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What do Prenuptial Agreements, Postnuptial Agreements, and business failures have to do with one another? Perhaps much more than you think.


The reality is that after an unprecedented decade long business growth cycle that has created an enormous amount of wealth for many Americans, a business slow down has finally arrived. Surprised? You shouldnt be. Business downswings, and business failures, are all part of the business cycle. Business failures are inevitable. Preparing, well in advance, for the downswing of a business cycle is all part of good solid asset protection planning.


And when a business failure occurs, too often right behind is the marital relationship of the business owner as a result of the enormous pressure and stress placed on one or both of the parties in dealing with the business problems.


The reality is that 50% or more of all marriages end in divorce today. One-half. Ever notice that the emotions on the flip side of love are very bitter, hateful and vengeful? Neither love nor its antithesis is thought-out, rationalized, or logical-thinking, but the legal ramifications are plenty.


So how does a business owner plan ahead "just in case" a business or marriage fails? Does it necessarily follow that one problem must bring on yet another? What steps can be taken to help preserve what might be left of a business or struggling marriage when the other fails?


Using Prenuptial Agreements before you are married is a basic asset protection planning technique that should be considered before you walk down the isle. And if you are already married, then a Postnuptial Agreement is the correct tool.

What are examples of when Prenuptial Agreements should be used before marriage? One of the strongest situations is when one of the parties brings in significantly more assets, such as a business, into a marital relationship. If the business doesnt fail you can put into place, in advance by written agreement, how a business will remain with one party without claims of the other spouse. Businesses can survives a divorce, and you can avoid losing the business to a disgruntled ex-spouse.


If your business does fail, and the marriage falls right behind, you have established the steps of how to preserve all other wealth, or perhaps the remaining remnants of the faltering business you are struggling to hold together. A well thought out and planned Prenuptial Agreement can provide direction for business ownership and control in the event that divorce becomes a reality.


Lets not forget the importance of providing for children in a Prenuptial Agreement either, if they are in the picture. If your money or business does not matter to you, then how about making provisions in the Prenuptial Agreement for your children, or children of a prior marriage?


The Prenuptial Agreement is also a very useful and important vehicle for estate planning and business succession as well. You should consider using this along with a well-executed set of estate planning or business succession documents so that the kids, or other business successors, are protected in the event of divorce or death. The business succession agreement simply provides for the continuity of a business following the happening of a certain event, such as retirement, sale, death, divorce, or other activity.


A Prenuptial Agreement is a very important and useful tool in protecting and preserving your assets in many situations. However, they are not full proof. The law places a very tight set of standards on the formation of these asset protection tools, and if they are not properly satisfied, then they become a useless piece of paper.


But even that said, they still provide a strong psychological incentive to settle a dispute, since the time and cost to open them up in court during a divorce can be overwhelming, particularly to a weaker party, or someone in a hurry to a new relationship. In the end, it may mean the survival of the business you are protecting.


The laws vary somewhat from state to state on the formation of Prenuptial Agreements. But the common ground in most states require full disclosure of all assets, valuable consideration paid by the party with assets to the other with lesser assets, and that the agreement not be entered into under duress. Attempting to persuade your soon-to-be the evening before the wedding is also a definite prohibition.


Are you a candidate for a Prenuptial Agreement? According to a Business Week article written March 3, 1997, you are a candidate if you own a business, have children from a previous marriage, have lot of assets or a business, are supporting your spouse through professional school, or have serious success prospects. If you fall into any one of these categories, it is absolutely essential that before you say the inevitable "I do", you first sit down with a well qualified, experienced, asset protection lawyer.


Unfortunately, Prenuptial Agreements are sometimes frowned upon because, it is claimed, they cast a dark cloud over the love and affection that is being enjoyed between the parties. And, starting out a love affair that is intended to last forever, with thoughts of divorce someday, is negative and focuses the couple with a poor outlook from the beginning. Hum bug I say!


One small bit of reassurance for the faint hearted on this issue: If your beautiful lovely dream machine fails to walk down the aisle with you after you nicely gift-wrap and present your Prenuptial Agreement well in advance, it was probably for the better. Look at this agreement as a reconnaissance mission to flush out the enemy and see their true colors.


If you are unable to work through an important and essential asset protection tool now, when everyone is lovey-dovey, then when else?


The union of a couple in ceremonial matrimony brings with it significant financial responsibilities. This is particularly true where there are unequal assets, such as a business, brought into the picture. Is this new, legally binding relationship a gold mining function for one of the partners? Or is it really true love? If it is true love, then lets put the cards, and the Prenuptial Agreement, on the table.


What was the attraction in the marriage in the first place? If not money, then lets make that clear in a written document. If the other party truly does not want your assets, then get their signature on the Prenuptial Agreement. Lets keep things honest from the get-go.


And when should you consider using Postnuptial Agreements? Is it a reality that once you are married you are allowed to present to your spouse a written document which provides for "just in case" you get divorced? Might this proposal to your spouse alone be enough to land you in domestic relations court?


Keep in mind that a Postnuptial Agreement does in fact occur after you are married. Using a Postnuptial Agreement for asset protection planning comes into play in a variety of situations.


For example, in a business situation one of the partners might be required to personally guarantee large amounts of business debt for business purposes. While I always recommend avoiding personal guarantees for business obligations, sometimes this is difficult. Postnuptial Agreements can address the possibilities of business failures by segregating the collateralized business assets from marital assets in case the business fails and the marriage is right behind. This can be a business or marital lifesaver.


And too, if a husband and wife realistically believe that their relationship will inevitably come to an end, with or without prospects of a business failure, and then they can plan ahead for this event. Business assets can be segregated from personal assets. One party can take on the risk and exposure related to the business, the other can agree to other marital assets.


Postnuptial Agreements also come into play with estate planning and business succession planning. These are important asset protection tools. For example, during the planning process the transfer of assets held in one parties name might need to be transferred, in part, into the name of the other party or their trust for estate tax saving purposes. If the marriage or business fails, then making it clear that the transfer of assets was only for estate or business succession planning purposes becomes important. This too may ultimately preserve a business by keeping it in the hands of the rightful owner.


Whoever first said, "all is fair in love and war" was on the right track. Relationships change, businesses wind down or fail, things happen. If you die before you divorce, thats good news since your love out-lasted the marriage; or at least you didnt end up in divorce court first. Think of Prenuptial Agreements and Postnuptial Agreements as insurance policies. They are there if you need them, "just in case". Then, let true love blossom and grow, and the other less wealthy partner will share in the financial rewards anyway.


There are other examples of asset protecting planning covered in my book "How to Legally Protect Your Assets."


Significantly, the key to successful asset protection planning is always to plan ahead and take affirmative planning action. Waiting until a problem occurs can be, and often is, too late. If you fail to take asset protection planning measures when life is going smooth, then all you can hope to do is provide damage control for a bad situation that happens later.


Think of good solid asset protection planning as a safety net so that if, and when, a business or marriage fails you are ready to take control of the situation. Being prepared, well in advance, is what good solid asset protection planning is all about.


The Prenuptial Agreement and the Postnuptial Agreement, used together with business ownership, are two more safety nets that you should consider now, today, if you are seriously interested in protecting and preserving your wealth. Asset protection planning means using planning techniques, and acting today.


The importance of acting now, combining with the synergy of legal planning tools working successfully together, is covered in great detail in "How to Legally Protect Your Assets" found elsewhere at this site.



(C) Copyright 2006 David Tanzer all rights reserved.