I am working on a divorce case in which the husband set up a nonprofit public benefit corporation during the marriage. The 501(c)(3) corporation owns and operates a small hospital. The wife is a licensed pharmacist and self-supporting but claims the hospital should be valued and the husband should be charged with the value in the divorce settlement. Do you believe that is a correct way of handling the nonprofit?
No. The founder-husband does not “own” the hospital, even if he still has effective control over it. If it were to be sold or dissolved, whatever net value it may have would have to continue to be used for charitable purposes, both under federal tax law and state charitable asset law. None of the value could be paid to either the husband or the wife. And if he can’t get anything from it that is more than reasonable compensation for which he would actually have to work, it doesn’t seem to me to be an asset of separate value to consider in a divorce settlement.