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Prenups and family firms
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August 27, 1996: 8:39 p.m. ET
How to keep the family business safe from vindictive ex-spouses
From Correspondent Jill Brooke
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NEW YORK (CNNfn) -- With 50 percent of all U.S. marriages ending in divorce, lawyers are drafting more and more prenuptial agreements designed to keep family businesses from becoming spoils in a divorce fight.
Many parents who own one of the nation's 13 million family businesses are asking adult children to make sure a divorce doesn't turn into a scene from "The War of the Roses." (QuickTime Movie 1.19 MB)
"What you're protecting yourself against is, frequently, extortion," said lawyer Jacalyn Barnett. "People will try to put it to their former in-laws in any way they can, and force someone into an unfair settlement."
Experts suggest a prenuptial agreement with the following points:
- that the family business is not the adult child's asset, even if he or she will eventually inherit it;
- that non-family members don't have voting rights to the business;
- that a confidentiality clause bar divorcing spouses from revealing corporate or family secrets.
There are several ways to write prenuptials without offending the non-blood relatives, according to Marcy Syms, president of the family owned Syms clothing-store chain.
"The earlier you bring up the issue of prenups, the easier it is to discuss -- and the more casual (the non-blood spouse) will be about it," Syms said. "If it's something that happens 48 hours before the wedding, of course, there will be an upheaval and protest."
Syms also recommends assuring the non-blood spouse that even if the person signs away rights to the family business, they'll still be provided for in case of divorce.
Experts say prenuptials make sense for all types of family businesses, no matter what size.
They stress that small restaurants, cleaners or food stores often do not have the resources to pay off a vindictive in-law.
"Sons- and daughters-in-laws are going after family businesses now -- and it's only going to increase," attorney Barnett said.
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