DAVIS LAW

YVETTE CARMON DAVIS

ATTORNEY AT LAW

I have an opinion about

PRENUPTIAL AGREEMENTS

In 2011 there has been lots of conversation about prenuptial agreements among the royals and the wealthy. I got into a conversation with a pastor about pre-nups (also called ante-nups). Her opinion is that no Christian should ever sign a  prenup, because the document presupposes divorce. And of course, Christians promise to love and honor (feminists don't want to obey!) until death.

It occurred to me during our discussion, that every pre-nup does not necessarily anticipate divorce.

ASSETS AND LIABILITIES. I posed a scenario: four adult siblings decide to go into business together. Two of them are married with children, one is divorced with adult children, and one is not yet married. They form a corporation (it could be a partnership), and sign a shareholder agreement. The siblings agree that they want to work closely together toward the success of their enterprise, but also agree that they would not admit new shareholders, except under stringent conditions. These conditions included a unanimous vote, with no absientions, and that the shares of stock are not inheritable by spouses. Why so stringent?

The parties don't want to work with anyone else, especially the two spouses that are in the family. During negotiations, they finally agreed on the unanimous voting, but also agreed that an investor could be admitted as a shareholder without a vote. One of the ways that could NOT happen, is if one of the siblings died without a will, and the ownership interest in the company passes to a spouse or children by the descent and distribution laws of the state in which they reside. Furthermore, by the terms of the shareholder agreement they all signed, upon the death of a member the shares are not personal property that will be included in the sibling's estate. Instead, the shares will be returned to the treasury of the corporation, and the estate of the decedent would be paid the fair market value of the shares.

One of the unmarried siblings finds a potential spouse. The company is doing well. The other siblings fear the suitor is a gold digger. By the terms of the shareholder agreement, this person cannot ever take part in the operation of the company, even if his spouse wills her shares of stock to him. Despite all of these terms, he may still sue in case of divorce. A prenuptial agreement can be drafted that would notify him in advance of their marriage that he would not inherit shares of stock from his spouse to-be, nor ever take part in the operation of the business, and receive only the fair market value of the shares upon her death. Another safety clause is one in which he promises not to sue the company in case of divorce.

In some states these clauses, or some of them, might not be enforceable, so a good attorney familiar with prenups should always be consulted. In Ohio, for example, couples cannot agree to custody arrangements for children. This is a matter that the court will always consider, in the best interests of the children. The probate law of the state should also be consulted, as some states may not allow certain personal property to be exempted from a decedent's estate, even though the spouse agrees.

I got the Pastor to agree that a prenup in my scenario was not a bad idea. She agreed principally because the prenup was for the protection of others, not just the spouses themselves. And because the prenup did not necessarily require divorce to be effective.

Yvette Carmon Davis - 09/2011