A prenuptial agreement ("prenup" for short) is a contract created by two people before they are married, typically listing all property each person owns, as well as any debts, and specifies what each person's property and financial rights will be if the marriage should end. While the topic of prenuptial agreements can be uncomfortable, and certainly not very romantic, about one half of all marriages in America end up in divorce proceedings.
Prenuptial Agreements: Protecting your business and assets
A solid prenup should address any issues that would ever come up during a legal separation or divorce and must be specific to the state in which the marriage occurred.
Prenuptial Agreements and Businesses
The most common protection for a business is a prenuptial agreement.
it is important that one’s business is protected if the marriage falls apart. Not only could a lengthy and turbulent divorce cause damage to your business, but also to your partners, co-owners, and all your employees. In fact, in some partnership and operating agreements unmarried shareholders are required to have a prenuptial agreement.
Depending on the state, community property laws and other rules allow a spouse to claim half or more of any value that has appreciated in a business since marriage.
Community property states include Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. In these states, all the marital assets are jointly owned and therefore, must be split during a divorce. These assets include real estate, personal property, savings, retirement accounts, and debts acquired during the marriage. In many instances a valid prenup can overrule community property law.
Prenuptial Agreements In General
An enforceable prenup should address any issues that would ever come up during a legal separation or divorce and must be specific to the state in which the marriage occurred.
There are various reasons for a prenup to be revoked and certain clauses weaken a prenup. Here are examples of what may make a prenup unenforceable:
- One spouse did not sign the original document voluntary, or with full knowledge and understanding of the agreement;
- not having independent counsel for each person signing;
- not having an appropriate amount of time to review the agreement before marriage;
- having unusual or outrageous request that favor one side; and
- vague language.
When drafting a prenuptial agreement, it is important to consider that making promises within the agreement and failing to complete or follow through with those promises, may be interpreted as fraud because it could look like a coercion tactic to get the other party to sign the prenup.
We recommend couples from all backgrounds – and budgets – to get a prenuptial agreement, especially if you have assets that might be at risk in the event of a divorce, like property, businesses, inheritance, or children from another marriage.
Below are examples of people who really should have considered getting a Prenuptial Agreement:
Sir Paul McCartney: McCartney’s marriage to Heather Mills ended up costing him about $48.6 million. Reportedly, when McCartney married his third wife, Nancy Shevell, he skipped the prenup yet again, only asking Shevell to sign a one-page document stating that she would leave his children’s trusts alone if they should divorce.
Michael Jordan: Michael Jordan and Juanita Jordan did not initially sign a prenup in 1989 when they married, however, agreed to a postnuptial agreement in 1991. When the couple divorced in 2006, Juanita reportedly received a $168 million settlement.
Mel Gibson: Robyn Moore, Gibson’s wife of 31 years was entitled to half of his $850 million estate and settled for $425 million in 2011.
Jeff Bezos: After 25 years Jeff and MacKenzie Bezos filed for divorce in Washington state. With out a prenuptial (or postnuptial) agreement, their $137 billion dollar fortune was split in two.
And finally, Frances Mountain and Harold Mountain famously had to sort through their collection of Beanie Babies and divide, one by one, each under the supervision of a Family Court Judge because they were not able to do so themselves.
When ready to protect your business with a prenuptial agreement, contact the attorneys at Wilson Legal Group P.C.
