When starting a business the last thing most individuals think of is protecting that business in case of divorce. Also, when falling in love and deciding to get married, most people actually over look discussing the possible consequences a divorce may have on the business one spouse owns. However, a business may be the most valuable asset within a marriage, worth more than homes, cars, or stock portfolios.
The moral of this blog post is so important and so pertinent to any business owner that I was invited to give a lecture to business students at Montclair University about how to protect a business in case of divorce, and was more than honored and happy to do so.
Ways to protect a business in case of divorce:
1) Prenuptial Agreements
2) Postnuptial Agreements
3) Language in a business/partnership agreement
Prenuptial and Postnuptial Agreements:
These sorts of agreements have a bad reputation and stigma that are attached to them. After all, traditionally it was held that when two individuals get married their ideology is what is mine is yours and what is yours is mine. However, any business owner knows that starting and operating a business is extremely hard and time consuming and that a tremendous amount of effort, energy and sweat goes into the undertaking. So, why shouldn’t you protect your time, energy and effort?? No one goes into a marriage believing that it will end, but over half of them do, so the possibility cannot be ignored and should be planned for, especially for business owners. Moreover, the non-owner spouse is also protected by such an agreement, since naturally the non-owner spouse helps the business in their own way, by making sure there is a meal on the table, taking care of the kids while the other partner runs their business, or any other effort they put into a family so that the business owner spouse can devote their time to the business
The law relies on words and the language of a prenuptial agreement must be drafted by an attorney specializing in matrimonial law, so that the correct language is used and that the business is properly protected.
If an individual began a business after marriage, then a postnuptial agreement should be considered. There is no difference between a prenuptial and postnuptial agreement, except that a prenuptial agreement is one drafted prior to marriage and a postnuptial is one drafted after marriage. In fact, in the past certain retirement assets could only be waived by a spouse, so if one had a prenuptial waiving the right to those assets, they also had to have a postnuptial waiving the same assets.
Bottom line is that both a pre or post nuptial agreement are contracts between two individuals, premised on the consideration of their marriage. They must be done voluntarily without any duress, fraud, or concealment. Each individual must have full knowledge of all assets, their worth and what they are gaining or giving up prior to executing either agreement for the agreement to be considered fair and recognized by the Court of Law. The best part of having such an agreement is that any terms of the agreement override local law, in New York being equitable distribution. Without having said agreement the business would be split up by the Court any way they see fit and fair.
Language In Business/Partnership Agreement:
Divorce can become emotionally and financially devastating, not just for the divorcing couple and their family, but also for the business's employees and co-owners. In the past there have been cases of the non-owner spouse taking over enough interest of a business to control certain decisions of that business and obtain an active ownership interest themselves. So, business agreements and contracts, as well any articles of incorporation, should be reviewed and the right language inserted by a legal professional to make sure they also protect every one who has an interest in case of one partner or co-owner’s divorce.
If a business is a multi-generational family business that business may consider a Family Limited Partnership arrangement. These versatile estate transfer tools can specify that business interests are not subject to division in divorce.
Also, a spouse's interest in a partnership or corporation can be preserved by including restrictions on transferability.
This means, for example, that a shareholder cannot transfer half of his/her stock to a divorcing spouse even if that spouse is treated as having a right to that interest. The non-owner spouse can receive some assets, but not the business interest itself.
So, protect your business, don’t let a divorce wreck the biggest project and undertaking of your life.
Until Next Time,
Helen M. Dukhan, Esq., LL.M. at www.DukhanLaw.com
Showing posts with label Prenuptial. Show all posts
Showing posts with label Prenuptial. Show all posts
Tuesday, August 3, 2010
Wednesday, June 2, 2010
PERMISSION TO CHEAT AND PRENUPS
A Couple of Interesting Topics:
First, suing someone because they gave you permission to cheat?
Upper West Side couples counselor Jeffrey Mechanic is being sued by two of his former clients who claim he almost ruined their marriage. He told one of the spouses to have an affair because that spouse was not satisfied at home. The most amazing thing is that the spouse actually had an affair. Now some individuals may agree with the counselor and his belief that if you are unsatisfied at home you should have an affair rather than Divorce your spouse. The counselor’s advice may have even saved certain marriages. One of his former clients states, “he encourages people to have affairs. He makes people feel it’s O.K. He gives them permission to do it.” I mean really?!? Individuals who have serious medical illnesses typically get more than one doctor’s opinion before proceeding with a treatment. Why would any one going to a couple’s counselor who tells them to have an affair not do the same thing before choosing what is right for them to save their marriage.
The real issue here, though, is not whether the counselor gave bad advice, but it is whether a couple should be able to sue a counselor for his prescription if at the end of the day you chose to listen to that counselor. After all, have we forgotten that people have free will and are expected to know the difference between right and wrong?
Second, waiver of interests in retirement assets enforceable within a prenuptial agreement:
In the past, a provision in a prenuptial agreement waiving one’s interest in certain retirement rights was unenforceable. In Richards v. Richards (232 AD2d 303, 303 [1996]), the court had found that under the Employee Retirement Income Security Act 'only a spouse can waive spousal rights to employee plan benefits, that a fiancé(e) is not a spouse, and that such rights, therefore, cannot be effectively waived in a prenuptial agreement.' Therefore, because such rights could only be waived by a “spouse”, if one fiancé(e) wished for the other to waive their interest in such retirement rights they would have to have had a prenuptial agreement and a post-nuptial agreement waiving said rights.
Now, the first department in New York (Manhattan), found, in an opinion by Justice
Andrias, that the parties' prenuptial agreement contained an enforceable waiver of defendant wife's interest in the marital portion of plaintiff husband's retirement assets. Strong v Dubin,--- N.Y.S.2d ----, 2010 WL 1905004 (N.Y.A.D. 1 Dept.).
Judge Andrias pointed out that Prenuptial agreements addressing the ownership, division or distribution of property must be read in conjunction with Domestic Relations Law 236(B), which provides that, unless the parties agree otherwise in a validly executed prenuptial agreement pursuant to section 236(B)(3), upon dissolution of the marriage, marital property must be distributed equitably between the parties, while separate property shall remain separate (see Domestic Relations Law 236[B] [5][a]-[c]). Therefore, the court is distinguishing now between pension benefits as marital property and survivorship rights, which Richards v. Richards above failed to do. So, now a couple can waive pension benefits in a prenuptial agreement; however, survivorship benefits must still be left for a post-nuptial.
Until Next Time,
Helen M. Dukhan, Esq., LL.M. @ www.dukhanlaw.com
First, suing someone because they gave you permission to cheat?
Upper West Side couples counselor Jeffrey Mechanic is being sued by two of his former clients who claim he almost ruined their marriage. He told one of the spouses to have an affair because that spouse was not satisfied at home. The most amazing thing is that the spouse actually had an affair. Now some individuals may agree with the counselor and his belief that if you are unsatisfied at home you should have an affair rather than Divorce your spouse. The counselor’s advice may have even saved certain marriages. One of his former clients states, “he encourages people to have affairs. He makes people feel it’s O.K. He gives them permission to do it.” I mean really?!? Individuals who have serious medical illnesses typically get more than one doctor’s opinion before proceeding with a treatment. Why would any one going to a couple’s counselor who tells them to have an affair not do the same thing before choosing what is right for them to save their marriage.
The real issue here, though, is not whether the counselor gave bad advice, but it is whether a couple should be able to sue a counselor for his prescription if at the end of the day you chose to listen to that counselor. After all, have we forgotten that people have free will and are expected to know the difference between right and wrong?
Second, waiver of interests in retirement assets enforceable within a prenuptial agreement:
In the past, a provision in a prenuptial agreement waiving one’s interest in certain retirement rights was unenforceable. In Richards v. Richards (232 AD2d 303, 303 [1996]), the court had found that under the Employee Retirement Income Security Act 'only a spouse can waive spousal rights to employee plan benefits, that a fiancé(e) is not a spouse, and that such rights, therefore, cannot be effectively waived in a prenuptial agreement.' Therefore, because such rights could only be waived by a “spouse”, if one fiancé(e) wished for the other to waive their interest in such retirement rights they would have to have had a prenuptial agreement and a post-nuptial agreement waiving said rights.
Now, the first department in New York (Manhattan), found, in an opinion by Justice
Andrias, that the parties' prenuptial agreement contained an enforceable waiver of defendant wife's interest in the marital portion of plaintiff husband's retirement assets. Strong v Dubin,--- N.Y.S.2d ----, 2010 WL 1905004 (N.Y.A.D. 1 Dept.).
Judge Andrias pointed out that Prenuptial agreements addressing the ownership, division or distribution of property must be read in conjunction with Domestic Relations Law 236(B), which provides that, unless the parties agree otherwise in a validly executed prenuptial agreement pursuant to section 236(B)(3), upon dissolution of the marriage, marital property must be distributed equitably between the parties, while separate property shall remain separate (see Domestic Relations Law 236[B] [5][a]-[c]). Therefore, the court is distinguishing now between pension benefits as marital property and survivorship rights, which Richards v. Richards above failed to do. So, now a couple can waive pension benefits in a prenuptial agreement; however, survivorship benefits must still be left for a post-nuptial.
Until Next Time,
Helen M. Dukhan, Esq., LL.M. @ www.dukhanlaw.com
Monday, May 10, 2010
POSTNUPS: FIXING MARRIAGES AND PROTECTING INDIVIDUALS
Lately, it seems as though postnups (Post nuptial Agreements) are the new prenups (Prenuptial Agreements). According to a recent survey, 50 percent of matrimonial lawyers, including myself, reported a rise in these contracts, which give married couples an opportunity to rewrite the rules of their marriage on everything from property, consequences of cheating and money. The most famous example of is Tiger Woods who is rumored to have an agreement to pay his wife, Elin, $5 million to stay in the marriage. These days more and more individuals are being compensated for their spouse’s infidelity and breach of their marriage contract, but in high profile marriages the rise of postnups are being credited for saving marriages. For example, if one spouse is a compulsive gambler, the other spouse may stay in the marriage if a post nuptial agreement is in place stipulating that certain accounts and/or assets are separate property and cannot be used for such purposes, and that all of the gambler’s debts are their own responsibility. Thereby, the spouse is secure and protected in case of divorce caused by the other spouse’s gambling problems.
Postnups are becoming so prevalent, that even some Hedge funds are known to force their high earning principles with a stake in the company to ensure their spouses won’t take half the business in case of a divorce. In fact, I gave a lecture at Montclair Univiersity, in Montclair, New Jersey, to a large group of business student about the topic of how to protect one’s rights and interests in a business from the impact of divorce and postnups were a big part of my lecture. This becomes especially important when a couple marries before there is any need of a prenup, meaning not many assets are owned by either spouse, but eventually one or both of the spouses acquire major assets and/or interests in a businesses. Business owners must also be very aware of their partners and ensure that they also have agreements with their spouses, so that a partner’s spouse does not walk away with half the business, leaving you, a non-party of the divorce in ruins.
Sure, it is not the most romantic or sexy topic of conversation between spouses, essentially planning a divorce in case it happens, but adult spouses must acknowledge the possibility of going through divorce. This becomes even more apparent, when one takes into consideration the rate of divorce in America being at approximately 50%. There is a stigma that surrounds postnuptial and prenuptial agreements, and these contracts are seen as shallow, contrary to the principles of what is mine is yours, and what is yours is mine, but this is not the case. Individuals, prepare Wills in case of death because death is a possibility, as should people protect themselves and their business interests, from the possibility and consequences of divorce.
Lastly, it is important to remember that according to the IRS code there are certain assets one cannot waive until they are married, so a post nuptial agreement might be required to back up a prenuptial agreement. Moreover, for both a prenuptial and post nuptial agreement there must be full disclosure. Therefore, both spouses must be very well informed of how much all assets are worth, how much they will receive in case of divorce and how much they are waiving in case of a divorce.
Until Next Time,
Helen M. Dukhan, Esq., LL.M. @ www.DukhanLaw.com
Postnups are becoming so prevalent, that even some Hedge funds are known to force their high earning principles with a stake in the company to ensure their spouses won’t take half the business in case of a divorce. In fact, I gave a lecture at Montclair Univiersity, in Montclair, New Jersey, to a large group of business student about the topic of how to protect one’s rights and interests in a business from the impact of divorce and postnups were a big part of my lecture. This becomes especially important when a couple marries before there is any need of a prenup, meaning not many assets are owned by either spouse, but eventually one or both of the spouses acquire major assets and/or interests in a businesses. Business owners must also be very aware of their partners and ensure that they also have agreements with their spouses, so that a partner’s spouse does not walk away with half the business, leaving you, a non-party of the divorce in ruins.
Sure, it is not the most romantic or sexy topic of conversation between spouses, essentially planning a divorce in case it happens, but adult spouses must acknowledge the possibility of going through divorce. This becomes even more apparent, when one takes into consideration the rate of divorce in America being at approximately 50%. There is a stigma that surrounds postnuptial and prenuptial agreements, and these contracts are seen as shallow, contrary to the principles of what is mine is yours, and what is yours is mine, but this is not the case. Individuals, prepare Wills in case of death because death is a possibility, as should people protect themselves and their business interests, from the possibility and consequences of divorce.
Lastly, it is important to remember that according to the IRS code there are certain assets one cannot waive until they are married, so a post nuptial agreement might be required to back up a prenuptial agreement. Moreover, for both a prenuptial and post nuptial agreement there must be full disclosure. Therefore, both spouses must be very well informed of how much all assets are worth, how much they will receive in case of divorce and how much they are waiving in case of a divorce.
Until Next Time,
Helen M. Dukhan, Esq., LL.M. @ www.DukhanLaw.com
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