[WSBAPT] ante-nuptial agreement : effective against creditors?

Josh Grant jgrant at accima.com
Thu Sep 3 10:22:35 PDT 2015 

Mark
1. Yes, I typed too fast (or my brain worked too slow).  This is a ante-nuptial.
2. These are farmers, and the corporation borrows every year.  The bank puts them on a budget, and the corporation dribbles out the loan to the farmer (not sure if it is to the corp??.. but probably) so much each month which is used for the living expenses.  I am sure it is shown as salary on the corporate books.   I will find out for sure.
3. I would guess that the bank requires a personal guarantee, but again.... I will find out.  But I have always thought with a sole shareholder, officer, director, that it was easy to pierce the veil...  If everyone could avoid paying taxes by incorporating and then having the corporation borrow enough to live off of, just because the corp. doesn’t pay for the food?  We wouldn’t need car insurance.
4.  I think this is my main point/question.  If W’s separate property is protected because she doesn’t sign the bank note, or personally order the fertilizer, I don’t know that this post-nupt is adding any protection.

So lets assume a corporate salary paid to husband, he pays for food and power.  He is married. Isn’t the corporation, notwithstanding the corporate share being H’s... a community asset?  

thanks

Josh


From: Mark Higgins 
Sent: Wednesday, September 02, 2015 3:00 PM
To: WSBA Probate & Trust Listserv 
Subject: Re: [WSBAPT] ante-nuptial agreement : effective against creditors?

Josh--some simple thoughts:

1.  Aren't you talking about a post-nuptial agreement rather than an ante-nuptial?

2.  You don't say how the corporate income comes out of the company to be used by the H and W for personal expenses.  Does it come out of the corporation via salary to H or via dividends to the shareholder?  This is critical as salary is community property and dividends are likely separate property of H.​And, an adequate salary is important in keeping the stock H's separate property.  

3.  Did H personally guarantee the corporate debts?  I saw nothing in your email which suggests a valid path for a creditor to pierce the veil and impose the debt directly on H and W, unless when you say company income is being used for personal expenses you mean the corporate check book is being used to buy groceries.  That would be bad.

4.  I agree that nothing you mention suggests W's separate property could be used to satisfy a debt which is community unless she also signed the obligation.

Mark

On Wed, Sep 2, 2015 at 2:00 PM, Josh Grant <jgrant at accima.com> wrote:

  This is an estate planning type question.
  W is a client whose husband’s business corporation appears to be raking up a lot of business debt. This is a second marriage and they have tried to keep their finances separate, in fact the income from the business has been used for community benefit (food, electricity, vacations etc.).  W has a separate asset she wants to protect (farm land given by dad).  H&W never did a pre-nuptial agreement.  Been married 10 years+.

  H&W thought a ante-nuptial  agreement might help protect W’s separate asset.  H had it drawn up and W was referred to me as her  independent attorney.  This is a standard type of agreement where on schedule “A” the business corp is listed as H’s, and W’s is listed as her separate asset.

  My thought is that basically, as long as they are married, or as long as they do not have  a separation decree, that whatever they sign between them won’t help against creditors.  (just like the client who has to pay a community debt even after that debt was listed as the responsibility of the former spouse in a dissolution decree).  If I were a creditor’s attorney I would ask the court to pierce the corporate veil and determine that the corp is a community asset and the debt is a community debt and go after all community property, again without regard to this agreement.

  I think if ever sued, judgment would be entered against H&W and their marital community, and the separate farmland wouldn’t be affected anyway.  If a creditor tried to get a judgment against W’s separate property, then she could hire an attorney and get the court to enter a judgment only against the community and community property, with or without an agreement.

  Anyone think a ante-nuptial agreement would be a substantial protection for W against business debts, even if H is a sole shareholder?

  Josh Grant

  Joshua F. Grant, PS
  Attorney at Law
  P. O. Box 619
  Wilbur, WA 99185
  tel 509 647 5578
  fax 509 647 2734




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-- 

Mark T. Higgins
Mark T. Higgins, P.C.
P.O. Box 57
Darrington, WA 98241
206-491-2420


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