If You Own a Business in Pennsylvania, Consider a Pre-Marital Agreement before Marriage

By Sheryl Rentz on April 29, 2011

Forbes featured an article recently discussing how divorce can complicate ownership of a business, especially if the business’ value increased during the marriage. This value will typically be included in the marital assets that will need to be divided between former spouses after a business valuation in Pennsylvania is conducted. However, there are a few steps a person can take to protect the business during the divorce if they consider the business to be their separate property or if they have a greater stake in the business and may avoid having a business valuation be necessary.

Separate and marital property can be extremely complicated, but usually, one person will be entitled to a certain percentage of the other person’s business, despite whether they directly contributed to growing it or not. One of the most advantageous steps a person can take to protect their business during their divorce is to already have a pre-marital agreement in place before the marriage starts. In the agreement, details regarding both peoples’ property rights as well as other expectations would be described if the need to divorce arises.

For the pre-marital agreement to be most effective, certain elements should be covered, including:

• It should be done in writing;
• It must be done without coercion and is voluntary;
• It must show an honest admission of assets, with nothing hidden;
• It must be fair: one person can’t receive significantly more than the other;
• It must be implemented by both parties, and if possible in front of witnesses.

Both parties involved in the agreement can decide in advance what property will be considered separate or marital property and how the marital property should be split in the event of divorce.

Another option instead of a pre-marital agreement would be for a person to set up a Domestic or Foreign Asset Protection Trust. Doing so essentially transfers the ownership of separate property into the trust. This method would work for the majority of business entities, though there are a few exceptions, and would need to be done several years in advance of a divorce or else it is possible if may be able to be voided. A post-nuptial agreement can be put into place to protect a business during a divorce in Pennsylvania; however, they are challenged frequently.

Sheryl R. Rentz is a skilled Philadelphia pre-marital agreement attorney who can answer any questions you may have about the Pennsylvania divorce process, including questions regarding property division, business valuations, pre-marital agreements, and more. Call 610-645-0100 to learn how The Law Offices of Sheryl R. Rentz can help you.