A divorce can be a complicated and emotional time for both parties, but it might be even more so if one spouse owns a business. This is because a spouse may be entitled to some stake in the company unless the proper steps are taken. Two ideas to consider are a prenuptial agreement and a postnuptial agreement. A prenuptial agreement may override state property division laws and are generally respected as is by divorce courts.
For a prenuptial agreement to be valid, it must be in writing. It is often recommended that the agreement is signed in front of a judge to reduce the odds that any party to the agreement claims it was signed under duress. Such agreements should also be signed well in advance of a wedding and should contain reasonable terms. Agreements that are signed the night before a wedding are likely to be invalidated in court.
A postnuptial agreement may offer the same protection as a prenuptial agreement. However, it is often held to a higher standard as an individual may be giving up certain rights by agreeing to a deal after the divorce occurs. For the postnuptial agreement to be viewed as valid, it should be signed in front of a witness and contain reasonable terms just like a prenuptial agreement.
Those who are going through a divorce may wish to consult with a family law attorney. Doing so may help both parties come to a settlement regarding property division, spousal support and child support and custody if necessary. Legal counsel for either party may be able to review any prenuptial or postnuptial agreement in place to determine if it is valid and enforceable in court.
Source: Inc, "How to Protect Your Business in a Divorce: Prenuptial and Postnuptial Agreements", Jeff Landers, May 1, 2010