Many divorce disputes can be solved in advance with properly-drafted prenuptial agreements. Their benefits are not limited to the wealthy. Starting business owners with limited resources, couples who married and moved and divorced spouses with children who remarried have the greatest need for a prenup.
In a community property state like Texas, any business formed during the marriage is community property which is divided when they divorce. If the business was owned before marriage, any increase in value also becomes community property.
At the end of the marriage, valuation experts will determine the value of the business. If it existed before marriage, its value will be determined for the time before marriage and when the divorce action begins. If the couple does not agree to one expert, each spouse may hire their own expert who may dispute findings. Performing the valuation may be even more intrusive than a tax audit as the experts must engage in a through, invasive and potentially time-consuming and expensive review of the business’ books and records.
Deciding the treatment of a business in calmer times before marriage could avoid these issues. The spouses could decide, for example, to treat it as separate property or that a spouse would receive a portion of proceeds if it was sold. A prenuptial agreement generally covering all business interests, even those not in existence before marriage, are a flexile method to govern changing and unpredictable careers.
States also have different laws governing property division, which assets are marital property and alimony. A prenup allows spouses to make their own decisions on these issues which still control if they relocate.
Spouses with children who remarry, especially later in life, may also agree to keep their assets separate, forego alimony and do not anticipate gaining any more assets. Each spouse may also choose to disinherit their partner and give their assets to their children or other family members.
However, the spouse may choose to petition a court and elect to take a portion of the other spouse’s estate which is set by state law. A prenup can allow spouses to waive their right of election to provide for their children and other relatives.
Each spouse should have their own attorney assist them with negotiating and drafting a prenup. This can help couples make financial plans for their marriage and overcome many divorce issues.
Source: Forbes, “Those who are most in need of a prenup may surprise you,” By Alyssa Rower, Esquire, Jan. 28, 2018