Business Savvy: Protect Your Business with Marital
Property Agreements
By Marjorie Jobe, J.D.
As a businessperson, the most responsible and loving act
in safeguarding your family is to insulate your property
and assets from the risks of starting, running or
operating a business. Marital property agreements are
one of the most effective tools in shielding family
wealth, property and holdings from the legal perils of
litigation, judgment, seizure, forfeiture or other loss
of assets.
A solid marital property agreement is powerful and
simple. Such an agreement can be entered into either
before or after the marriage and can be modified at any
time by written agreement. As a married person your
assets and wealth are not adequately addressed or
insulated for the protection of your business or your
family until you have this agreement in place. If you
are single, you should study and understand marital
property issues before considering or discussing
marriage with your loved one.
Marital property agreements have an unwarranted and
unjustified negative stigma that this article will
hopefully debunk. Many people consider them to be a
divorce planning device and therefore view them
negatively or emotionally. Although they do accomplish
the division of property and assets in the event of a
divorce, they provide a more important layer of
protection to the business owner and his or her family.
The smart entrepreneur will recognize the primary worth
of this contractual device to be asset protection,
family protection and lending protection.
The most common form of marital property contract is
often called a "prenuptial agreement." This contract
recognizes and separates ownership interests in both the
property owned before marriage as well as the property
which will be acquired post marriage. This feature is
important because it can shelter the non-business
owner's separate property from creditors and liability
of the business owner spouse. Future income can also be
addressed in these agreements.
Post marital agreements can achieve the same kind of
separation of assets and income after the marriage is
entered should the parties agree to the property
separation. The major benefit of post marital property
agreements is the insulation of property and assets from
any liability that may flow from either spouse's
activities or businesses. However, another important
advantage of post marital agreements is that lending
capacity can be increased. For example, if you own a
business that borrows a great deal of money for a large
expansion or acquisition, the lender may restrict your
future borrowing capacity until the large loans are paid
down. As a result, your spouse may not be able to obtain
a loan for a separate line of credit or other capital
requirements for his or her business because of the
restrictions. With a marital property agreement in place
defining separate property issues of the two independent
businesses, these lending restrictions could likely be
avoided.
Even though marital property agreements should be
regarded first as responsible business planning tools
instead of divorce planners, they do serve the added
purpose of insulating business assets and operations
from the claims of divorcing spouses. No one plans or
expects to divorce when deciding to marry. However,
marriage is a leap of faith that sometimes meets with a
disastrous landing as proven by our country's divorce
rate. Thus, responsible business planning benefits from
the marital agreement's divorce consequences.
Marital property laws vary from state to state. But
regardless of where you live, your spouse could end up
as the sole owner of the business or as a partner
depending on certain circumstances and legal
consequences. Certainly, in most cases this would be
unthinkable if not merely unworkable. Having an
insurance policy in the form of a marital property
agreement against an unexpected divorce and subsequent
property division can definitely be advantageous.
Pre-marital agreements are technical and have state
specific legal requirements and procedures which impact
their enforceability; therefore, a family law specialist
or a contract lawyer with experience in drafting
enforceable premarital agreements in your state of
residence or domicile should be consulted and retained
if you decide to enter into a proper marital property
agreement.
With adequate planning and the right marital agreement,
you can protect yourself, your spouse, your family and
your business from unexpected liability and unintended
circumstances arising from any business, professional or
personal legal disaster. It is simply a smart business
practice to use these powerful legal protection tools.
About
the Author:
Marjorie Jobe is the author of "Business
Law Battle Plan for Entrepreneurs: Protect Your Company
from Lawyers, Lawsuits and Legal Disasters" and a
practicing attorney in El Paso, Texas. Visit her website
at
www.marjoriejobe.com or www.jobelawfirm.com.
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