When people hear the words “prenup” or “postnup” they often jump to the idea of planning for, or staving off, a nasty divorce, and that one of the parties is only sticking around in hopes of collecting a windfall from winning his or her spouse’s money in a settlement. The truth of the matter is that there are all kinds of solid reasons for having a post- or prenuptial agreement drawn up.
If you are a business owner, you really need a prenuptial or postnuptial agreement for the sake of your business. Why? Because businesses are assets, too – and you could find that your life’s work now has to be divided and shared.
I owned my business before I got married. Will it be divided in a divorce?
It could be, if your assets from your business ever comingled with your personal, joint assets. For example, if you used personal funds to help bolster your business, or if your spouse ever worked for you, then that business belongs to both of you now, unless otherwise designated by a pre- or postmarital agreement.
This can also be the case if your spouse never officially worked for our company, but devoted his or her free time to helping it grow. If your husband or wife helped you manage the books, take care of inventory, make repairs, or woo clients through dinners or drinks, then he or she can make a reasonable claim on that business.
My spouse was also my business partner. Don’t we have to split the business?
Not necessarily. You can be as creative as you want in a prenuptial or postnuptial agreement, even if you opened the business together. For example, the agreement may give one of you sole control over how the business is run, but allow the other spouse to collect part of the revenue. Or, perhaps one of you will keep the business, but the other person will get a greater share of the personal assets.
Simply put, divorce can be bad for a business. In many cases, it can trickle down and create unrest with your employees, your shareholders, and your Board of Directors, too. If you and your spouse jointly run your company, a postnuptial is one way to ensure that the business remains safe regardless of what the future holds.
Other benefits of using a post- or prenuptial agreement
Divorce creates instability in all elements of life, not just the running of a company. By creating a prenup or postnup, you can ensure that, in the event of a divorce – even an amicable one – that instability creates ripples, not waves. Pre- and postmarital agreements can allow for:
Arranging for financial support of children from a prior marriage
Maybe you are on a second or third marriage, and you, like your spouse, have children from a previous marriage or relationship. It can be important for both of you to establish their inheritance rights to ensure that each of your children receives exactly what you planned for them to have. If you should pass away, it can decrease the likelihood of will contests between your children and current spouse in a battle over assets.
Designating who will be responsible for payment of certain debts
While many couples discuss and agree on financial decisions, sometimes it’s simply not possible. Each spouse may enter the marriage with debt already incurred, or as the marriage progresses, debts can be racked up along the way by one spouse. Whatever the debt, sometimes it shouldn’t become the responsibility of both parties and putting that into an agreement can alleviate fear and hostility that may negatively affect your marriage. Used in conjunction with a will, a postnuptial agreement may help protect the other spouse’s estate from an unexpected creditor.
Addressing property and financial concerns between the spouses
There are some very positive reasons for using a postnuptial agreement to assign property ownership and deal with financial issues ahead of time. There may be unnecessary tax implications by handling it through a divorce settlement or a will.
Amend an existing prenuptial or postnuptial agreement
Because postnuptial agreements are legal contracts, they do contain certain legal requirements to become valid. A skilled Rockville family law attorney can advise you on the state-specific rules for amending an agreement in Maryland.
Postnuptial and prenuptial agreements are tools for financial protection just like trusts, contracts, and other types of legal agreements. They do not have to signify the end of your relationship or make you and your spouse adverse parties. What they can do is save you a lot of grief no matter what the future brings. If you believe that you and your spouse would benefit from a consultation to safeguard yours business from an uncertain financial future, speak with one of our insightful Rockville family law attorneys at McCabe Russell, P.A. by calling 443-812-1435 or reach out to us through our contact form.