In a divorce, couples often have to divide marital assets based on equitable distribution laws. Equitable distribution means that assets and debts are divided based on what is fair rather than an even 50/50 split. A few factors can affect the equitable distribution process, such as the length of a marriage, age of spouses, education and yearly salary. Not all assets, however, are subjected to the division process, such as gifts, inheritance and assets owned before marriage. Yet, there may be complications dividing assets when, for example, a spouse runs a business.
If you are worried that some of your property — including your business — may be divided in a divorce, there are several ways to protect assets. You could create either a prenuptial or postnuptial agreement. Here is what you should know:
Protecting your assets before and after marriage
A prenuptial agreement is a legal arrangement made prior to marriage that allows spouses to keep certain assets and set expectations for asset division during a divorce. This can reduce the amount of conflict that can arise during the asset division process.
A prenup can help protect profits and investments gained from a business. Spouses could establish how much each person would retain from a business in a divorce, including profits and business shares.
One of the biggest factors that leads many people to create a prenup is debt. A prenup can establish who would retain debt in a divorce, which can be useful if a spouse builds up a large amount of debt from a business.
If a couple is already married before making a prenup, then they may need to consider making a postnuptial agreement. A postnup works much like a prenup except that it is made after marriage. A postnup can also be used to amend a prenup, such as establishing asset division terms for a newly started business.
Are you looking to protect your business? You may need to reach out for legal guidance.