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Is a prenuptial agreement good for business and marriage?

| Jan 7, 2021 | Prenuptial/Postnuptial Agreements |

Love, romance and marriage all get rolled up together, often thought of as chapters in life (though not necessarily in that order). Couples usually think of marriage as a union of love that results in family, and less as a legal contract that affects property, finances and sometimes business.

But for a business owner whose first priority before marriage has been keeping it going, expanding it and making it profitable, having a prenuptial agreement that keeps that business out of potential disputes or commingling down the line is a wise decision.

What is a prenup in New York?

Although New York has not adopted the Uniform Premarital Agreement Act, there is a provision for pre-marital contracts under New York Consolidated Laws, General Obligations Law GOB § 3-303. The full text of the statute states “A contract made between persons in contemplation of marriage, remains in full force after the marriage takes place”. Such a contract in New York will provide:

  • that designated separate property will not become commingled after marriage
  • that specified separate property will become shared after marriage
  • spousal maintenance in which one party will be responsible for financial maintenance of the other during or after marriage
  • the support of non-adopted children from a previous marriage in the event of divorce

Can a prenuptial agreement be challenged?

A prenuptial agreement may be challenged or not enforced under the following conditions:

  • evidence of coercion or duress, in other words if one party was forced to sign the agreement
  • evidence of fraud, of assets not properly disclosed, or concealment of assets from the other spouse
  • if both spouses used the same attorney and there is evidence that the agreement was unfair
  • if the agreement creates financial hardship on one of the spouses or appears grossly unfair

How will a prenup protect my business?

A prenuptial agreement can protect one or both spouses’ business interests in several ways. Establishing the value of the business at the date of marriage will protect that asset in divorce, and provisions concerning the contributions of the other spouse can also be addressed in the prenup. You may assign a percentage of the business to which your spouse is entitled as a way of preventing it from being sold or divided by a judge. And your contributions to the business outlined in the prenup can be shielded from a distribution of assets in divorce.

Being pragmatic in business, and in marriage, can lead to a happier and more realistic marital arrangement. Finding supportive and knowledgeable New York City legal counsel to help is a first step.

 

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