Premarital and Post Nuptial Agreements

Premarital Agreements
A premarital agreement is far and away the best planning tool available. In North Carolina, parties can agree upon virtually any financial and property aspect of their marriage other than the support of children. So long as there is a written agreement after full disclosure of assets and liabilities by a party seeking to enforce an agreement or an informed voluntary waiver of disclosure, parties may make any agreement they wish about alimony, post separation support and the classification, valuation and distribution of property. While no agreement is guaranteed unconditionally to be enforceable, the courts have a strong track record for enforcement.

Here are some things a business owner can accomplish with a premarital agreement:

Preserve closely held stock as separate
Preserve all appreciation in closely held stock as separate
Preserve retirement savings as separate
Preserve assets purchased with business income as separate
Preserve successor businesses as separate
Preserve business products such as copyrights, patents, customer lists as separate
Classify fame or notoriety as separate
Eliminate the right of a spouse to inherit
Eliminate the right of a spouse to take a survivor share of a pension (ratification after marriage is needed)
Eliminate the requirement that a spouse sign for a bank loan secured by real property
Eliminate or limit a spouse's claim for equitable distribution or alimony
Control what assets procured after marriage are subject to division upon separation
Control the process whereby a division will be made in the event of a separation

Post Nuptial Agreements

While parties are not permitted to waive alimony after marriage and prior to separation, and while agreements after marriage are subject to higher scrutiny and more risk than premarital agreements, nevertheless it is possible for spouses to agree on property matters after marriage and before separation. The agreement must be in writing and, especially if it involves an interest in real property, should be notarized. A spouse should be represented and advised by separate counsel. Obviously, these agreements are much more difficult to reach after marriage. Because there is a fiduciary relationship between husband and wife, these agreements are at risk if they are not negotiated at arms length with both parties having independent counsel. Even so, there is a substantial risk of litigation concerning their validity. These agreements can be used for the following purposes among others:

Make shareholder agreements binding on spouses. This can include a valuation formula, a binding buyout procedure for a spouse and a waiver of spousal interest in assets or income from a business.
Provide for freedom to buy and sell real estate without the permission or signature of the spouse
Provide for the classification and valuation of property
Do anything enumerated above for premarital agreements except regarding waiver of alimony or post separation support

Other Considerations for Business Owners
There are some circumstances in the control of a business owner which may prove helpful to a fair division of a business asset even if there is no premarital agreement or post marital agreement, and a spouse has not signed a shareholder agreement. Here are some suggestions for business owners who are at risk for the dissolution of their marriage:

Do not inflate the value of your business interest on loan applications or financial statements.
Do not discuss the value of your business casually.
Do not send email correspondence or other correspondence opining of an inflated value of your business.
Exercise care in using exit, succession and estate planning techniques which involve the cooperation of a spouse.
Do not make a spouse a title owner of business property.
If property is separate, keep good records and preserve that property. Do not mingle it or use it for living expense.
Do not use the business to pay a phantom salary to a spouse.
Avoid record keeping practices that can result in business expenses being unfairly attributed to you personally and added back to the profit of the company.
Do not commit fraud.
Keep accurate records of business income.
Keep up your minute book and note pertinent decisions in the minutes.
If business information is confidential, only discuss it with your attorney. Other business advisors have no ability to keep the information confidential in litigation.
Do not send anything by email on your business or personal account that you would not want read in court.
Do not use your cell phone to call anyone you would not want identified in court.
Do not exaggerate your role in the business or unfairly depreciate the efforts of others.
Do not ask third parties involved with the business to do anything but tell the truth.
Do not hide business records.
Establish a procedure for purging records including emails and stick to it.
Make written contracts, especially for liabilities of the business.
Have shareholder, partnership and membership agreements that provide separation and divorce procedures.
If you have a formula for ownership valuation, use it and consistently follow the process for determining the valuation.
Do not cheat on your taxes.
Be realistic about the capital needs of the enterprise and your access to capital after a separation.
Be aware that any position you take must be supported by ordinary and necessary business documents.