The Importance of Prenuptial Agreements for Married Couples Who Own a Business
Recently, Forbes featured an article that discussed how divorce can complicate business ownership, particularly if the value of a business increased during a marriage. The value of a marital business in Illinois will usually be included in marital assets that will need to be split between divorcing spouses following a business valuation. However, there are steps a party can take to protect the business and their investments. If they have a greater stake in the business or if they consider the business to be separate property, they may be able to prevent a business valuation from being conducted.
While marital and separate property can be incredibly complicated, typically, one party will claim a right to a certain percentage of the other party’s business, whether or not they contributed directly to growing it. One of the biggest steps a person can take to protect their business during a divorce is to have a pre-nuptial agreement in Illinois in place before the marriage begins. In order for the prenup to be most effective, it should contain certain elements, including:
- The agreement should be in writing
- The agreement must be made voluntarily and without coercion
- The agreement must provide an honest admission of assets, nothing should be hidden
- The agreement must be fair: one party cannot receive significantly more than the other
- It must be implemented by both parties, in front of witnesses if possible
By making use of a pre-nuptial agreement, both parties can determine in advance what property will be considered marital or separate property and how the marital property should be divided in the event of divorce.
Another option would be for a party to set up a Domestic or Foreign Asset Protection Trust which essentially transfers the ownership of separate property into the trust. While there are some exceptions, this would work for most business entities, and would need to be done several years before a divorce or else it may be able to be voided. A post-nuptial agreement can also be used to protect a business during divorce, though they are frequently challenged.
When your business is on the line, you need skilled and experienced legal assistance to ensure that you receive what you need and deserve. At Nottage and Ward, our Chicago divorce attorneys have spent over 20 years helping families through the complexities of the divorce process. To learn how we can help you, call 312-332-2915.
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