Legal Question in Business Law in California

Proctect

I want to give my son 10% of our new corporation. How do I protect him if he getís a divorce?


Asked on 6/03/08, 9:55 am

3 Answers from Attorneys

Daniel Harrison Berger Harrison, APC

Re: Proctect

Usually, gifts and inheritances are separate property. So long as he doesn't have a pre or post-nuptial agreement, or gifts the stock to his wife, or otherwise transmutes the property from separate property to community property, the stock, and the dividends thereon, should remain his (once he mixes the dividends into his community property bank account, however, he will likely have transmuted those dividends to community property).

If your son works at the company during his marriage, and the stock becomes more valuable as a result of his efforts, the wife may have an interest in the increased gain in the value of the stock.

Also, if your son works at the company, you need to ensure the "giving" of the stock is a gift and not deemed a bonus or income.

A lot of what you hope for will rely on the actions of your son.

Depending on the type of corporation you have, and the value of the stock, there are other options you have. Feel free to email or call for a free consultation.

No matter what, you shouldn't do anything without utilizing a lawyer in the process, unless you want your son's wife to one day be a shareholder.

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Answered on 6/03/08, 10:45 am


Bryan Whipple Bryan R. R. Whipple, Attorney at Law

Re: Proctect

The prior answer pretty well covers the subject. I might add that you are not just protecting your son, you are also protecting your company. There is nothing worse than having an unhappy ex-spouse as a minority shareholder. For this reason, you might want to consider having a repurchase agreement where the company has the right to re-acquire the shares at fair value in the event of any change of ownership, whether voluntary or by operation of law.

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Answered on 6/03/08, 11:43 am
Terry A. Nelson Nelson & Lawless

Re: Proctect

YOU don't get to protect him. If he wants to do so, he might be able to keep the gift as his separate property, and/or set up a family trust to partially protect his assets. Have him consult with a trust attorney in his area.

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Answered on 6/03/08, 1:49 pm

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