AMM Blog

Welcome to the AMM Law Blog, a tool to help you keep up to date on current legal developments over the broad spectrum of our practice areas.  We welcome your comments and suggestions to create a dynamic forum that will be of interest to readers and participants.

The divorce is final. No more deadlines to meet, papers to file or waiting time for all of it to be over. Now that the hard part is behind you, it is time for a fresh start. However, there might be a few things remaining for you to do before you can officially move on to the next chapter.

The following is a checklist of things that you might still need to do after your divorce is finalized:

  • Review your divorce decree and create a list of things that you and your former spouse still need to satisfy. It could help if you create a calendar to visualize when certain things are due such as alimony/child support payments or when certain things are scheduled to terminate.

  • Divide investment assets and retirement plans according to the terms of the divorce settlement agreement. Dividing a 401(k) or pension will require a Qualified Domestic Relations Order (QDRO). A QDRO is a court order telling the administrators of the retirement plan or the 401(k) how to divide the account. Most QDROs need to be drafted by an attorney or a CPA, signed by you and the former spouse, filed with the court and signed by a judge. If you are the recipient of a portion of your former spouse’s retirement account and you need the QDRO, it is imperative that you follow-up with your attorney to ensure the implementation of the QDRO is done in a timely fashion.

  • Update all beneficiary designations with your workplace retirement plans, investment accounts, retirement accounts, trusts, annuities, life insurance, bank accounts, credit cards and any other place you might have listed your former spouse as a beneficiary.

  • Obtain your own insurance coverage for your health, automobile, home and life insurance.

  • Review your credit report to cancel any joint credit cards and close any joint accounts. Also, look through your credit report for any joint debts that you were not aware of.

  • Update your estate planning documents including your will, any trusts, durable and health care power of attorneys.  If you never had a will, this is a good time to consider making one.

  • Change your emergency contacts with your workplace, doctors, health club, etc.

  • If you changed your name back to your maiden name, you will need to notify different agencies. Most importantly, you will need to change your name on your social security card, passport and your driver’s license. You should also consider changing your name on your social media accounts. 

  • Consider changing your passwords to any emails or online accounts (i.e. Paypal, Facebook, etc.) that you might have shared the access information with your former spouse.  Confirm that your spouse isn’t either a signer or authorized user on any of your online accounts.

  • After the divorce, your financial circumstances have likely changed. You should consider developing, by yourself or with the help of a professional, a new financial plan for your new life.

Getting these things done might seem a burden now, after all you have been through, but it is necessary to avoid trouble later on.  It is better that you go through this checklist and handle these issues as soon as your divorce is finalized to prevent possible future complications.

Once these things are done, you get to close that chapter and enjoy your new life with no worries about unhandled matters left over from the divorce.

One of the trickiest issues we deal with in business control disputes relates to the impact and management of personal guaranties on the part of the individual shareholders/members.  A personal guaranty can be an impediment to a transaction among the shareholders consolidating ownership, an impediment to the withdrawal of a shareholder/member, or even a trigger of default under the terms of financing agreements in place between a business and its bank.  Managing the impact and expectations of business owners as to a personal guaranty should be considered in the early stages of any potential transaction.

In nearly every small business banking relationship, the bank requires personal guaranties on the part of business owners.  Personal guaranties, often even the more overbearing “spousal” personal guaranties, are the norm.  Of course, the purpose from the bank’s perspective is to increase the level of security against repayment.  The individual terms of the personal guaranty are governed by the language of the agreements. 

The net effect of a personal guaranty is to, in effect, pierce the corporate veil and render the guarantor liable for the debt to the bank (or other creditor party to the guaranty agreement).  In this way, not only does the bank obtain another source from which it can recover, but also dramatically impacts its practical bargaining power.     Often we see shareholder agreements including and incorporating indemnification provisions which reference those situations in which a shareholder/member has guarantied an obligation to a lender.  The value of such indemnification provisions is suspect given that the bank is always going to look to the path of least resistance to recover the extent of its obligation.  In a guaranty the company is the primary obligor to the creditor.  It is the primary obligor’s default which leads to exposure under a personal guaranty.  In that instance, the company is not likely in a position to indemnify as its assets are likely devoted to the repayment of the primary guarantied obligation.

The best and most frequent approach to a personal guaranty in a business control dispute is to secure the release of the guaranty by the bank or other creditor as part of the transaction.  Certainly, if the debt is retired in a third party sale, accounts are closed and the issue is moot.   Not necessarily so in an ownership consolidation transaction involving a transfer among existing owners or members, or where one or more shareholders/members leaves the business.  In that case, the business may continue and banking relationships may remain unmodified.  The bank is not required to release the guaranty.  Even further, under certain circumstances and agreements, a transaction may constitute an event of default of the credit arrangement.  Management of the personal guaranty becomes an important part of the deal.

It is obviously always better to secure a release of a guaranty contemporaneous with a transaction.  If that course of action is unavailable, indemnity is the only other option.  In such cases, indemnification should flow from both the company and individuals as, if the guaranty is ever an issue, it is likely the Company’s ability to pay in the first place, which gives rise to creditor’s pursuit of the guarantor.    

Blogger Bios

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