Premarital Agreements: Protecting Family-Owned Business AssetsBondBeebe
Posting by Geoffrey D. Brown, CPA, Principal
Last week, I had the pleasure of facilitating a webinar with Linda Ravdin, a knowledgeable family law attorney from law firm Pasternak & Fidis. While divorce is always a difficult subject, it can become particularly troublesome when there are concerns about protecting family-owned business assets. Through this webinar, Linda shared a number of insights and strategies that business owners can use to protect their business assets in the case of a divorce.
Properly protecting your family-owned business when it comes to divorce is, like so many other family business challenges, all about planning. With appropriate preparation, namely through a premarital agreement, owners can properly protect business and family assets and guide their business through the challenges of a divorce, should it be necessary.
While there are many legal considerations, and you should consult with a professional regarding your unique situation, here are four of Linda’s best practices for premarital agreements:
- Timing. If you are going to pursue a premarital agreement, it should be presented well in advance of the wedding. Short notice makes it difficult for both sides to have adequate access to counsel, which is important, as explained in more detail below.
- Actual Negotiation. Maryland case law states that an actual negotiation is a transaction between equals and is therefore a voluntary agreement. The stronger party in the negotiation should be open to considering and agreeing to some proposed changes to the agreement.
- Access to Counsel. When an economically weaker party is represented by counsel, it is almost impossible to have a premarital agreement thrown out. Ensuring that both sides have access to legal counsel will strengthen the validity of your agreement, should it ever be challenged.
- Financial Disclosure. There is no obligation to engage an expert appraiser for a business when developing a premarital agreement, and both parties may waive financial disclosures as long as the waiver is voluntary. However, the gold standard is a written statement appended to the agreement identifying all significant assets and providing a reasonable statement of values so that the weaker economic party knows what he/she is giving up claims to in the agreement.
I would encourage you to view the PowerPoint slides for a detailed overview of Linda’s main points. You can also view her insights in the Summer 2012 issue of Reporter (PDF), the newsletter issued by Pasternak & Fidis.
The common myth that premarital agreements are easy to break is simply not true, so it is imperative for you to consider protecting family-owned business assets by planning up front and involving expert advisors to create an agreement that will work for your financial and family situation.
– See more at: http://dcfamilybusiness.com/protecting-family-owned-business/#sthash.cIQFnNE0.dpuf