We have all heard of pre-nuptials in high profile family and especially Hollywood marriages and more often after a star’s divorce happens.  A pre-nuptial agreement also can be necessary in a family business, where the family wants to ensure that the business and enterprise stays within the family, whether or not one of the children’s marriage survives.  This is a cold look at the world of business, and protecting all of the hard work that you [and your parents] have put into the business.  Here is a link for more information and thoughts on pre-nuptial and co-habitation and if appropriate, post nuptial agreements.

Article on pre-nuptials

What does this have to do with succession?  If you enable your children to become shareholders of the family business, do you want their shares to remain in the family, under all circumstances?

Well, in the absence of a pre-nuptial, in some jurisdictions, the shares owned by one spouse could be considered to be a family asset, and the departing spouse (ex in-law) may be entitled to 50% of the value of the shares owned.  This necessary settlement could result in a financial settlement to the departing spouse, in order to keep the shares in the family of, in some cases, millions of dollars.  The pre-nuptial can give greater certainty in the instance of a divorce by setting a value or determining the entitlement of the departing spouse, to assets in the marriage, particularly shares of the family business.

Some suggested considerations for a prenuptial

  1. set as an expectation of all family members that a pre-nuptial is necessary when entering into a relationship
  2. the pre-nuptial is not about trust [or distrust]; it is simply a consistent expectation of all family members
  3. ensure that all parties obtain independent legal advice
  4. full disclosure of family assets is a necessary part of a valid pre-nuptial agreement

This is a complex area of family law and certainly needs input from an experienced lawyer, knowledgeable about pre-nuptials.

Learn, think, apply!