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If a spouse operates or owns a family business, one strategy to protect that business would be to enter into a marriage contract that contains a waiver by the non-owner spouse of the owner spouse’s interest in the business, whether the business was owned prior to marriage, or whether it is anticipated that one spouse will take over the family business in the future. The contract can also include a waiver of any claim for the future increase in value of the business over the course of the marriage.
Two important considerations involved in drafting a waiver include: (a) the business owner must provide full financial disclosure to the non-owner spouse regarding the business’ present value and its future value if known, and (b) each party must receive independent legal advice. The financial disclosure needs to include the current value of the business, and any future value (if known). It may be necessary to consult a business valuator, depending on the size of the business.
Take away:
- To ensure that there has been a full disclosure of the value of a business interest at the time of the signing of a waiver in a marriage contract, it may be prudent to consult a business valuator.
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Kathy Tomaszewski: Kathy earned an LL.B from the University of Western Ontario and was awarded a Gold Medal for the highest average in her graduating class. She articled as a law clerk to Hon. Bora Laskin, Chief Justice of Canada, Supreme Court of Canada. As a law student, Kathy also worked for one of the ‘Seven Sisters’, drafting proposed amendments to the Income Tax Act, and working in the litigation department. After receiving an LL.M. from Harvard University, Kathy taught law full-time for 10 years at the University of Western Ontario in the areas of constitutional, corporate and commercial law. In addition to teaching and publishing in these fields, Kathy acted as a consultant for the Ontario Securities Commission (researching proposed legislative changes), and the Ontario Human Rights Commission (sitting on Boards of Inquiry). Kathy also taught a course in Securities Regulation as an Adjunct Professor at the Law Faculty of the University of Toronto.While caring for her growing family, Kathy launched her own business in private educational therapy. Kathy has worked with many individuals challenged by learning difficulties and developmental delays, helping them to become independent learners. She has designed and taught courses in all subjects K-grade 8, with a specialty in logic, critical thinking, and writing skills. Kathy continues to act as a research consultant for small law firms on issues ranging from family and criminal law, to human rights and constitutional law. Kathy started with Clausehound in November 2014, and is the Company’s Knowledge & Research lead.