For Love or Money: Considering Prenuptial Agreements

by Bradley Arant Boult Cummings LLP
Contact

Bradley Arant Boult Cummings LLP

The question of prenuptial agreements comes up often in multi-generational family- owned businesses. The question is typically raised by mom or dad, or maybe grandmother or grandfather, and goes something like: “We’re all very excited about [daughter’s/son’s] upcoming wedding. Do you (i.e., family lawyer) think you should talk to [daughter/son] about signing a prenup? We think it would be a good idea.” Note that the question is rarely raised by the glowing bride or groom to be.

What should you do? Here are some basics to consider:

A prenuptial (or antenuptial) agreement is an agreement made before a marriage, typically to resolve issues of support and property division if the marriage ends in divorce or by the death of a spouse.

How can a prenuptial agreement be useful?

  • It allows the marital parties (as opposed to a court) to define the division of assets and debts between the parties if the marriage ends either by divorce or death.
  • It allows issues of business ownership and control to be handled prior to any potential problems that may arise.
  • It can be used to provide a method of valuation for the Company’s stock in the event of a death or divorce of a shareholder.
  • It ensures that both spouses will have adequate support if the marriage ends and will help uphold each spouse’s estate plan.

Prenuptial agreements have been recognized and upheld in all 50 states.

If challenged under Alabama law, a prenuptial agreement will be carefully scrutinized by a court. The agreement will be deemed valid in Alabama if one of the following conditions are met:

  • Consideration must be adequate and the entire transaction must be fair, just and equitable; or
  • The agreement is freely and voluntarily entered into with competent independent advice, full knowledge of interest in estate and approximate value.

What do these requirements mean?

  • There can be no fraud or duress at the time of entry.
  • Both parties must voluntarily enter into the agreement.
  • The agreement must be in writing.
  • Each party must know what rights he or she is relinquishing and have a general knowledge of the estate of the other.

Thus, the circumstances surrounding the preparation for and execution of the agreement are the key to its enforceability. We also recommend that each party be advised by independent counsel.

So, how should the topic be raised with a bride or groom to be? Answer: Very carefully. Each option discussed should be addressed with care, as these are very sensitive issues.

Some good reasons for a prenuptial agreement include:

  • Family history of ownership of the Company and desire to maintain family ownership
  • Importance of the family’s control of the Company to pursue long-term plans and preserve value and the threat of disruption caused by a minority shareholder who is not aligned with the family’s objectives
  • Best interests of the soon-to-be spouses (i.e., both agree in advance that they will receive sufficient support in the event of divorce or upon death)
  • Creates an environment of trust and financial openness
  • Valuable estate planning tool
  • “Marital Insurance”

However, there are also potential downsides:

  • Others may view the suggestion of a prenuptial agreement as a manifestation of one’s distaste for the potential spouse, or as meddlesome, greedy or unromantic.
  • Finding an appropriate time to approach the topic can be difficult.
  • It can be a challenging conversation for the parties involved.
  • Lawyers are involved.

We recommend that older generations begin educating the younger generation on the subject of protecting the family business, including techniques such as prenuptial agreements, early–preferably before the engagement.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Bradley Arant Boult Cummings LLP | Attorney Advertising

Written by:

Bradley Arant Boult Cummings LLP
Contact
more
less

Bradley Arant Boult Cummings LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.