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Prenups and trusts protect business assets in divorce

| Feb 17, 2017 | high asset divorce

Just like any other marital assets, business interests are often subject to division in a divorce. A Minnesota couple that overlooks this possibility could endanger the company that they own if they end their marriage. The business might not have enough cash on hand to buy out one of the parties, which could force its sale. Planning for this possibility could eliminate such pressures and ensure assets stay in family hands.

If one of the parties has started the business before getting married, a prenuptial agreement could set the terms for how to treat the assets in a subsequent divorce. In some situations, the business might be segregated from marital assets and assigned to one party. Alternatively, the agreement could specify how to handle a buy out. This could establish the valuation method for the company and how one spouse could sell shares back to the company. The parties might also choose to create a buy-sell agreement instead of a prenuptial agreement.

Trusts represent another vehicle for asset transfer. If a father wanted to give company stock to a daughter, then the assets could be placed in a trust. The trust could specify that she is the beneficiary and that a spouse cannot access the money in divorce. To ensure this protection, the assets need to stay within the trust.

Minnesota follows the principles of equitable distribution during the property division stage of divorce proceedings. This means that, absent an agreement between the parties, a court will divide marital assets in a manner that it deems to be fair. Even if a business was started prior to a marriage and operated solely by one of the parties, any appreciation in its value during the marriage could in some instances be deemed marital property. People in this position may want to have their respective family law attorneys negotiate a settlement accord.

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