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Protecting Physician Business Assets

[By Dr. David E. Marcinko MBA]

Pre-nuptial agreements are becoming well known; but post-nuptial agreements are not so known.

Family Business Environment

Prenuptial agreements are increasingly common in family business environments. In some cases, the business owner or a shareholder’s agreement may require certain family members to enter into prenuptial agreements with their prospective spouses.

However, postnuptial agreements are becoming equally popular—and for the same reasons. They protect the family business if a family member divorces, becomes disabled, or dies.

State Laws Vary

Only a few states have laws governing the enforceability of postnuptial agreements.

For example, New York law makes no distinction between prenuptial and postnuptial agreements.

In other states, postnuptial agreements are valid only under specified conditions, which vary by state. In some cases, a postnuptial agreement is valid only if each spouse has a certain net worth. 

Another provision requires that each spouse be represented by counsel, while in some states couples must be married for two years before they can prepare a legally valid postnuptial agreement. Some states, such as North Carolina, require a court proceeding and a judge’s approval.

Where state law is silent, it is unclear whether postnuptial agreements will be enforced. New Jersey recently held that a postnuptial agreement was not valid because it was signed under duress. The spouse had said, “Either sign a postnuptial agreement, or there will be a divorce.”

Full Disclosure Needed

In the absence of duress, if there is full disclosure of financial assets and separate representation by counsel, postnuptial agreements should be valid.

For example, Donald Trump executed a postnuptial agreement with his first wife. She challenged it, but the court granted her the amount stipulated in the document ($25 million).

Assessment

Prenuptial agreements are a sensitive issue and can be difficult to propose; especially for physicians with other family business interests.

Postnuptial agreements can be equally problematic to discuss, but they too can offer some degree of protection for doctors with other family business interests.

Conclusion

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Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com

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Filed under: Financial Planning, Risk Management | Tagged: pre-nuptial agreements | 9 Comments »