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Can an ESOP Help My Divorce Settlement?

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BLOG DM How can business valuators help my divorce case PHOTOIf you are getting divorced and own a business worth over $5 million, you might find that when it comes to marital assets, you have trouble satisfying the equitable distribution demands of your spouse. Especially with a booming business, it can be hard to come up with the liquid assets specified by your divorce.

Options if You Don’t Have Cash on Hand

  1. Borrow money from the bank
  2. Establish a long-term payment plan
  3. Form an Employee Stock Ownership Plan, or ESOP.

An ESOP is a specialized employment benefit allowing an employer to contribute cash or stock to a trust for employees. This money is then allocated to employees in proportion to the employee’s compensation.

A simple explanation is that you are selling an interest in your company to your employees. This allows you to raise the cash you need to pay off your spouse without allowing your spouse to own part of your company. An additional benefit is that when you create an ESOP, the funds put into it are no longer owned by you; the ESOP itself is the owner. This means that creditors cannot go after it, and neither can your spouse.

Meet with a Denver Divorce Lawyer to Discuss Your Options

ESOPs are not the be-all-end-all of marital asset divisions for successful businesses. Only consider an ESOP if you expect your business to continue experiencing healthy growth and increased profits. As with any complicated issue involving divorce and division of marital assets, you should always speak with a Denver divorce attorney to explore all of your options.