We’re finishing up our discussion of small businesses and family law. The two are often inextricably linked. The most public example is the McCourts. The couple’s divorce has taken a serious financial toll on the baseball team they own, and many say the divorce is responsible for a management vacuum, as well.
The McCourts tried to protect the business by entering into a postnuptial agreement when Frank purchased the team. Even if it didn’t quite work out the way he’d hoped, a well-crafted postnuptial agreement is one way to protect the company and the marriage when a business opportunity arises after the couple is married. In cases where the marriage follows the founding of the business, the most obvious instrument is a prenuptial agreement.
Most couples don’t want to admit the possibility that their marriage could fail. When a business is the primary source of income, though, the couple may find it easier to accept the necessity of a prenup or postnup. Illinois law governs what these agreements can cover and how they are executed.
A business owner’s estate plan should also include arrangements for the business. It is possible to transfer leadership and ownership of a business through a will or a trust.
A trust can be a fairly flexible option, in fact. Some legal experts suggest establishing a domestic asset trust. By transferring the business shares into the trust, the couple ensures the business will not be considered marital property in a divorce.
All business owners should consider entering into a buy/sell agreement with co-owners or shareholders. The agreement details how certain events affect ownership and control of the business. Separation, divorce and remarriage are examples of triggering events.
The goal in all cases is to protect the marriage and to protect the business. If questions about the business are settled before or early on in the marriage, the couple can avoid disagreements down the road, and the business can be spared the turmoil that can come with distracted leadership and ownership disputes.
Source: Financial Post, “You don’t have to lose your firm in a divorce,” Deborah L. Cohen, Oct. 3, 2011