Louisiana is a community property state, wherein spouses are considered joint owners of nearly all assets and debts acquired in marriage. In the event of a divorce, assets acquired during the marriage are divided equally. One way to safeguard your financial future is by entering into marital agreements that shield assets from a spouse during a separation. What are marital agreements? Marital agreements are contracts that spouses use to inventory their business or personal assets to retain ownership in the event of a potential separation. The terms of the agreements govern how to divide marital assets in the event of a divorce and override community property laws in Louisiana. A prenuptial agreement, executed before marriage, itemizes the property and financial assets each spouse brings into the union and outlines protocols for asset division in the event of a divorce. A postnuptial agreement functions similarly but is established after the marriage has commenced. Why consider marital agreements? For those interested in entering a marital agreement – and perhaps on the fence – here are some reasons why they are beneficial in the event of a divorce: You have significant wealth that you want to protect from potential equal distribution, You want to protect property, earnings, assets, or retirement accounts accumulated before or during the marriage, You want to shield inherited property and assets or future inheritance, You plan to get additional education or change careers, You want to protect one spouse from the debts of the other spouse incurred prior to or during the marriage, You have children from a prior relationship and want to specify obligations relating thereto, or You want to address the obligation of final spousal support or the finances of each party and responsibilities of each should the marriage end in divorce.   What are the pitfalls for business owners who don’t have a marital agreement in place? The following scenarios could lead to problematic results for business owners in community property states who have not secured a marital agreement:   One spouse has an ownership interest in a business before marriage. The business generates corporate distributions during the marriage. Upon divorce, the other spouse seeks half of the distributions, or the property acquired using the distributions. The distributions are community property.   One spouse has an ownership interest in a business before marriage. They work in the business during the marriage and use their earnings to purchase additional ownership interests in the company (or any other company) during the marriage. Upon divorce, the other spouse seeks an ownership interest in the business. Earnings are community property. The other spouse has a claim to the portion of the business purchased with community earnings during the marriage.   One spouse uses their earnings during the marriage to purchase an ownership interest in a business during the marriage, titling it only in their name. They keep the business accounts and records separate from marital accounts and listed solely in their name. Upon divorce, the other spouse seeks an ownership interest in the business, including the business assets. Earnings are community property. Assets purchased with community property are community property. The business is community property.   One spouse purchases an ownership interest in a business during the marriage only in their name. They desire to donate that ownership interest to a family member. Without the concurrence of the other spouse, they cannot do so.   One spouse acquires an ownership interest in a business enterprise during the marriage. They subsequently decide to sell a majority of the assets of the enterprise to a third party. They cannot do so without the concurrence of the other spouse or risk being liable for damages.   One spouse has substantial debts prior to marriage. Creditors seek to seize that spouse’s 50% in community property to pay the other spouse’s debt. Separate debts can be satisfied from community property, so that spouse’s property is at risk.   In the above scenarios, the corporate distributions, work earnings, and subsequently purchased small business are community property under default Louisiana community property law, despite whether either spouse believed the property to be their separate property.  Ownership of neither the asset nor the debt follows the named holder and, despite either spouse’s understandings, could subject the community to liability or the property to claims of ownership by the other spouse upon divorce. Further, additional problems arise when a business owner seeks to operate their business without interference from the other spouse.  In some cases, in order to take action pertaining to business assets related to businesses owned solely in one spouse’s name, the concurrence of both spouses is required.  Thus, a spouse’s business is often prevented from taking action without the other spouse’s approval, even if that spouse does not own the assets. How to get a marital agreement? Prenuptial and postnuptial agreements must be documented in writing, voluntarily entered upon by both parties, and signed and notarized. Therefore, it is crucial to contact an attorney to help negotiate, prepare, and execute the necessary martial agreement(s).       Brooke Tigchelaar is a member of New Orleans-based law firm Stone Pigman Walther Wittmann and helps her clients navigate community property laws as it pertains to individual assets as well as business assets. She concentrates her practice in family law, including divorce, property partition, custody, and support.