See marriage as a business

Do you know why the wedding ring is placed on the fourth finger? The theory is that the fourth finger is the only finger with a vein connected to the heart. Similarly, movies and television, certain religious dogmas and, frankly, just the general impression we get of marriage as we grow up suggest that marriage has an intrinsic and spiritual component that goes beyond mere laws . However, these grandiose performances hardly find their way into a courtroom in which a judge decides on the dissolution of the marriage of two peoples.

Recently, my attorney partner, Zachary Markham, wrote an article in Flagstaff Business News discussing the merits of getting a prenuptial agreement before marriage. Markham appropriately and aptly compared a marriage contract to “marriage insurance.” In my practice, however, I would roughly estimate that less than 5% of cases have a prenuptial agreement. I understand why you might not even want to think about a prenuptial agreement, despite your possibly better knowledge. After all, my wife gently and lovingly advised me that she would “kick my butt” if I asked her to sign a prenuptial agreement almost a decade ago before we got married. Hence, this article focuses on viewing marriage generally as a business or contract, as that is how Arizona law and the courts see it.

Arizona is a jointly owned state. Simply put, this means that once two people get married, they are contractually considered to be one and the same for financial reasons (with a few nuanced exceptions that are likely to be prosecuted). In other words, the flowery promise of “for richer or for poorer” really means “We have founded our own company, from which we both benefit financially, but are also financially liable.”

While the above paragraph may seem fairly obvious and simple, in practice it is not. I have regular conversations with my clients in which I have to advise them, they are literally on the hook because of their spouse’s bad financial decisions. Similarly, I have regular conversations with my clients in which I declare that their individual business ventures (and the hard-earned successes that go with them) fall into a bucket that after a divorce is fair (often in equal parts) with their soon-to-be ex- Be spouse. This can make an already stressful and emotional situation worse. In addition, lawyers are bound by applicable laws and ethical restrictions and therefore do not have the magical, blanket ability to achieve a satisfactory result in every case despite all efforts. After all, Arizona is a “no-fault” state, which means that an Arizona court will not consider why two parties are divorcing (e.g., infidelity), but instead begin with the fact that they are and will in most circumstances prevent either party from explaining why.

Hence, dissolving a marriage often works just like dividing up a company’s business assets. I compare the breakdown of my client’s common property (which can include cash, investments, real estate, life insurance, annuities, 401Ks, and actual business) to the breakdown of a pizza cake. Let us assume that a church’s “pizza” consists of eight pieces. Given that Arizona law mandates fair sharing of this pizza, it is almost certain that no party will go away with all of the pizza (and no party can ever go away with more than the eight slices). When two parties hire attorneys and bring a lawsuit, each party’s attorney often gets a share – so the community has six shares to share. It’s difficult for a person going through a divorce to get away with only three slices; although this is arguably a “fair” result under the law. Also, the slices may be unequal, or both parties may want the same slice (which I assume must be hot peppers as opposed to a slice with pineapple on top). As you can imagine, this complicates the negotiations.

The proactive way to avoid potential marriage dissolution problems – or, in other words, to determine in advance which party would receive which pizza slice – is for the parties to enter into a marriage contract either before or after receiving an asset. These agreements are usually enforceable provided they are clearly worded and the terms are not grossly unfair at the time of signing. A lawyer should work out the agreement and both sides need independent legal counsel to sign it. Such a document may very well prevent much more expensive future litigation.

In the case of a dissolution of the marriage without a prenup or prenuptial agreement, think of that divorce as a division of a business (I often encourage my clients to put on their “business hats” when going into settlement talks). The court and lawyers will see it that way. It can be a cold, dry process that couldn’t be more different than the joyful process of actually getting married.

Finally, dissolution of the marriage may require the division of a business owned by the “community” that unites the two principles discussed in this article. In situations like this, I usually bring in an attorney to deal with “business divorces” at my law firm, Jennifer Mott. I assume that in the near future she will write an article on this subject in this publication. FBN

By Michael Wozniak

Michael Wozniak is a partner at the Aspey, Watkins & Diesel law firm practicing family law and criminal defense. He moved to Flagstaff with his family in 2019. He is available for free advice on all family law issues and can be reached at 928-774-1478.