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Prenuptial Agreements Can Help Prevent the High Cost of “Free” Labor in a Professional Divorce

Posted by J. Benjamin Stevens | Nov 22, 2015 | 0 Comments

It's a very common sight in professional practices, one person is the professional service provider (whether it's a doctor, dentist, lawyer, accountant, therapist, etc.) and the other spouse serves in a jack-of-all-trades/office manager role, which is almost always unpaid. This kind of arrangement usually begins when the professional practice is just getting off the ground and there isn't any money to pay salary to someone else. The other spouse pitches in, with both parties working together to get the new business up and running.

Sounds good, right? Wrong! Though this is a very common arrangement, it can also prove exceptionally costly in the event of a divorce. Why? Because all that free labor eventually comes at a high cost, with the “unpaid” spouse claiming that his or her work contributed to creating a large share of the value in the professional practice, for which he or she must now be compensated. To find out more about how to avoid some of the problems associated with working with a spouse in a small professional practice, keep reading.

Get a Prenup

The absolute best thing you can do to protect yourself from an expensive divorce claim down the road is to obtain a valid prenuptial agreement before any conflict occurs. Prenuptial agreements can clearly explain the division of assets that will occur in the event of a divorce, and they can help prevent your professional practice from being ripped apart by a divorce. Despite how important these tools are, they are shockingly rarely used, with most couples failing to give the idea a second thought, assuming that if they aren't wealthy yet, there's no reason to bother with a prenup.

Pay Your Spouse

If the prenup ship has already sailed, is there anything else you can do minimize a potential claim from an unpaid spouse? Short of not employing them in the first place, the best thing you can do is pay him or her a fair salary. The reality is that especially when you're starting out, you may truly rely on the help from a spouse. That's fine, just do your best to compensate him or her for the work. Even a relatively modest salary will help for several reasons: it will help create an earnings history to be relied on later, it allows the person to receive Social Security benefits down the road and, most significantly, it helps take some of the sting out of the claim that the person helped build your now lucrative practice and received nothing in return.

About the Author

J. Benjamin Stevens

Senior Partner


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