Doing Business With Your Spouse

Do any of these remind you of yourself?

1. You want to take your spouse into the business?
2. Or you have a business, maybe at home, and your spouse is just helping out?
3. Or are the two of you are thinking of starting a business together?

I suggest – strongly – under any of these scenarios that you get yourself to an attorney now.

Why? Take the second scenario first because it hides its problems like a snake in the grass. You may not know that the law can imply partnerships by actions as well as by a formal agreement. Two spouses start a business and even without a formal agreement, a partnership can be created by their acts. I willingly admit to an aversion against partnerships. I think most attorneys do not like them. Law school beats us over the head to avoid liability for our clients as much as possible. If anything goes wrong with a partnership, then business creditors can go after all the joint assets. Since most businesses fail, why would you not be talking to a lawyer before problems start?

The other two scenario at least get the horse before the cart. The first scenario might only require tinkering with the business format and maybe a prenuptial agreement or a post-nuptial agreement while the third does require advising on the business format (corporation, limited liability company or partnership) and a post-nuptial agreement.

Why a prenuptial/post-nuptial agreement? If the clients want to keep the business running as long as possible, they need to consider all of the problems including divorce. I think this kind of l agreement needs to be considered regardless of the business type used by the husband and wife. With a partnership and limited liability company having a written document (and a LLC requiring a written operating agreement) setting out how the business shall be run, incorporating some of the prenuptial/post-nuptial’s terms does not seem out of place. Based upon that reasoning, they need a separate prenuptial/post-nuptial agreement if the business is to be set up as a corporation.

Then they need to consider their retirement and estate planning objectives. If the business entity is a partnership or a limited liability company, these objectives need expression in the partnership agreement or the LLC operating agreement and for corporations in a separate document.

Source: Sam Hasler’s Indiana Divorce & Family Law Blog

Prenuptial Agreement FAQ’s

Why is a prenuptial agreement a good idea?

One in three of all first marriages end in divorce, as well as 50 percent of second or third ones. A prenuptial agreement is smart financial planning, since marriage is not just an emotional and physical union – it’s also a financial union. A prenup and the discussions that go with it can help ensure the financial well-being of the marriage. It is like an insurance policy you hope you wont need it, but in a divorce it may help eliminate some of the emotion that’s naturally involved.

A fairly negotiated prenuptial agreement can provide some reassurance to the wealthier spouse as to the extent of the financial impact of a divorce; at the same time it gives the less wealthy spouse some guarantee of his or her entitlement to a property distribution and/or maintenance upon a divorce.

Couples without a prenuptial agreement will have their assets distributed for them by the state if the marriage ends and they disagree about who should get what. Without a prenuptial agreement, assets could end up in the hands of your spouse’s children from a previous marriage instead of your own kids, or they could go to a lazy mate who did nothing while you worked hard at a business or profession that eventually became a big success.

What People Think of Prenups

A 2002 Harris Poll demonstrates the polarized opinions on drafting a prenuptial agreement:

• More than one-fourth of respondents (28%) think that a prenup makes smart financial sense for anyone getting married.

• One-fourth think they are for the rich and famous, not regular people.

• One in five (19%) believe a prenup is never needed if two people really love each other.

• Fifteen percent think a prenup dooms a marriage to failure.

• Twelve percent think prenuptial agreements are a good idea but would feel too uncomfortable to bring the issue up in their own relationship.

• One-half (49%) of divorced Americans believe that prenuptial agreements make financial sense, while just one in five (21%) married Americans feel the same.

From freep.com.

Source for Post: California Divorce and Family Law.

Source for Post: Kansas Family & Divorce Lawyer

When a Prenup Isn’t An Option

Some people will go to extremes to stick it to their exes.
Take H. Beatty Chadwick, a corporate lawyer in Pennsylvania. Eleven years ago, during his divorce hearings, Chadwick was instructed to turn over $2.5 million he had stowed away in overseas accounts. Chadwick refused–choosing instead to spend his days browsing magazines in county jail (where he still resides on a contempt charge) rather than watch his ex take her cut of the slippery largesse.
For many, floating prenuptials is flirting with disaster (especially near Valentine’s Day). Unromantic as they sound, though, the agreements do come in handy. Sir Paul McCartney took a bath because he didn’t have a better one, and rapper Kanye West topped the charts singing about how one of these could thwart gold diggers.
“Prenuptials are now such a buzzword in popular culture that people are getting them more often just because they think ‘I need a prenuptial agreement,’ ” says William Beslow, a matrimonial lawyer in New York who represented Nicole Kidman, Al Pacino, Robert De Niro and Demi Moore.

In legal terms, prenups are designed to keep individual assets from being considered “community property” during divorce proceedings. “Prenup” is a general term: Depending on how it’s written, the agreement can cut as sloppy as a sword or as sharp as a scalpel. The one critical element: It requires two signatures.

So how do you protect your assets if your spouse-to-be refuses to sign one (or if you are too afraid to ask)? Herewith, some options that require neither permission nor steel bars–though all have to be put in place before you say “I do.”

1. Do A Prenuptial Inventory

Lines of “entitlement” get blurred over the course of a marriage. The best way to ensure an accurate divvying of assets (and any appreciation) is to have them independently assigned and appraised prior to the exchange of vows. Such reckoning eliminates having to prove such things years later to a skeptical and overworked judge.

Musicians and authors do this to protect royalty streams from material composed before the marriage but that won’t show up on Amazon until after the wedding. Athletes who have their hands in many businesses should take inventory, too.

“A premarriage agreement is critical, but without one, I make sure my clients have all their corporations tied down and that the people on the board of directors are who they want them to be,” says Steve Reed, president of Capital Advisors Consulting, a firm which advises professional baseball players. “Once they get married, things become tied to the spouse.”

2. Set Up An Investment Trust

To protect appreciation in your investment portfolio, make like a politician and set up an investment trust administered by cozy trustees willing to let you manage the money behind the scenes. (If the account is under third-party control, the assets are not considered community property.) Any appreciation, goes back to you–assuming the trust administrator doesn’t skip town with the bread.

“It’s legal,” says Beslow. “But it requires trusting someone else a lot more than your spouse, which is antithetical to the whole concept of marriage.”

3. Form A Joint-Ownership Agreement

Similar to No. 2, this preemptive tactic aims to protect your property. Again you’ll need a third party–a trusted friend or family member–to pull it off. Sticking property in a joint ownership account separates it from the community pie, as long as management and maintenance payments flow through the third party.

“You’d have to make sure that payments made to the third party’s bank account during the marriage came from an account without your spouse’s name on it,” says R. Richard Banks, a professor at Stanford Law School. “If you pay the third party from a joint account, the spouse has a good claim on the property.”

4. Use Your Child’s Trust As A Shield

Have nagging concerns about your second spouse’s motivations? Stick that vacation home in the trust of a child from your first marriage. Children’s trusts are off-limits during divorce proceedings–in an even more ironclad sense than with investment trusts or joint-ownership agreements–and you can still manage those assets on behalf of the youngster. (Of course, if you and Junior have a falling out, you may not see that second house again.)

Beware: While all of these methods are perfectly legal, they can have adverse psychological consequences, says Beslow. “The flaw of these methods–and of prenuptial agreements–is that in the zeal to protect against the contingency of divorce, they become self-fulfilling prophesies. Anyone who is seriously thinking about acting on some kind of dipsy-doo should not be getting married.”
Source: California Divorce and Family Law

Prenuptial Agreements Can Promote Healthier Marriages

Heather Mahar of the Harvard Law School recently concluded a study in which she sought to assess whether the common perception that prenuptial agreements increase the likelihood that a marriage will end in divorce, and came to the conclusion that such agreements, if properly drafted and entered into for the right reasons, can actually increase the likehihood that the marriage will be successful. You can read more about the study here. The press release announcing the resutls of the study states that:

Mahar argues that the division of assets is “the least compelling reason for average American couples to consider prenuptial agreements, since most couples do not enter marriages with significant assets.” However, she finds that “for couples who choose a traditional partnership, with one spouse exiting the workforce to raise children, agreeing in advance about how to divide assets earned during a marriage or potential future earnings can protect the stay-at-home spouse against divorce laws, which have generally eliminated long-term alimony.”

The process of creating a prenup acts as form of premarital counseling, making couples talk about what kind of marriage they want, and what legal ramifications there will be if one spouse veers off course.

In the study Mahar advocates mandatory prenuptial agreements. That is perhaps a radical prescription, but it is always refreshing to see the conventional wisdom aggressively challenged.

Source for post: Emediawire.com.Hat tip to Jeffrey Lalloway of the California Divorce and Family Law Blog for this post on the study.