Thursday, October 10, 2019
Gifting interests in a family business to members of the younger generation is a great tool in any estate planning arsenal. But if that younger family member is married, it is understandable if a family as a whole would not want to have the ex-spouse as a business partner.
So what to do in this conundrum? Some parents may believe that a spousal consent form, signed by either the son-in-law or daughter-in-law, stating that in the case of a divorce, no portion of the business interest would not be transferred to them. But this could go south very quickly, either by opening a can of worms by offending the in-law or by the restriction being illegal in a particular state. Even if the stock is not considered part of the marital estate, the value of it may be, and thus the soon-to-be ex-family member could receive a higher percentage of the marital assets.
A better solution would be discussing with your own child about having a marital agreement such as a prenuptial or post-nuptial agreement. The family business may be better protected with the child having an agreement that states that the stock is outside the marital estate and not subject to division in the event of divorce. It also means that the value of the stock would also be off the table.
See Christine Fletcher, What Family Businesses Need to Know About Gifting Business Interests, Forbes, October 9, 2019.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.