Premarital Agreements: When a Family Business Owner Divorces
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Geoffrey Brown, CPA Linda Ravdin Bond Beebe Accountants & Advisors Pasternak & Fidis
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Learn how your family business can proactively handle premarital agreements and best deal with divorce when the plaintiff is the owner of the family business. In this presentation, you will learn how the lawyers and advisors for the family business owner can most effectively carry out their roles during a divorce, and how they can work together as a team to preserve and protect the family business and the owner’s interests. You'll also glean best practices for developing a premarital agreement, and concrete steps you as the business owner can take to protect your business and family assets.
Transcript of Premarital Agreements: When a Family Business Owner Divorces
Geoffrey Brown, CPA Linda RavdinBond Beebe Accountants & Advisors Pasternak & Fidis
Legal Issues Surrounding Property Division at Divorce
Basics of the Law of Spousal Support
Issues of Special Concern to the Business Owner
How to Protect Your Business
Best Practices in Premarital Agreements
Separate (nonmarital) property belongs to the owner Marital property is divided equitably Hybrid – part marital, part separate
Gender neutral
Rehabilitative (term-limited) vs. indefinite (no predetermined end point, not even retirement)
Amount and duration can be unpredictable
Double-dipping: property division payout and spousal support come from the same source
Appreciation in Value During Marriage of a NonmaritalBusiness
Transformation of a Nonmarital Business
Valuation of the BusinessIn a contested divorce, the judge must make a ruling on
the value of the businessThe enterprise good will component of a business’ value
is a divisible marital assetValuation often involves dueling experts who:
Value business as a wholeAllocate between enterprise vs. personal good willAllocate between separate and marital share of the businessValuate/allocate active portion vs. passive portion of
appreciation
Potential for Expensive Divorce Litigation
Disclosure of Business Documents, Information Valuation expert will want access
to extensive business records Employee interviews Private information disclosed
in trial Press attention
Don’t get married
Don’t get divorced
Get a premarital agreement
Compensate a spouse who works in the business with market‐
based wages and employee benefits
Owner should take adequate compensation
Be careful with statements of value – e.g., application for a
loan or key person insurance.
Criteria for Validity
Meeting Minimum Standards is Not Good Enough
Best Practices
Timing
Actual Negotiation
Access to Counsel
Financial Disclosure
Issues with Stating the Value of a Closely‐Held Business
Value may not be readily ascertainable
What qualifiers to use?
The owner can provide known data
No obligation to engage an expert
appraiser
Documents supporting under‐valuation may be discoverable
Terms of a Premarital Agreement to Protect the Owner
Define the interest in the business as a separate property
Active vs. passive appreciation
If sharing an interest in a business, agreement can state that good
will is not included in the value for purposes of property division
at divorce
Fix or waive spousal support
Provide some terms to benefit weaker party
Other Terms to Protect the Owner
Confidentiality clause
Penalty and loser‐pays provisions
Dispute resolution clause
Arbitration
Collaborative Process
Any other process to lead to settlement
Court as last resort
Ask a question by typing in the field provided in your GoTo Webinar menu bar – on the right side of your screen.
Thank you for attending today’s webinar!
For more information, contact:Geoffrey Brown, [email protected]
Linda J. [email protected]
