Preserving Generational Wealth: Protections for Marriage and Divorce
At Broder Orland Murray & DeMattie LLC, Connecticut’s largest Family Law firm with offices in Westport and Greenwich, we regularly counsel families about preserving generational wealth in the context of upcoming and future marriages. While no one enters a marriage expecting to be divorced, the statistics reflect a significant percentage of failed marriages. Whether a family has managed to preserve wealth throughout the years or is looking to protect more recent wealth, perhaps derived from a successful business, employment or investment, it is important to discuss ways to safeguard and protect accumulated and ongoing wealth. Whether the goal is to protect an ongoing family business or to protect family trust interests, it is important to be proactive in exploring the landscape. With vast experience in our practice, we recognize that having conversations with children about safeguarding wealth, particularly when a marriage is on the horizon, can be very sensitive and difficult. We have been successful in counseling families in ways to address these concerns. This may involve:
- Prenuptial Agreements: One of the most common objectives of a prenuptial agreement is to ensure that assets owned by a party prior to the marriage and/or assets that may be received during the marriage through inheritance and trust distributions, including any appreciation in the value of such assets that may occur during a marriage, will be solely retained by that party in the event of a divorce. Where generational wealth is involved, the negotiation, preparation and execution of a well-crafted prenuptial can be critically important for ensuring that generational wealth is preserved and maintained in the event of a divorce, and we regularly negotiate and draft such agreements on behalf of our clients.
- Post-Nuptial Agreements: Postnuptial agreements (which are similar to prenuptial agreements, except that they are entered into after parties are marriage) can also be critically important for ensuring that generational wealth is protected in the event of a divorce. Postnuptial agreements often become desirable in instances where one spouse accumulates substantial wealth after the marriage date in a manner that was not necessarily anticipated at the time of marriage, such as starting a business that becomes highly successful or receiving a valuable inheritance from a family member.
- Family Business By-Laws: Absent appropriate protection, generational wealth derived from a successful family business can be exposed when a family member who holds an interest in such a business divorces his or her spouse. We coordinate with business counsel on integrating provisions into a business’s by-laws that serve to shield business interests from being subject to distribution to a non-titled spouse in the event of a divorce.
- Trusts: Families can also protect generational wealth through the creation of trusts, and when a family member is getting married it may be wise to create such instruments in conjunction with the preparation and execution of a prenuptial agreement in order to ensure that these documents align with each other. Particularly in instances where generational wealth is at stake, we regularly collaborate with our clients’ estate planning team to ensure that prenuptial or postnuptial agreements that we prepare work in unison with any relevant trust instruments.