Prenuptial Agreements and the Family Business


When a couple is planning to marry, there is often not much consideration given to what would happen should the duo later decide to get divorced. Nonetheless, a prenuptial agreement (sometimes referred to as a premarital or antenuptial agreement) is an essential consideration for any person who happens to be entering a marriage while owning their own business.

It will be necessary for a person to stress that such an agreement is not necessarily some implication that the agreement signifies some level of distrust about the future spouse. Instead, such an agreement will specifically focus on ensuring the survival of a business in the event of a divorce, and the agreement is, in turn, more of a business transaction.

Benefits of Prenuptial Agreements

Addressing prenuptial agreements with a partner can be a difficult topic to broach, but not bringing up such issues beforehand will only lead to other problems later on. As it concerns business owners, prenuptial agreements can provide a wide range of long-term benefits that include:

  • Defining marital/non-marital assets — Specifying that a business is to remain non-marital property and that its value and any increases after the marriage will not be subject to division in a divorce.
  • Confirmation of business decisions — A prenuptial agreement may specify you maintain the right to manage the business.
  • Plan for asset division — A prenuptial agreement specifies which spouse is entitled to certain assets in a divorce. When one spouse enters with much greater assets, there may be a spousal support agreement.
  • Estate planning concerns — A prenuptial agreement can also modify wills and trusts in the event of a death that allows a business to pass to desired beneficiaries.

It is important to understand that you can still adjust prenuptial agreements even after marriage should a new situation arise. You can also create a postnuptial agreement if there was no legal agreement before the marriage.

What to Include in a Prenuptial Agreement

For a prenuptial agreement to be enforceable, you need to ensure it was valid when formulated and agreed to. A court may decide a premarital agreement is not enforceable if the individual against whom they are seeking enforcement proves that they did not execute the agreement voluntarily or the general agreement was unconscionable when executed.

The enforceability of a prenuptial agreement will thus depend on the agreement honoring all of the following concepts:

  • Both parties voluntarily agreed without any concerns about coercion or duress.
  • Both parties had independent legal counsel.
  • Language carefully and explicitly details any rights either party is waiving by agreeing (especially important if one party decides not to have an attorney).
  • Both parties were provided sufficient financial disclosures regarding respective incomes, assets, and liabilities.

So what should be included in a prenuptial agreement? Some of the key concepts are going to include:

  • Characterizing all of the property brought into the marriage and which kinds will become community property.
  • Characterizing how to treat any property and income acquired during a marriage.
  • Defining whether payments towards separate property is a gift or equity in that property.
  • Characterizing income and other earnings as community property or separate property.
  • Defining contributions of funds and/or services by a spouse or the marital community to the other spouse’s property.
  • How property jointly acquired during a marriage will be characterized.
  • Defining treatment of life insurance and retirement plans before the marriage and future plans or policies.
  • Division of property in the event of divorce or death, such as alimony or support payments.
  • Defining whether to file joint or separate income tax returns.

Things to Remember About Prenuptial Agreements

In general, it is crucial for each party entering a marriage to retain independent legal counsel before entering a prenuptial agreement so there is no perceived conflict of interest or the appearance of any undue influence. Both parties must provide sufficient financial disclosures that include disclosures of all their respective income and liabilities.

A prenuptial agreement does not become public unless there is litigation, so both parties must make full disclosure in the agreement. Failure to fully disclose assets and liabilities may lead to an agreement not being enforceable.

Make sure to carefully draft your language and fully detail both parties’ rights, obligations, and waivers as they relate to the marriage. It should not include any provisions that could be deemed overreaching or encourage divorce.

Proposed agreements should be presented well in advance of the wedding, with agreements usually being signed a minimum of 30 days before the marriage. The agreement ultimately needs to be entered into by both parties freely and voluntarily without any pressure, influence, or coercion and should not be one-sided to the point where it could be considered unconscionable.

If you are preparing to get married and need help drafting a prenuptial agreement, then do not hesitate to contact an experienced family law attorney. You will better be able to get the agreement that specifies the business concerns you want addressed while also protecting your interests.