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Using a prenuptial agreement to protect a family business

Prenuptial agreements tend to be common in states with community property laws, and they can be especially valuable when a family-owned business is involved. California family law judges are required to divide marital property equally even when couples have only been married for a short time, but drafting a prenuptial agreement allows the parties to set their own guidelines.

In addition to defining how business assets will be divided and profits distributed, a prenuptial agreement can establish how much a company is worth when a marriage takes place. This allows the parties to determine how much of a business is separate property and how much is part of the marital estate. These documents can also state how a business should be valued in a divorce, which is often a contentious issue in property division negotiations.

Unfair prenuptial agreements could be difficult to enforce in court, and spouses who contributed to a business may be entitled to a share of the profits even if documents they signed prior to getting married state otherwise. What amounts to a contribution can be a thorny issue, and judges have sometimes ruled that spouses who stayed home to raise children contributed because their husbands or wives were freed from this responsibility.

Experienced family law attorneys in states with community property laws may advise their clients to think carefully before making excessive demands during prenuptial agreement negotiations. They could also urge them to negotiate in good faith and declare all of their assets. This is because an agreement that is unlikely to withstand the scrutiny of a family law judge has little real-world value. In addition to being essentially fair, prenuptial agreements must be entered into freely. This is why it may be wise for each party to be represented by their own attorney.

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Law Offices of Catherine A. Schwartz
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Riverside, CA 92506

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