IMPACT ON REAL ESTATE

Divorce-Proof Your Business

By Edgar Henry

Before "I do's" turn to "I don’ts," make sure your business is well protected. This analogy may sound unromantic, but when all is said and done, it is worth its weight in gold. Here are some things to consider for your prenuptial agreement before tying the matrimonial knot.

No matter how bizarre it may seem, when lovers have substantial worth prior to marriage and they are engaged in a relationship with plans to exchange those vows, they ought to seriously ponder on implementing a prenuptial agreement.

Surely, there was a time when only the wealthy executed such agreements. Nowadays, more and more couples, especially those who own businesses and have been married before, need to evaluate and contemplate the pros and cons of a prenuptial agreement as part of their wedding plans.

In fact, a prenuptial or premarital agreement is nothing more than a written contract signed by two people before they're married. It can be used to accomplish many legal and financial objectives. In general, couples use it to protect separate property, a family business, support an estate plan, define what's marital or community property, reduce conflicts and save money in the event of a separation or divorce. This will clarify special arrangements, such as legal fees and establish procedures and provide ground rules for deciding future events. This process is a norm when persons of celebrity status intend to marry.

Typically, the agreement spells out exactly what each person brings to the marriage in terms of what assets they own and what liabilities they have, and it then details how those assets and liabilities will be disposed of after separation, divorce or death. It might also outline an inheritance and how any assets and liabilities acquired during a marriage will be disposed.

In short, a prenuptial agreement can help ensure there's an orderly process that will take place if a marriage ends. That order can turn to chaos if certain preconditions aren't met. There are a few essential compliances if you want your agreement to fulfill its intended purpose. Of course, meeting these conditions does not guarantee that an agreement won't be challenged by an unhappy spouse. But it can go a long way toward making sure there's a common agreement and understanding in order for marital bliss to prevail.

Full disclosure

Each person should prepare a detailed financial statement that includes all assets and liabilities, annual gross income, interests in family trusts, and even potential inheritances. Full disclosure ensures that each person understands what he or she is getting and giving up; failure to do so can result in a prenuptial agreement being set aside by the courts.

Be fair

The legal system tends to strike down agreements that favor one spouse over the other. Additionally, courts will overturn agreements signed under pressure, such as within 48 hours of the wedding. A thirty day period is considered reasonable.

Put it in writing

Though each state has different laws regarding prenuptial agreements, they basically follow the same general format. A prenuptial agreement is a written contract signed by the two prospective spouses and acknowledged by a notary. These agreements need not be filed with a court and can be drawn up by the two prospective spouses.

Add-on clauses

Generally, the agreement should contain a clause stating that if any provision of the agreement is invalidated, the rest of the agreement remains valid. Couples should also add a clause that makes sure the laws of the state in which the couple are going to be married take precedence should they get divorced in another state. In the absence of such a clause, couples that get divorced may have their assets divided according to the laws of the state in which they reside when they divorce.

Thus, community property states such as California and Washington will generally divide in half, the couple's assets acquired during the marriage, while in other states the equitable distribution principle may decide how to split the assets fairly, based on years of marriage, status of children, lifestyle considerations and any number of other factors. The agreement should contain a clause stating that all arrangements between the prospective spouses regarding their assets and liabilities are included in the prenuptial agreement.

Include ALL specific information

Couples might also wish to quantify "maintenance," the amount of alimony a divorced spouse may receive from his or her wealthier counterpart. In addition, an agreement could speak to the preservation of a business, family assets or a family fortune held prior to the marriage, so that those assets stay with the original owner should the marriage end in divorce. For more complex situations, couples about to exchange marriage vows might also consider protecting separate property through other more sophisticated legal tools.

Hire a lawyer to review the agreement

Last, but by no means least, it's important that each person hires separate counsel to review the contract to make sure his or her interests are protected and that the agreement follows the letter of the law of the state in which they'll marry. Some agreements get struck down because each party didn't hire his or her own lawyer to review the agreement. Unless of course, if a clause is provided within the agreement that one or both parties elect not to be represented by counsel.

If you decide that you intend to do business with your intended spouse, especially if you both have assets, you need to have such an agreement in place for protection and peace of mind. Trust me, it works.

"It is always better to have information and not need it than to need it and not have it."

All your Real Estate Questions can be directed to:

EDGAR HENRY
Licensed Real Estate Broker
(718) 469-8131