Over the last several weeks, via emails, attending webinars and otherwise, I have frequently heard that the coronavirus may create significant estate planning opportunities. In fact, while writing this post, I Googled “coronavirus and estate planning opportunities” and got 544 million results in .46 seconds. While I am sure that not all of the results were on point, the first several pages of results certainly were. I am sure that this is music to the ears of our Trust and Estates department. Aside from certain very technical and some less technical tax reasons given for the estate planning opportunities, another major reason is depressed asset values caused by the pandemic and slowing economy.
For that same reason, I am sure that there will be people out there in a marginal to unhappy marriage that will opt for the opportunistic divorce when the value of their business is down and their income is down. While the impact of the coronavirus on businesses and the economy in general is too early to gauge at this point, the one universal truth is that everyone is impacted in one way or another. Unlike the crash in 2008 which hit certain sectors worse than others, there are few businesses that are truly spared now. Unemployment numbers approach 30 million. Even with PPP loans, CARES act and other government relief, many businesses may never re-open their doors. Will the businesses that stay open/re-open ever be the same, and if so, how long will that take? For those business owners who think that they are down, but not out, many will see this as an opportunity to end an unhappy marriage at the lowest possible cost in terms of payment to their spouse in the form of the value of the business if not alimony.
Even those businesses that may be surging now (toilet paper, Clorox wipes, for example), is their enhanced business sustainable, and if so, for how long? For businesses that were able to pivot from the core business to produce wipes, masks, hand sanitizer, etc., will their core business still be there when the demand for these alternative products/income streams still be there. Will non-titled spouses see the surge in their spouses business and think that this may be the time to get out when things are at their apex?
The question of exactly how the pandemic will impact value is both presently unknown given that we remain in the throws of the pandemic, and ultimately be determined on a case by case basis. Will it be a blip on the radar screen that gets attributed little weight, or will it be life and business changing? Again, facts and circumstances, and industries, and locations, etc. are going to matter more now than ever before when valuing a business. Gone are the days when someone can look at some tax returns and give a back of the envelope calculation that is “in the ballpark” for discussion purposes. Experts are going to have to dig in to the specific industries, actual impact, and other economic factors, perhaps in more detail than ever before.
That all said, certainly, we saw opportunistic divorces after 2008. I am sure that we will see them again in 2020 and 2021. Just as people are going to seize on estate planning opportunities caused by low asset values, so too will people seize on divorce opportunities caused by the pandemics financial implications.
[View source.]
