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Security for Ex-Spouses

Dear Advisor:

Last month, your “Two Hats” column talked about making the pre-nuptial process less dreaded by communicating early with the children. We’ve done that, and as a business owning family, we have long required pre-nuptial agreements, and all of our children have them. Still, one of the children has been having some serious marital problems, and we know we may need to help. We have begun to be a bit uneasy about meeting any financial demands the spouse might make, should a divorce occur – especially since our child’s budget is already stressed to the max due to the spouse’s spending habits. Should it become necessary, where can we find the money to help him meet his immediate obligations without compromising the business?

When most couples sign a pre-nuptial agreement, the independent lawyer for the more dependent spouse often asks for a divorce payment to provide security and independence in case of a divorce. Providing for such a “nest-egg” is consistent with a marriage contract. No one's intent is divorce or insecurity.

In business-owning families, an additional goal, if divorce occurs, is to assure the family business stock for future generations. If a payout becomes necessary and you or your child are not able to provide it from private funds, fulfillment can be done in ways that do not compromise ownership control:

1) Pledge liquid capital; or if lacking such,

2) Have the business and its owners personally guarantee the assets; or

3) Establish a line-of-credit at a bank to guarantee the funds.

The Advisor




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