Families should not expect a spouse to give up those rights for nothing,
especially with postnuptial agreements, wherein a spouse may already have had an
expectation of some cut of the stock. “Usually, when a spouse signs those
things,” says Bernard Clair, a divorce attorney with Clair, Greifer in New York,
“you talk about giving them some sort of financial consideration for that
waiver.” Experts also warn that a nuptial agreement can be found invalid in
court if it is found to be abusive or coercive—for instance, if it
stipulates a less-advantageous valuation method for the stock in the case of
divorce than in the case of death.Because of the integral role prenups play in stock ownership succession
planning, families should begin educating children about them early on. Leslie
Dashew, president of Human Side of Enterprise in Scottsdale, Ariz., and a
partner in Aspen Family Business Group in Aspen, Colo., a consulting firm
serving affluent business owners, counsels younger family members about prenups.
She recalls that during one such conversation with three children from a wealthy
family, the youngest of the three, then 16, came up with an idea to address the
awkwardness of asking a potential spouse to sign a prenuptial agreement. “She said, ‘What if we all sign an agreement right now promising to get prenups,
and if we get married without one, we forfeit a quarter of our assets back to
the family,’” Dashew remembers. The other siblings agreed to what Dashew calls
one of the greatest prenup ideas she has ever heard. “It takes pressure off the
kids. They can say to their spouse one day, ‘This agreement isn’t about you. It
was in place long before you came along.’” While no one wants to start a marriage on a contentious, even hurtful, note,
frank discussions about family assets and expectations, along with proper legal
planning, can actually prevent greater emotional upheaval over the long term, a
point to which the Grace family can now attest. The judge overseeing Cindy
Witte’s divorce trial agreed with the Graces, and her ex-husband walked away
empty-handed. “Without those documents,” Kevin Grace says, “he probably would
have gotten something. Having the right legal representation and doing proper
planning were absolutely crucial.” Estates by State
Depending upon where you live, inherited nonpublic shares of a family business
are either relatively safe or unsafe from inclusion in a divorce settlement. In
community property states (Arizona, California, Idaho, Louisiana, Nevada, New
Mexico, Texas, Washington and Wisconsin), anything inherited, gifted or brought
into the marriage is considered separate, not marital, property that is excluded
from the division of assets. The remaining states are common-law states; some of
them consider everything that both partners own or hold as fair game for
division, regardless of how or when they received it. These are the states that
represent the greatest threat to unprotected family company stock.
Kris Frieswick is a Boston-based business and finance writer.
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