Yours, Mine And Ours

Testing The Waters

Is something that unleashes such negative emotions worth contemplating? Consultants say yes. "A prenuptial agreement is just a tool. It's how the tool is used that determines its effect," says Hubler.

In a divorce, the in-law spouse may seek a lump-sum settlement and go after the family member's shares. He or she may even own shares. In either case, "it is not a good idea to keep a divorced [partner] as a partner in the business," says Nager.

If parents broach a prenuptial discussion when the first adult child gets engaged, the perception is "You don't like my fiancé." That's why formulating a policy that applies to all family members before the children even think of marriage makes sense, says Jeff Wolfson, a partner specializing in family business at Boston law firm Goulston & Storrs.

Even if no policy exists, the issue should be raised. Hubler suggests initiating the discussion with the engaged couple and framing it positively--not as "we" against "you," but as a way of satisfying both generations' interests and all parties' goals.

Hubler recommends starting with something like this: "Owning a family business is a unique situation, and we want you to know our views of stock ownership. This has nothing to do with how much we love you--because we do and we couldn't be happier that you're part of the family. We want to do everything possible to help you satisfy your own interests and move toward your goals. The idea is to create a win-win situation."

If the subject is first discussed by parents with their adult child, which Nager says is more common than two couples sitting down together, "the parent might say something like `Michael, we really love Jennifer, but there's something we need to talk about--something that's important to the business and to the family.' "

Try these techniques to keep prenuptial discussions on a productive path:

  • Introduce the idea using a magazine or newspaper article that points out the concept's weaknesses and strengths.

  • Find another family business you know that also faced this situation, and suggest your couple talk to the couple in that business.

  • Use a neutral third party everyone trusts to facilitate the discussions.

  • If an agreement is reached, make sure each person is represented by separate counsel. The agreement must protect both parties, provide full and fair disclosure of assets and liabilities, be entered into voluntarily, and be completely understood by both people.

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This article was originally published in the November 1996 print edition of Entrepreneur with the headline: Yours, Mine And Ours.

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