person who’s responsible for communication or things like that – then they should get advice from a lawyer because if it’s too bad, they’ll need the protection of the court,” she said. “But, that’s not the majority of the cases. They usually just need someone to cool things down.”
“The advisors are really close to the clients. They know the ins and outs of their finances and their goals,” said Boutet. “So, if the advisors can get in there and provide sound and non-emotional advice to the people that are running the business when they’re separating, that’s very helpful.”
Originally written by Noelle Boughton on Wealth Professional.