An antenuptial agreement may be important and practical for people with children from a previous relationship or with significant accumulated assets. For a closely held business owner who is preparing for marriage, an antenuptial agreement can also protect the company's future health and profits - and should be considered an important element in business continuity and shareholder negotiations.

In Minnesota (Stat.§518.58), absent an antenuptial agreement, property accumulated during a marriage is considered "marital property" and divided "equitably." Whether or not a spouse has ownership in a closely held or family business, Minnesota law may entitle the spouse to an "equitable" share of the value of the business interest regardless of the interests or desires of other owners and shareholders. Not only can a divorce affect the business owner's personal life, the potential valuation and investigation of assets is also likely to disrupt business operations. 

To mitigate or avoid the impact a shareholder's divorce would have on the business, here are some facts about antenuptial agreements that can support business health and financial security for a business owner AND the future spouse.

1. Written agreements have more enforceability than verbal contracts. Promises to take care of each other's needs mean nothing in the face of divorce. Antenuptial agreements give both spouses more control over the financial outcome, compared to allowing a judge and state law to determine what is fair and equitable.  

2. Antenuptial agreements should be reasonable and fair to ensure enforceability. Stingy agreements are more likely to be overturned and may result in the business owner paying even more to the spouse. For example, providing for the non-moneyed spouse to receive little or nothing under the terms of a antenuptial agreement will more likely cause that spouse to challenge the antenuptial agreement in the event of a divorce.

3. Changes in circumstances are case specific. Two of the six criteria for an enforceable agreement are that the agreement was fair at the time of execution AND fair at the time of divorce. A common argument in contested agreements is a "change in circumstance."  No one can anticipate a job loss, disability, having triplets or losing assets in a recession. All of these and other circumstances can impact the enforceability of an antenuptial agreement. Your goal should be an equitable settlement in the most efficient manner to avoid additional legal costs and financial losses in your business.

4. Full disclosure is always best. Regardless of the circumstances of the divorce, hiding assets or not cooperating with the valuation of a business rarely proves beneficial to the business owner. Full disclosure is another criteria of enforceability. Any attempt to hide financial information could make the agreement unenforceable.

5. Agreements can specify spousal rights to business assets. Without an agreement, the courts will consider the value of a premarital business at the date of marriage and then at the date of divorce. A percentage owed to the spouse will be determined based on that difference in value. Rather than being entitled to half of all growth throughout the marriage, the ownership stake for the non-owner spouse can be designated in an agreement (i.e. a certain percentage based on years of marriage). This can protect the business from a payout that threatens its financial stability.

6. Agreements can designate terms of payout. A non-owner spouse may be entitled to a certain ownership stake in a business, but prefer a payout to ongoing ownership. While a business may benefit from a payout over several years, this can put the non-owner spouse at risk of never receiving the full amount. The agreed payout should be fair to both sides of the transaction to avoid future legal disputes.

This is the first recession in my career where I have actually seen a decrease in divorces due to loss of personal and business net worth and other financial circumstances. However, this proves more than ever that changes in circumstances cannot be foreseen and that written agreements should extend beyond the marriage license for the couple's future financial security - and that of the business world.