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3 times a prenuptial agreement won’t protect a business owner

On Behalf of | Nov 9, 2023 | Divorce |

Business owners have much to lose in the event of a divorce so many of them safeguard this interest before they get married. Signing a prenuptial agreement with a fiancé is one way to better ensure that a business isn’t at risk if they decide to divorce. A prenuptial agreement can set a company aside as separate property or outline very specific terms concerning what will happen with the company and other property should the couple eventually divorce.

Business owners served by their spouses or contemplating filing for divorce themselves often operate under the assumption that a prenuptial agreement will protect them and dictate what happens during a divorce. However, there are certain scenarios in which a prenuptial agreement will not hold up in family court.

Coercion or claims of duress

If the business owner coerced or manipulated their fiancé into signing a prenuptial agreement, their spouse may use that misconduct to invalidate the agreement later. Scenarios in which someone felt as though they had no choice but to sign, such as when one fiancé was pregnant but the other would not finalize the marriage without the contract, could lead to the courts deciding to invalidate the agreement later.

Hidden assets or inaccurate disclosures

The negotiation of a prenuptial agreement requires the thorough and accurate disclosure of someone’s resources. If one fiancé intentionally hides certain assets, that misconduct can undermine the validity of the prenuptial agreement later. Proof of financial misrepresentation may lead to the court setting aside the agreement during divorce proceedings.

Unconscionable terms

Frequently, those requesting a prenuptial agreement primarily want to protect themselves and the assets they view as most valuable. For a contract to be valid and enforceable, it has to offer something of value to both of the parties involved. If the agreement only protects one spouse at the cost of the other, the family courts may decide to set aside the agreement because it is unconscionable and therefore unenforceable.

Even in scenarios where the courts may not uphold a prenuptial agreement, it is often still possible for people to protect the business that they own. Seeking legal guidance during divorce proceedings can decrease the chances of an unfavorable outcome.