Protecting the family business in a marriage breakdown
The business family consists of owners, spouses/partners and their children.
In the event of a marriage breakdown, protecting the family wealth and the family business and assets is necessary even if the separating spouses/partners are not directly involved in the business.
The purpose of asset protection in such circumstances is to preserve the business as it is the source of wealth for family members. Family members in turn are concerned to protect their own assets and ensure family wealth is transferred to not only the next generation but to successive generations.
There are a number of ways that family wealth can be protected as a precautionary measure. It is common to use more than one with the intended end result being a suite of documents all of which are consistent with each other.
Asset protection at a business level
We have all heard of Trusts and Family Trusts. Just about all family businesses have at least one Family Trust. These can be very effective vehicles for asset protection and passing the actual assets down to later generations while at the same time enabling the current family members to enjoy the fruits of those assets along the way. But they must be set up carefully and the trust deed prepared carefully so as to withstand an attack from a creditor or a former spouse.
Learn more about discretionary or family trusts.
Asset protection on a personal level
We should all have a Will and an Enduring Power of Attorney. These documents are effective tools for asset protection but they cannot do the job on their own. The Will document has to be prepared by experts in this area to produce the outcome intended. But a Will is of no use until the person passes away. This is why we should also have an enduring power of attorney. This document is for use while a person is still alive but has lost capacity or is unable to look after their affairs.
The third document in the suite of personal documents should be a Financial Agreement for those family members who are either married, about to be married or in a relationship. It is this document that will do the heavy lifting in protecting the family business and family wealth when a relationship comes to an end. As with Wills, Financial Agreements must be prepared by specialist family lawyers who are experts in this area of the law.
We would think that it would be a responsibility of each family member to have all three documents in place as a pre-condition to being a member of the family business decision making process.