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  • Writer's pictureDavid H. Kinder, RFC®, ChFC®, CLU®

Divorce is harder to plan for with infinitely more emotions

Updated: May 9


This article is probably more for me to help clarify this subject more than anyone else. I am on a committee to help expand on a training course on helping business owners with their planning in various areas. This program may become a designation itself for insurance agents and financial advisors. With such a commitment to building out a course, comes with an implied mandate to make it as complete and all-encompassing of a curriculum as it can be, even in areas where the agent/advisor doesn't earn any compensation for such advice or guidance.


One area that is common where agents and advisors don't get compensated, is in the recommendation to get a will or a trust. This is common to refer the client either to an attorney licensed in your state... or for legal document preparation (such as LegalZoom or similar services). Something is always better than nothing. In part of my research for developing this, I do reference other resources. The Exit Planning Institute has a "5 D's Infographic" (Divorce, Disagreement, Disability, Distress, and Death) that shares this about divorce:


A divorce could lead to dissolving your business. If you and your ex are in business together, the negative impact on your business could be widespread. Without proper legal documents, a divorce could impact not only your personal life but your business value as well.


Divorce is the largest killer of wealth today. The joke these days is "only Jeff Bezos can still be one of the wealthiest men in the world today after a divorce."


Jeff Bezos still rich after divorce
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Now, what are the possible solutions or guidance as recommended in that piece?


  • Have a signed and detailed pre-nuptial or post-nuptial agreement dictating how assets are to be divided should you and your spouse separate.

  • Do not use collateral in your home to invest in your business as this can cause confusion about what belongs to whom during asset distribution.

  • If your spouse has held a pivotal role in the day-to-day workings of the business but decides to quit in light of the divorce, is your team prepared to take over their responsibilities?


Sounds easy right? Get a post-nuptial agreement done. But how do you bring up a post-nuptial agreement... to a business owner couple... who appears to be happy in their marriage? My thought: It's not about them. Don't make it about them. It's not a commentary about the state of their marriage and perceived level of happiness. It's not about them. It's about the business, the employees, vendors, and keeping the enterprise going.


Unlike with creating a will where you're thinking about a time when the other spouse may not be there due to their passing (either by accident or illness), this is about maintaining one's relationship while there are still business ownership interests to be maintained and honored.


Could the business itself not be functioning well enough that could be causing friction in the marriage? That is a common theme in some of these 'rescue' reality shows. One of my favorites is Restaurant: Impossible where Chef Robert Irvine will go in and in 48 hours, turn around the owners, a restaurant, and often a marriage by helping everyone be far more 'functional' the way it should be.


In this short clip, Robert Irvine is sitting with a couple to help see if they're on the same page. We can tell that she is a reluctant owner and participant in the business. It wasn't really her idea or choice, but because of the conditions of the business, she has been working in the business.


Then there's the other way: Could issues in a marriage be spilling over into the business? Depending on the roles and functioning of the owners in their business... it can spread through the business... much like a cancer.

Either way... the business suffers. Morale suffers with the rank-and-file let alone key managers, executives, and any business partners. Tensions increase. Revenues become affected. Customers sense it. Things begin to slow down.


Robert witnessed a service with that couple. Here's his commentary:


But could the solution (a postnuptial agreement) end up being worse than the problem? With a postnuptial agreement, just like a pre-nuptial agreement, both spouses need to retain their own legal counsel. Both of which are to protect their client's interests.


Here's what Investopedia says about a post-nuptial agreement:

  • Marital agreements, post- or prenup, may run counter to the spirit of love or companionship. Critics argue they indicate the couple expects the marriage to fail. However, if a contract can remedy financial discomfort, a couple might consider a contract in hopes of restoring marital harmony.

  • Couples may sign a postnuptial agreement to protect an inheritance, provide for a stay-at-home spouse, assign ownership of a business, repay a parental gift, or salvage a marriage.


Here are my (non-legally binding) thoughts:

  1. A conversation about a post-nuptial agreement isn't about the couple. It's about the business and the continued viability of the business.

  2. Approaching the conversation while you're in a happy place in your marriage will probably be a far better place to ensure that each of you are treated fairly in such an agreement.


If we think of the business itself like a child (regardless of whether the business was created or acquired)... I think the topic may get a better reception. Once the exit strategy is determined, the next part is determining the funding. Where will the money come from to purchase the other owner's interest in the business? First, I would imagine (again, non-legally binding opinion here) that until lump-sum arragements can be made (subject to a current business valuation), I would imagine that payments would be acceptable, whether that would be interest and/or principal payments on the amount. Of course, you may still be dealing with your spouse as they will have their financial interests to protect. Having a line of credit against the value of the business, financing a loan, or having any other resource to help buy out the exiting spouse's interest will be very helpful to get well in advance. If you're looking for another business partner, that new partner's ownership buy-in may help relieve some of that burden.


Without funding, the agreement... may be worthless.


And yes, I did look up whether "divorce insurance" was a possibility. There is such a thing as "divorce insurance", but I think it may be rather limited in scope compared to using it for a business context. (And no, I don't offer it.) https://www.insurancequotes.com/home/divorce-insurance "Under a WedLock Divorce Insurance policy, divorcees can receive a lump sum to cover expenses such as attorney’s fees, court costs, arbitration fees and apartment rent. Someone going through a divorce can rack up expenses of roughly $15,000 to $40,000."


I think such a policy may be too limited for this, let alone costly if it is never used. Like many things in life requiring cash... it would be far better to have financing options in place before they are needed. Just my thoughts. If you're curious, the episode of Restaurant: Impossible is Chattanooga Blues, season 18, Episode 16. You can find it on Discovery Plus along with many other episodes of restaurants in distress for a multitude of reasons.

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