Prenuptial Agreements & Protecting Family Businesses
People who own and run family businesses often consult with business executive consultants and family law attorneys when the time comes to plan for the succession of their business and its passage onto the next generation, and what, specifically, that transition will look like. Interestingly, one common issue that these professionals find themselves dealing with is what role a prenuptial agreement plays in planning for how the family business passes onto the next generation. In the context of a family business, prenuptial agreements are incredibly important in order to ensure that shares are protected and business ownership “stays in the family,” so to speak.
This is especially the case for business owners who have unmarried children, as, currently, a significant number of first marriages end in divorce, and the divorce rates are even higher for second and third marriages. Even for couples over the age of 50, divorce rates are on the rise. In fact, according to some statistics, Florida has one of the highest overall divorce rates in the country. In light of this, one business advisor offered some points to consider when it comes to planning for the succession of family businesses in prenuptial agreements:
While state law varies, there are some basic principles to follow when it comes to prenuptial agreements:
- There must be full financial disclosure by both parties;
- The agreement should not be hurried or coerced; and
- Each party should be represented by their own independent attorney in order to prevent any conflicts of interest.
Language, Goals & Clarity
When it comes to ensuring that your children from a previous marriage have inheritance rights to the family business that was formed prior to this subsequent marriage, a prenuptial agreement might, for example, establish that future earnings during the marriage are separate property not subject to division in the instance of divorce, where the business formed prior to the marriage and any changes in the value of that business remain “nonmarital assets.”
The most important goals should also be clearly spelled out in any prenuptial agreement. For example, when it comes to a family business, that’s presumably going to involve keeping ownership of the company within the family (as opposed to purposely trying to go after someone’s financial security).
It is also important to consider the emotions involved when it comes to family businesses and contracts like prenuptial agreements governing marriage. To this end, it is always important to constantly be aware of how a particular agreement will be perceived by the parties it applies to, and plan ahead for this in terms of what very specific language you select to use.
Pre- and Postnuptial Agreement Attorneys in Fort Lauderdale
Whether you are seeking a prenuptial agreement in order to protect the family business or dealing with any other area of family law, such as divorce, child custody, child support, etc., we at the law office of Sandra Bonfiglio, P.A. are here to help. Contact us today to schedule a consultation in Fort Lauderdale.