Does my husband's ex wife still have any rights to income from his business beyond her support if he hasn't bought her out yet?

Asked about 5 years ago - Somerville, NJ

My husband owned his own professional business for 1 year before he married his ex wife. they were married for 20 years, she was a stay at home mom, and contributed nothing to the business except for her decorating help during the Christmas season only and physically paying some of the bills (not proper bookeeping). Their divorce agreement requires him to buy her out of the business, at a set dollar amount, no later than the sale of the marital residence, "at which time all rights and responsibilities of the business will go to (him) alone". (They wrote the agreement themselves without an attorney). The house has been on and off the market for 21 months and not sold. He is planning to use all of his share of the proceeds to buy her out. The agreement also states that if he were to die before the buy out she would get the entire business. She is claiming that until he buys her out, she is still "co-owner" and is entitled to half of the business income and has a say in how the business income is spent. He is an S corp and was always sole shareholder, President and CEO. We are saying that her entitlement to the business income ended the day they were divorced and she is only entitled to the agreed to buy out money and her current support ( which, with the mortgage payment he's making for her each month, is ironically is probably about 80% of the montly business income anyway). Does she still have any rights to the business income until he buys her out?

Attorney answers (1)

  1. David Perry Davis

    Contributor Level 17

    Answered . I'm not against the idea of people writing their own agreement, especially when it's a short term marriage and there are no kids, but the facts you're giving are a perfect example of why saving a buck during a divorce can backfire -- "penny wise, pound foolish." Having an attorney go over an agreement and make sure it doesn't contain potentially explosive ambiguities isn't expensive - it can be literally just a couple hundred bucks (if the two of you are waiving discovery and only having an attorney review the agreement for clarity and are willing to sign a "limited representation" retainer agreement to this effect).

    I'd need to see the agreement they wrote to really answer, but based on the basic law, you're correct. If they distributed the business and she has a set entitlement to be paid when the house sells and there's a support component that he's paying (was the support properly worded - did it address Crews and the marital lifestyle issue?) then I don't see an argument that she's additionally entitled to income, especially if he's the sole shareholder... But again, it could come down to the wording of the agreement. If she files a motion and it's not clear, the court will probably order a hearing, which will end up costing far more than having the agreement drafted properly would have cost.

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