MacSweeney & Company Solicitors Galway

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Protecting family businesses or inherited assets in marital disputes

Protecting family businesses or inherited assets in marital disputes

Marital breakdown can result in one spouse making a claim over the other spouses inherited assets or his/her shareholding in a family businesses which has been in existence for generations prior to the marriage.

There is a constitutional requirement that “proper provision” is made for the financially dependent spouse and the Courts have been relatively inconsistent in the manner in which they will distribute assets following a separation/divorce.

Given the unpredictable nature of the Courts attitude it is recommended that the asset-owing spouse would consider the following mechanisms to protect those assets:-

  1. Pre nuptial agreements- while currently not contractually enforceable under Irish law, such an agreement would be a factor which a Court would consider on the breakdown of a marriage, particularly if the marriage was short. The Courts would need to be satisfied that each party was independently legally advised when the agreement was made and that full disclosure of assets and income was made prior to the execution of the agreement.
  2. Parties should keep assets in their own (separate) names and not be pressurised into transferring them into joint names. This is clear from Keane J’s decision in HN v BN (2016) IEHC 330.
  3. The Courts are required to consider third party interests. It is therefore recommended that Partnership Agreements and Shareholders Agreements are formalised with any third party business partner. Such agreements should include a restriction on the transfer of shares to outside parties and provide for pre-emption rights, that is, it should be obligatory on the transfer of any share(s), that the other shareholder(s) be first offered those shares and given the right of first refusal.
  4. Finally a discretionary trust could be a useful tool in protecting family assets. While the assets held under a discretionary trust are taken into account by the Courts, the realisation of these assets may be deemed to be difficult or uncertain which could offer some means of protection.

While no guarantee can be given that inherited or family assets will be protected on the break-down of a marriage, steps can be taken to minimise the risk to such assets.

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