Protecting your business in the event of death and divorce


Protecting your business in the event of death and divorce

We spend a lot of time putting specific measures in place to protect our assets during our lifetime. 

It should therefore follow that we apply the same level of forethought to safeguarding our business assets upon significant life events such as entering into marriage or upon death.

There are a number of wider protection methods available, which are perhaps not at the forefront of our minds when considering how best to protect our business assets. 

Marriage and your business

How are assets divided upon divorce and how could this affect your business?

Under English law, upon marriage a spouse is entitled to a share in the ‘matrimonial assets’ should the marriage breakdown in later years.  When faced with a dispute surrounding the appropriate division of matrimonial assets between spouses, the Court will focus on the guiding principles of ‘equal sharing’, ‘the ‘needs’ of the respective spouses (and dependants if there are any), and ‘compensation’. 

More often than not, the most contentious issue arising in such applications surrounds the definition of ‘matrimonial assets.’  These are not restricted to those assets which arise solely during the marriage; they can, in fact, include all assets which either spouse separately brought into the marriage or inherited and include any business assets.

Clearly, the notion that business assets could be lost in a divorce is an unwelcome thought, particularly if there are children to whom one spouse had planned to pass the business in years to come. 

How to use nuptial agreements to protect your business

There are two types of nuptial agreements.  A pre-nuptial agreement is a legal agreement between two individuals made before their marriage has taken place.  A post-nuptial agreement is a legal agreement between two individuals who are already married.

There has been a real shift in the Court’s approach to nuptial agreements.  This is ultimately since judgment was given in Radmacher v Granatino [2010] UKSC 42 in which the Supreme Court considered that weight should be given to a nuptial agreement.

The existence of a nuptial agreement enables each individual to clearly identify ‘matrimonial’ and ‘non-matrimonial property’.  Once the assets are identified in this way, the agreement can set out  the couple’s intentions in respect of how the ‘matrimonial’ and ‘non-matrimonial’ property should be dealt with and how financial affairs, both during the marriage and in the event the marriage breaks down, should be conducted.

By entering into a nuptial agreement, you may be able to protect your business by identifying it as ‘non-matrimonial property’, to be ring-fenced from becoming subject to a later financial claim in the event of a marriage break down. 

What happens to your business when you die?

As well as considering whether you can make use of very advantageous inheritance tax reliefs on your business on your death, you also should give some thought to succession planning for your business. Make a Will which allows your executors to carry on managing your business immediately after your death and also ensure it stipulates to whom the business assets should pass.  

Next steps

Seek advice from professional legal advisers to ensure your business is unaffected by personal events.

  • Consider whether a nuptial agreement would be relevant and helpful in clarifying ownership of assets
  • Do you have a will and does it meet your needs? Check that your will makes provision as to who gets business assets on your death
  • Plan for succession – what happens to your business if you’re no longer there to manage it? Does your ex-spouse have a claim on your business assets?

This article was published in the Travel Trade Gazette on 19 November 2015.

To download the article, please click here


For more information please contact Gail Brooks, Associate, Private Client - Family. 

 Gail Brooks 

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Published: 23 Nov 2015

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