Personal Finance: Prenups and Other Protections
A divorce settlement can kill a private company. But James Pollock, a senior vice-president at Sherburne, Powers & Needham, a Boston law firm, suggests three ways to mitigate that threat:
1. Sign a prenuptial agreement that will provide for a division of assets that won't threaten the life of your company.
2. If it's already too late to take step one, insist that your children and business heirs do so before they marry. In divorce court, a judge may base a settlement on expectancy -- the company's anticipated value to an heir -- unless a premarital agreement limits the in-law's access to corporate stock.
3. Sign spousal agreements restricting the transfer of stock in the event of a divorce. Your goal is to keep stock in the hands of company management. To do that, agree upon mutually fair buyback terms (ideally, before there are signs of marital discord). If possible, arrange for payments to be made in cash rather than in company stock.* * *