Prenuptial agreements have become a bigger part of the development of an estate plan. A prenuptial agreement is an agreement that is entered into before marriage that states the parties’ rights during the marriage, after death, and after a divorce or dissolution of marriage. This type of agreement can especially be very important to individuals who have an ownership interest in a family business.
Specifically, a prenuptial agreement or sometimes referred to as an antenuptial agreement is a written contract between two people before they have married each other. There are a number of requirements to make sure the prenup is valid. One of the requirements is that the parties provide full disclosure of all of their assets and liabilities to each other. These types of agreements are used by individuals who currently have significant assets, may have assets in the future, or may have certain assets that they want to protect from termination of a marriage or a death situation.
Some of the items that a prenup can assist with involve being able to determine exactly what the parties’ rights are during their marriage and who is going to be responsible to provide income to the marriage and the payment of expenses incurred during the marriage. Another item involves the ability to avoid certain arguments in the case of a divorce or dissolution of marriage by allowing the individuals to determine exactly how their property will be divided upon termination of the marriage. This agreement could also determine if spousal support will be paid and the amount of spousal support to be paid by one party to the other.
A prenup can be very important for an individual who has children from a prior marriage. That individual will be able to determine exactly how certain assets will pass to their children from a prior marriage in the case of death. Since surviving spouses have certain rights, without a prenup, surviving spouses may receive more from an estate, and children from a prior marriage may receive less than what was anticipated. With a prenup, these issues would not occur.
Another instance in which a prenup may be very valuable is in the case of a closely-held family business. In these types of situations, it is common for business owners to require only family members to be owners of both the operating business and/or any real estate holding company. Thus, if there would be a divorce and if it was determined that part of the ownership of the operating business or real estate business would be determined to belong to the non-business spouse, the non-business spouse could end up being an owner and the other owners would be working with that non-business spouse. In order to alleviate that situation from occurring, restrictions can be placed in various business legal documents, such as buy-sell agreements. However, in order to provide another layer of protection, the business owner could enter into a prenuptial agreement in order to delineate the rights and restrictions on the parties as it relates to the ownership of the operating business and/or the real estate company.
Therefore, before entering into a marriage, no matter what the individual’s net worth is, the individual should determine whether or not a prenuptial agreement could be a part of their estate plan. Please contact your local attorney to discuss whether or not a prenuptial agreement would be important in your particular situation and to assist with the preparation of your prenuptial agreement if it is determined to be necessary.
NOTE: This general summary of the law should not be used to solve individual problems since slight changes in the fact situation may require a material variance in the applicable legal advice.
James F. Contini II, Esq.
Certified Specialist in Estate Planning,
Trust & Probate Law by the OSBA
Krugliak, Wilkins, Griffiths & Dougherty Co., LPA
158 North Broadway
New Philadelphia, Ohio 44663