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Many marine businesses are family run and more often than not, the family’s priority is to ensure it is preserved for future generations. There are many ways to protect a business but often people neglect to consider the impact of a marital breakdown and how to safeguard against a claim from a future/current spouse.

Anyone with a business to protect, or anyone with a significant disparity in wealth entering a marriage, should consider whether a pre-nup would offer the reassurance they need. The agreement also seeks to protect assets which can include moorings, sailing boats, yachts and any other types of vessels.

It is important to understand that such an agreement doesn’t have to be entered into before a wedding – a post-nup (i.e. after the marriage has taken place) has exactly the same effect.

Since 2010, the law on pre-nups has been clarified and their weight has increased significantly.  The court’s normal starting point on divorce is a 50/50 division of a couple’s assets. A correctly drafted pre or post nup agreement changes this so the starting point becomes the terms of the agreement.  This can make a huge difference to the outcome of a divorce.

Here are a couple of common examples of where pre and post nups are used.

 

  1. Second marriages

Many people are choosing to remarry and the number of people getting married for the second time is on the rise. For some couples, one or both of them may have built up significant business interests or assets before their second marriage and they may wish to preserve these to pass on to any children from their first marriage.

If this second marriage breaks down, potentially all of the couple’s resources (including the family business) could be considered for distribution by the court when deciding the financial settlement. This could have a detrimental impact on the business particularly where any cash extracted from it causes cash-flow issues. In an effort to avoid this, it is advisable to enter into a pre or post nup which ring-fences pre-acquired business interests and assets from what would be shared.

 

  1. Succession and inheritance tax planning

If you are thinking about handing on the business to the next generation as part of your inheritance tax planning, you may feel strongly about ensuring that the business remains within the family.   You may also have concerns about potential claims from a spouse of one of your children which could prevent you parting with your share in the business tax-efficiently.  One possible way to safeguard against this is to require your children to enter into a pre nup (or a post nup if they are already married when you plan to make the gift) with their partner/spouse before you adjust the business ownership.

The agreement can ring-fence the business from the assets shared on divorce, subject to the reasonable needs of the spouse being met, to minimise the impact of a divorce and protect the business for future generations.

The court will only follow the terms of a pre or post nup agreement if it is entered into freely and with a full understanding of the terms of the agreement and that the provision for a spouse within the agreement is fair. It is really important that legal advice is sought to ensure all these requirements are met to minimise the risk of the court departing from the terms in the event of a divorce.