The benefits of including business valuation in a prenuptial agreement

Why Prenuptial Agreements are increasing

A Prenuptial Agreement, better known as a Prenup, is a legal agreement between two people before marriage. Amongst other matters, it sets out how their assets will be divided in the event of a divorce or separation.

There are several reasons why many people choose not to get a Prenup, one being the obvious unromantic nature of planning for the then unlikely possibility of a divorce. More practical reasons include a lack of significant assets at the time of the marriage or the knowledge that Prenups are not legally binding.

However, a change in attitudes and circumstances has led to a notable rise in the number of people choosing a Prenup. Generally, people are getting married later in life and may have more assets to protect. Additionally, people are more aware of the potential risks of divorce and want to protect their assets. Perhaps most importantly, judges are taking more account of Prenups when considering the split of assets on divorce.

Benefits of Business Valuations in Prenups

The starting point for the division of assets during a divorce is the “marital acquest”, i.e. the assets built up during the marriage.

When valuing businesses in the context of matrimonial finance, we are increasingly instructed to value businesses not only at the current date but also at the date of marriage/cohabitation. This is an attempt by the parties to quantify the marital acquest and separate business value before the marriage from the marital “pot”.

While this exercise can be undertaken, valuing a business at a historic date has its difficulties, such as information availability, market changes, and the parties’ inclination to use hindsight.

Therefore, having a contemporaneous business valuation at or around the date of marriage can be hugely beneficial to all parties in providing:

• Clarity and transparency
• Asset protection
• Future planning
• Cost savings by avoiding potential legal and professional costs down the road
• Fairness and equality when considering the marital acquest.

At Pierce, we have considerable experience in the valuation of businesses in the context of matrimonial finance. Our Prenup valuations are sensible and robust should they be relied upon in a divorce process.

If you would like to discuss a Prenup business valuation, please contact George Horley or Jeremy Rowe, directors of Pierce Forensic Limited, on 01254 688 100