Sabrina Winters, Connors Stillwell
If 2020 taught us anything, it’s that sometimes we are blindsided by events outside of our control. You can’t predict every twist and turn, but you can take steps to protect yourself. You have insurance on your car; on your home; on your life. You work with financial advisors and corporate lawyers to protect and grow your business and investments. But are you prepared for the fallout of a relationship breakdown?
You may know that business assets in only your name are presumed to be excluded from the pool of property divided on divorce. But you might not realize that New Brunswick law does allow a court to divide those assets in certain circumstances, upon a claim by the non-owner spouse. Relying on the presumed indivisibility of business assets is a gamble, and what’s at stake is your livelihood. So how do you protect the business you’re working so hard to grow?
Cohabitation agreements (before marriage) and marriage contracts (at or after marriage) are types of domestic contracts that let you and your spouse negotiate expectations in case of separation. A skilled family lawyer with experience in corporate matters will work with you to understand your relationship and business and will create a contract to protect you. Your spouse will review the contract with their lawyer, who will advise them of their rights—a critical process to ensure the domestic contract is enforced if challenged in court.
A domestic contract can:
- Set out entitlement to any type of asset, even ones acquired after the contract is signed;
- Provide for the payment—or non-payment—of spousal support;
- Protect your inheritances, business assets, shares, etc. by having your spouse release any claim to those things; and
- Provide the spouse who does not own the assets with certainty and comfort in knowing what to expect in the case of marriage breakdown.
Most importantly, a domestic contract is negotiated and signed while everyone is friendly and cooperative. This approach is infinitely better than arguing over assets in the aftermath of marriage breakdown, when feelings are hurt and tempers are flared.
Corporate structuring and tax planning with an eye toward protecting assets in case of divorce is a good starting point. As is proper estate planning with a will and Powers of Attorney. But it’s not enough. The savvy business owner has a team of legal and accounting professionals who work together, and that team should include a family lawyer with corporate experience to make sure all angles are covered. Keep in mind that without a domestic contract, even an unsuccessful claim by an ex-spouse will cost you time and money. A properly drafted domestic contract can thwart any such claim before it becomes an expensive nightmare.
And isn’t that a worthwhile investment in your business?