Prenuptial agreements are a way to divorce-proof your business

An estate plan is a savvy way to protect and distribute your assets after you die and make sure that your end-of-life wishes are clearly communicated and respected. Unfortunately, divorces routinely complicate a couple's financial and estate planning objectives. Divorces are even more complicated for small business owners who may find themselves faced with the prospect of dividing a business that they worked many years to make successful.

Prenuptial and postnuptial agreements are an important financial planning tool and can act as a type of insurance to protect a small business from a divorce. These agreements can preserve a family business from any divorce issues and allow the business to be passed down to other family members.

A prenuptial agreement is a contract between spouses that is signed before a wedding. These contracts list a couple's property and assets and set clear expectations as to what will happen to the assets in the event of a divorce. These agreements are an excellent way to start an important financial conversation and set expectations before the marriage.

Forbes reports that it is important for each spouse to have their own attorneys for a prenuptial agreement to be effective. Other requirements for a prenuptial agreement include:

  • The agreement must be written and signed voluntarily without coercion;
  • A prenuptial agreement must fully disclose all assets and liabilities.
  • The agreement cannot be unconscionable, or unfairly lopsided in favor of one party.
  • The agreement must be signed by both spouses, preferably with witnesses.

A postnuptial agreement is similar to a prenuptial agreement, and is entered into after a wedding. An experienced family law or estate planning attorney will help individuals considering prenuptial or postnuptial agreements decide what conditions are best for their particular situation and ensure that the agreements are properly executed.

Source: Forbes: Divorce Dollars and Sense, "Divorce-Proof Your Business, Even If You're Still Single Or Happily Married!" Jeff Landers, 4/19/11

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