Prenups Prepare Wealthy Couples

For individuals with a high net worth, kissing the bride or groom and saying “I do” without a premarital (also known as prenuptial) agreement can be a kiss of death financially should a divorce come to pass.

With Wal-Mart Stores Inc. and Tyson Foods Inc. headquartered in Northwest Arkansas, lawyers in the the Ozark Mountains need to know the ins and outs of premarital agreements as adeptly as those with clients around Beverly Hills.

An unprepared spouse could discover the meaning behind Jerry Reed’s hit “She got the gold mine, I got the shaft.”

But Fayetteville tax and estate lawyer Greg Jones of the law firm Jones Jones & Lushbaugh said that simply having a premarital agreement is not enough.

“A premarital agreement is done up front, but it needs to be maintained throughout the marriage,” Jones said. “If not, and 10 years later they have merged all of their assets and then get divorced, it’s tough. There’s a certain amount of maintenance that has to be done with a premarital agreement.”

There have been several examples of high-profile divorces over the years in Northwest Arkansas. And in some instances, couples have separated permanently yet never officially divorced to avoid the difficult financial ramifications.

“For better or for worse” can often turn into “who gets the stock options and who has to pay for taxable gains.”

While it may not remedy the heartache, Bentonville lawyer Steve Sawyer of the Bentonville law firm of Coffelt Burrow & Sawyer, said properly protecting yourself before marriage will help stave off headaches in the event of a divorce.

“You should get anything liquid into your own name,” Sawyer said. “Don’t spend it or dispose of it. Put it in safe keeping. That stops the other party from getting to it.”

Once problems begin to arise in a marriage and divorce becomes a possibility, protecting yourself may be a futile battle.

“Judges don’t like games being played before a divorce,” Sawyer said. “Don’t try to hide things. I’ve been at this a long time, and it is usually very, very, very counterproductive to try and hide things. Most things have a paper trail.”

Jones said the initial step in divorce settlements from a financial standpoint should be defining marital property.

“The real issue is property settlements,” Jones said. “There are great examples in Northwest Arkansas. If you’ve got $2 million worth of property, maybe $1 million is in cash and another million is in Wal-Mart stock. You may have bought that stock at $200,000 but have a gain of $800,000. If the husband takes the cash and the wife gets the stock, well, she has to pay the taxable gain so she’s actually getting less. In a property settlement you want to take the highest value after the tax net value.

“Alimony is not as common in Arkansas, but alimony is tax deductible. It’s also a taxable income to the payee. If the husband is in a top income bracket and the wife was a homemaker, it may be to the wife’s advantage to receive alimony. He may agree to pay 10 percent more to save on tax.”

Jones said he believes premarital agreements are “pretty commonplace” in Northwest Arkansas.

“Generally not with first marriages,” Jones added, “but you see a lot [of premarital agreements] these days when both the husband and wife are bringing families to the table. They enter into an agreement to protect their existing children. It’s less common among younger, first-marriage couples. But I have seen those, too, where one of the spouses had an uncommon high net worth.”

A real mess can occur when the divorcing parties are majority stockholders in a business. If a couple splits, then splits the shares in a company, there could be a shift in power within the company.

“If it’s just the husband and wife, just let ’em duke it out,” Jones said. “Run-of-the-mill divorce tax issues are pretty slight, but for the large-dollar ones, you have stock, maybe stock options, real estate and other things involved. If the stock is with closely held businesses, that can be a mess. The husband and wife may not be able to work together for the good of the company. That’s why it’s a good plan to have a shareholder agreement that provides a contingency in case of a divorce, especially when there’s a third party involved. Pre-emptive planning should be done during the formation of the business. If not, you could see a lot of surprises on the back end.”

Jones also said that retirement accounts such as a 401(k) are some of the most common tax issues in today’s divorce proceedings.

“You can make it a nontaxable transfer and split it into your own IRA,” Jones said.

Land of Split Opportunity

Arkansas ranks second or third nationally in divorce rates in most studies, and the Northwest Arkansas counties of Washington and Benton have a 63 percent higher divorce rate than the national average, according to The Christian Science Monitor.

Gov. Mike Huckabee called Arkansas’ divorce rate, which trails only the quickie-hitch-and-split state of Nevada, “appalling.”

Neighboring Oklahoma is right there with Arkansas. For every 100 marriage licenses issued in the Sooner State in 2001, the state granted 76 divorce petitions.

The Barna Research Group found that 27 percent of marriages in the South and Midwest ended in divorce. Northeast couples stayed together the most often with only 19 percent of those marriages ending in divorce.

The Barna study also found that 11 percent of the adult population in the 48 contiguous United States is currently divorced and that 25 percent of adults have had at least one divorce during their lifetime.

In another study, the Harbinger Press found that 60 percent of marriages in the United States end in divorce. Of those, about 71 percent were initiated by the female partner.

Sawyer doesn’t believe the fast growth in Northwest Arkansas is a cause for the area’s high divorce rate. Wal-Mart vendors constantly are relocating people to the area from all corners of the country. But Sawyer believes even couples relocated to Northwest Arkansas are happier here than their previous location.

Combs vs. Combs Could Impact Several Projects

Carla Tyson Combs and Gary Combs are headed for divorce court.

Carla Combs is the sister of Tyson Foods President, Chairman and CEO John Tyson, and daughter of Tyson Foods majority stockholder and former Chairman and CEO Don Tyson. Gary Combs owns Basic Construction Co. and Basic Block Group in Springdale.

The two reportedly have almost $100 million in co-signed real estate projects under several different limited liability companies, including Pinnacle Hills LLC, Champions Holding LLC and G&C Family LLC.

The couple’s house is at 3560 Sassafras Road in east Fayetteville, but they had planned to build near Stonebridge Meadows Golf Club, where they own several acres. The existing home is 4,292 SF and was appraised in 2002 for $974,600.

Earlier this year, Gary Combs and trucking mogul J.B. Hunt joined forces in founding Central Redi-Mix in Lowell. Hunt and Gary Combs are involved in other projects as well.

A couple of Fayetteville’s legal heavyweights will handle the divorce. W.H. Taylor of Taylor Law Firm is representing Carla Combs, while John Everett of Everett Law Firm is handling defendant Gary Combs.

Both lawyers declined comment on the matter.

Taylor filed for Carla Combs’ divorce July 31. It was not the first time. She married Gary Combs on Jan. 15, 1994, and filed for divorce Sept. 22, 1999. But she never followed through with the first proceedings.

Gary Combs was served his latest divorce papers Aug. 1 at his Basic Construction office.

Carla and Gary Combs have no children.

Washington County Judges Mike Mashburn and Mary Ann Gunn each recused themselves from the matter.

Judge Mark Lindsay also asked to be recused, noting that Tyson Foods Inc. contributed to his election campaign in 2000. Lindsay also noted that his wife owns a small amount — less than $1,000 in value — of stock in Tyson Foods. However, both parties waived any conflict of interest with Lindsay.

Combs Projects

Listed below are a few of the projects in which Gary Combs and his wife, Carla Tyson Combs, have been or are currently involved. Most of the projects have multiple partners.

•?$64 million first phase of a multi-use development at Pinnacle Hills in Rogers

•?$11 million Parkway Tower at Pinnacle Hills in Rogers

•?$9 million upscale business park near the site of the former Tale of the Trout restaurant in Rogers

•?$4.4 million Electric Avenue apartment complex in Springdale

•?$1 million White Oak Station in Springdale

•?Central Redi-Mix in Springdale (value not listed)

•?Basic Construction Co. in Springdale (value not listed)

•?Basic Block Group in Springdale (value not listed)