No one likes to plan for the failure of a marriage. But with the average nuptials in Canada lasting a mere 13.7 years, according to StatsCan, it's not surprising that prenuptial agreements are becoming more popular among today's couples looking to walk down the aisle.
Having a prenup is especially important when there is a family business involved. The business is often the main source of income for the family and it needs to be handled with care in the event of a divorce in order for the family to preserve their wealth.
While many people dread the idea, it is best to be up front and have an open conversation around expectations as early as possible in the relationship. Maintaining fairness and perspective is easier at this stage, when there isn't a lot of negative emotion involved. In fact, one client tells potential mates right up front, "I come with a marriage agreement."
When two generations disagree about the prenup
Parents involved in a family business, especially where there is considerable wealth, often require their children to enter into a prenuptial agreement before they start cohabiting with someone or before getting married.
This was the case with one client, the second generation of a wealthy Canadian family, whose parents were not pleased that her future husband was not agreeing to their terms. She was not comfortable forcing her parent's rigid expectations on her reluctant fiancé.
This created rifts within the family and also between the family and the fiancé. Eventually, a more balanced prenup was signed, which provided enough protection for the shares of the family business -- held for several generations -- but also addressed some of the fiancé's concerns.
There were two elements lacking in that case:
• Early discussions among the family members before any negotiation with the fiancé even began. It's important to be open regarding expectations from the outset, and come to some kind of alignment on what's really important.
• Ongoing dialogue within the family as the negotiations of the prenup evolved, so that everyone is kept apprised of what is and is not achievable at the negotiation table.
More communication before and during the negotiation process would have helped smooth the relations. The patriarch and matriarch would have understood why some of the items on their wish list were unacceptable to the fiancé, and the daughter would not have felt so conflicted as she tried to please the two opposing sides -- her parents and her fiancé.
If the kids won't sign a prenup
A substantially wealthy family I'm working with is devastated that, unlike their two eldest sons who have already wed, the youngest son refuses to sign a prenup. The son said that he would prefer being stripped of any family wealth than ask his fiancée, who is also the mother of his newborn baby, to sign a prenup.
In another family, while the son was perfectly willing to enter into a prenup, the fiancée refused resulting in the couple getting married without one.
Another unfortunate situation may occur where the family member enters into the prenup to appease the family but negates its effect during the marriage.
We can't force our own children, or their future partners, to sign a prenup. We can educate them on some of the benefits of having a prenup.
If education and honest communication fail, the family may need to reconsider other methods of keeping some control over their family wealth. Creating a discretionary trust is a popular vehicle though, in family law, even discretionary trusts have quantifiable value when it comes time to divide assets upon a divorce. Some families may decide not to pass on the ownership of the shares in the family business to their offspring whose new partner refused to sign a prenuptial agreement.
Prenups don't have to be all one-sided in favour of the family that wants to protect hard-earned assets. I find that bringing fairness and a balanced approach will often allow the young couple to reach a satisfactory agreement.
Nathalie Boutet is an experienced family law lawyer, mediator and certified Family Enterprise Advisor™ skilled at providing unique strategies and out-of-court results to the complex human, legal and financial matters related to separation or divorce within businesses and family enterprises.. To learn more, visit http://www.boutetfamilylaw.com/.
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