Business Plans and Exit Strategies

 West Coast Woman

Published February 2006

 Does Your Marriage Have a Business Plan and an Exit Strategy?

Post-nuptial agreements are continuing to rise in popularity so I am going to repeat and expand upon some points made in this column earlier.

First of all, financial issues are almost always at the core of a divorce. Although addictions also play a large role (drugs, alcohol, gambling, infidelity etc.) these often are causing financial stress and that stress pushes one partner or the other to give up on a relationship. So how can a post nuptial agreement help?

One of the most exciting parts about a post nuptial is that it forces all the hidden issues to the surface. In working out an agreement, while you are still married, to what things would be like should you divorce, all the issues must be discussed. Inevitably the root cause of the concern will come to the surface. The good news is that hopefully these concerns are being brought up early on so they can be dealt with while the financial and emotional damage is smaller.

Let’s use an inheritance as an example. If you are a regular reader of this column you probably know that we are against the co-mingling of inherited assets during a marriage for a wide variety of reasons. However, there needs to be a mechanism in place so that the spouse who inherits a sum of money feels both protected from losing 50% of the inheritance in a divorce and also free to share the wealth with a loving and responsible spouse. A post-nuptial agreement can accomplish this.

For example suppose the couple wants to use the inheritance to buy a larger and more expensive home. If the wife who inherited the money just put it down on a house in joint name with no other provisions, then she has effectively co-mingled the assets. A post nuptial agreement would lay out in clear “business only’ terms how the couple is to treat not only eventual profits from the home, but also how a new payment level is to be managed, taxes paid etc.

The discussion of these items would inevitably lead to a discussion of cash management, career moves, paying for education of children etc. The result would be that the post-nuptial if done from a planning approach as well as a legal approach, would lead to a “business plan” for the married couple.

If your marriage is currently at a standstill financially, then ask yourself the following:

  •  Does our family have a business plan, including an exit strategy for all parties?
  •  Are we cash flow positive, and if not why not?
  •  Do we have a budget?
  • Do both parties feel that they are full partners in all financial decisions, or is one person controlling all the decisions because he or she is “better at it?” (If you are short of money every month then there is an issue with cash management and wealth management in general.)

We often get comments that post-nuptials and pre-nuptials are not romantic and that “if my partner loved me they would not need that.” How romantic is a nasty divorce? The very existence of an exit plan may be what allows both parties to feel completely committed to a relationship, based on love rather than financial dependence. Think about it. Do you want your spouse to stay with you because he or she loves you or because he or she is financially dependant?

Whenever we can, we like to focus our business on the preservation of a relationship. This is true even if there is to be a divorce and especially if there are children. Don’t let old ideas about money (and how it is not to be talked about) ruin your life and your marriage. Take control today by planning a discussion of what happens if we divorce.

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