What Is a Prenuptial Agreement?
A prenuptial agreement, also known as a “prenup,” is a legally binding contract entered into between two people before they marry. The purpose of this type of agreement is to specify how assets and debts will be divided in case the couple should divorce or if one spouse should die. A prenup details each party’s property rights and specifies financial remedies in case of divorce. Important reasons for entering into a prenuptial agreement include:
- Protecting assets and property rights in the event of a divorce
- Reducing the potential for conflict by agreeing on the terms before marriage
- Clarifying financial responsibilities and expectations during the marriage
- Specifying how property is passed on after death
- Protecting business interests
What Are the Requirements for a Valid Prenup in Florida?
To be a valid and enforceable contract in Florida, a prenuptial agreement must meet certain requirements, including the following:
- It must be in writing, signed by both parties and notarized.
- The agreement must be entered into voluntarily, without undue influence or fraud, by both parties.
- It must include full disclosure of information concerning all income and assets owned by each party.
- A prenuptial agreement must be validated by a marriage, at which point it goes into effect.
After marriage, a prenup can only be amended, revoked, or abandoned by a written agreement signed by both parties.
How Can Equitable Distribution of Assets Affect Business Owner Interests in a Divorce?
Equitable distribution of marital assets and liabilities is required under the 2018 Florida Statutes at § 61.075. Marital property is divided fairly but not necessarily equally. In its decisions regarding equitable distribution, the court considers all relevant factors. Under the statute, these factors include:
- Duration of the marriage
- Contribution of each spouse to the marriage
- Contributions of either spouse to the personal career or educational opportunities of the other spouse
- Interruption of educational opportunities or personal career of either party
- The desirability of retaining the marital home as a residence for a dependent child or any other party
- The desirability of retaining any asset, including interest in a business, corporation, or professional practice, is “intact and free from any claim or interference by the other party.”
Marital property includes any assets or debts acquired during the marriage, regardless of which spouse acquired it or used it or whose name appears on the title of the asset or the account. If you start a business during your marriage, it may be subject to equitable distribution. Even if your business was established before your marriage, without a prenuptial agreement, your spouse may still be entitled to a portion of its value if:
- The business increased in value during the course of the marriage; or
- Your spouse contributed to the business during the marriage.
What Can Be Included in a Prenuptial Agreement?
Premarital agreements in Florida are allowed certain content under the law. The Uniform Premarital Agreement Act specifies that parties may establish a contract that includes the following:
- The rights and responsibilities of each party regarding the property of either (or both) parties, no matter when acquired, or where located.
- The rights regarding the control of property, including sale, purchase, transfers, and similar transactions;
- How the property will be treated in a separation, divorce, death of one spouse, or other event;
- The establishment, modification, waiver, or elimination of any spousal support;
- The creation of a will, trust, or other legal documents related to enforce the provisions in the agreement;
- The ownership and allocation of proceeds from life insurance policies at a death of one partner;
- The selection of the law to govern the construction of the agreement; and
- Any other matter, including personal rights and responsibilities not in violation of the public policy of the state or any law imposing a criminal penalty.
The statute specifically states that the right of a child to support may not be adversely affected by a premarital agreement.
How Can a Prenup Help Safeguard Your Business Interests?
A prenuptial agreement can help protect your business by setting forth an agreement as to how it will be treated in the event of a divorce. In the case of a family-owned business, it can address the valuation of the business at the time the prenup is made, each spouse’s ownership interest in the business, and what happens with various business interests, including appreciation. It can put provisions in place, such as non-compete clauses, confidentiality clauses, and social media image protections, to help ensure the business remains intact even if the marriage dissolves.
Whether you already have an established business or plan to start one in the future, you can include present or future business interests as separate property in a prenup. A prenuptial agreement can specify that any income generated by the business will be considered separate property not subject to distribution in the event of a divorce. In the alternative, it can state how business income will be divided between the spouses if the marriage is dissolved. A prenup can also set down what happens to business debt acquired before or during the marriage.
Skilled Legal Assistance With a Prenuptial Agreement?
A properly drafted prenuptial agreement can help protect both parties from financial hardship and risk in case the marriage is dissolved. This is particularly important when a business owner’s interest is involved. At The Law Office of Erin Morse, we take a proactive and personalized approach to help our clients prepare for the future. Call us today at (407) 743-6059.