How important is a prenuptial agreement?

On Behalf of | Nov 6, 2020 | Family Law |

It wasn’t that long ago that a prenuptial agreement was viewed as a fait accompli, an omen perhaps of impending divorce sometime down the line. In recent years, however, it is becoming more common for a spouse to request a prenup simply to keep a business out of the marital property in the event of a divorce proceeding.

In Georgia, a prenuptial agreement is also called an antenuptial agreement or “marriage articles”. Most prenups can be liberally written to convey the intentions of the signer, with the limitation that no provision can encourage divorce through a financial incentive or provide for child support or child custody.

How do prenups protect a business?

Prenuptial agreements are valid in all 50 states, with variations in duration through a sunset provision in some states. According to an article in Forbes Magazine, there are several ways that a prenup will help protect your business. It can:

  • Establish the value of the business from the time of marriage so only an increased in value during marriage, and not this value, can become part of a division of assets during divorce.
  • Include a specific role that the business owner’s spouse may play as a shareholder or employee, including how much the business’s increased or decreased value is shared with the other spouse.
  • Assign a value to the business at the time of divorce, eliminating the need for third-party assessors.
  • Assign to your spouse a percentage of the value of the interest in the company, guaranteeing that value at the time of divorce. This way, you decide what you will share rather than having to divide the total interest in your company during divorce.
  • Clarify how much potential income the business owner will contribute to the marital assets for his work with the business. Because business owners often do not take a salary for their work in the business, this eliminates unrealistic expectations during a divorce of what they could share as part of marital assets.

Marriages are usually for love, but for some it is wise to also have a pragmatic approach that preserves the assets of a business that one or both sides bring to the marriage. It may help to get advice on protecting that important asset before getting married.