Divorce and Protecting Your Business

By Michael Franklin

As many business owners here in Massachusetts know, a marriage is not guaranteed to succeed. Some may last for decades before failing, others just a few years. But no matter how long the marriage existed, its demise can have a profound effect on a business – unless the business owner took steps ahead of time to minimize the impact a divorce would have on it.

One of the best ways to minimize the impact is with a prenuptial agreement. In most cases, Massachusetts’ law upholds the terms of a prenup – so agreeing ahead of time on how things will be handled should a divorce occur can prove invaluable in protecting a business and its assets. Even in states like Massachusetts which considers a variety of factors when deciding how to split a couple’s assets, a prenup can help protect a business that would not otherwise be protected. In order to ensure that the prenup won’t fold under pressure, it needs to be drawn up under the following conditions:

  • Full financial disclosure takes place on both sides.
  • Both parties have their own attorneys.
  • Both parties have time to give the agreement serious consideration.
  • Neither party feels pressured to accept it.

If the above factors are met, chances are strong here in Massachusetts that the agreement will be able to withstand a challenge.

Prenuptial agreements aren’t the only way for a business owner to protect his/her business. A postnuptial agreement is another. Post-nuptial agreements are usually used in situations where a business was started after the marriage occurred. However, it can also be used by someone who owned a business at the time of the wedding but didn’t arrange a prenup beforehand. Here in Massachusetts, a postnup is scrutinized a bit more closely than a prenup because of the conditions under which it is made. Because of that, the owner needs to be sure that the agreement is drawn up under the following conditions:

  • Each party has his/her own attorney.
  • The agreement is above board with no fraud or coercion taking place.
  • Full financial disclosure is given with nothing being held back or hidden.
  • Each party is aware of the fact that he/she is waiving the right to a judicial determination on the issues contained in the agreement.
  • The terms of the agreement are “fair and reasonable”

If the above factors are met, chances are strong that the agreement will pass judicial scrutiny here in Massachusetts.