prenuptial agreement

The “Unromantic” Pre-nuptial Agreement – Alternative Action When it is Rejected on Principle

Almost every matrimonial law practitioner will have the occasion arise where a client wishes to consult about a pre-nuptial agreement.

This is often my favorite of consultations as a divorce attorney because, unlike most other areas of domestic relations practice, the client comes without an apparent looming crisis or conflict and they appear to be on a genuine mission to obtain sound asset planning and protection in advance of the rigors of marriage. As can be easily appreciated though, the client is often there with the glow and hope of a valued relationship that is in its most glorious but untested of stages: pre-honeymoon. And, as a result, there is likely more trepidation for the attorney adviser who needs to impart necessary information about such pre-marital agreements without sparking a crisis or conflict that the couple has not yet conjured up themselves.

Typically, the pre-nuptial inquiring client is a more mature age individual embarking on a second or later marriage with assets enough to worry about. The younger or first marriage client who inquires about this area of law is likely there at the urging of an older concerned ally who is encouraging money cautions on the verge of marriage, or occasionally where significant assets already have been accumulated by the young client.

So, there the client sits, and you embark on the mission of legal education concerning protective pre-nuptial agreements that they have come to receive while staring in the face of pre-marital bliss.

You need to get some basic concepts about pre-nuptials out early and emphatically. These are concepts that, when implemented, will help the pre-nuptial agreement to withstand the test of enforceability. These prerequisites are tied to the statutory and case law that has resulted from the unwanted scrutiny of later (divorce-era) challenges.

CONCEPT #1 – NO TIME PRESSURE

The prenuptial agreement should never be done on the eve of marriage. In fact, it would be hard to imagine an agreement being sought with less than several months remaining before the marriage. Haste to achieve an agreement gives rise to all sorts of challenges about duress, undue influence, pressure and inability for the other party to duly consider its terms and consequences. You should never be in the situation where reaching agreement is a condition of the marriage and the wedding date is already set and approaching. Time constraints could be strike one against the pre-nuptial agreement.

CONCEPT #2 – FULL DISCLOSURE

A valid prenuptial agreement is premised upon there having been full disclosure to each partner as to the financial status of their fiancé. There needs to be an understanding of what each spouse-to-be has in assets and liabilities. On the theory that one cannot know the suitability of an agreement without knowing what they are getting or giving up, it is essential that each person’s financial picture be laid out for the other. Best practice would suggest that not only should there be full detailed written statements indicating the asset/liability status of each party provided during the negotiation period, but that any resulting financial agreement be written up with similar detail and specificity. The lack of full candid financial disclosure is a sure strike against the agreement.

CONCEPT #3 – LEGAL REPRESENTATION

Perhaps most critical to the ensurance of a prenuptial agreement is the simple notion of separate legal representation for BOTH parties. It is not prudent to have the non-monied spouse talk with the “old family friend and attorney” of the monied spouse as a sufficient and convenient means to advise the parties of their legal rights. A monied-to-be spouse who sees the other as disinterested in money or willing to sign anything because they don’t want anything (but love of course), must take even greater precautions not to take advantage of their non-monied and carefree finance. However, monied or not, both engaged parties need to have independent legal representation without the presence or oversight of the other party. Neither the cost or inconvenience of using two separate attorneys should dissuade the eager pre-nuptial seeking couple from having the guidance of counsel.

CONCEPT #4 – FAIR & REASONABLE NOW / NOT UNCONSCIONABLE LATER

You should be trying to gauge the fairness / reasonableness / unconscionability of the terms of your agreement as you create it. If you don’t do this, be forewarned that this is exactly what will be evaluated by your soon-to-be spouse’s lawyer, or worse yet – the Court – when your soon-to-be-spouse is challenging the validity of the entire agreement later on. If fact you need to ask if the terms will be seen as fair and reasonable at the time the pre-nupt is made, and then you need to go a step further to ask whether the terms will be seen as unconscionable at the time of divorce. A challenge as to unconscionability is a more difficult contest to achieve but it’s a bit of a moving target since the test is conducted at the time of the challenge (divorce) and you cannot really know what the circumstances will look like at that time.

The bottom line is you must try to achieve an agreement that is not patently unfair, outrageous, unjustifiably lop-sided under the circumstances of your case. Use the “gut-feeling” test to sense the boundaries of your pre-nuptial agreement.

THE VERDICT

Now – you send your client home, armed with all this good and practical information about prenuptials. You hope that they can convey the essentials about these worthy marriage / divorce/ estate planning devices to their loved one without souring the pre-martial mood.  You wait.

SCENARIO 1 – CARRY ON!

Your client responds – all is good. The topic was favorably received and the legal sense of this pre-planning was at least somewhat embraced. You are off to the races with a job now to negotiate and draft a pre-nuptial agreement.

SCENARIO 2 – THANKS, BUT NO THANKS!

So, your client meekly reports back to you after your thorough initial consultation about pre-nupts, that their finacé will stand for none of this. “I’m planning for marriage and not for divorce” is the simple message the finacé conveyed to your client. One can only imagine what further retort may have also accompanied that message. Apparently – a prenuptial agreement will not precede this marriage. What can be done, if anything, for your client at this point? Can they protect assets, or minimize the future hazard of divorce? For many of our second marriage clients, is there a way to assure or protect some inheritance rights for their natural or adopted children?

NOT SO FAST

The de-railing of the pursuit of the classic pre-nuptial agreement is not a dead end. It opens the door then to educate the client on alternative ways to look at the impending marital money partnership with all its components of pre-marital assets, the first family strings, divorce concerns and/or estate planning preferences. Here are the topics and discussions for you to now introduce to the prenuptially-nixed, but ever-concerned, client in advance of a wedding.

  • Separate vs. Marital Property
    • Pre-marital assets
    • Commingling/contamination/transmutation
  • Awareness of Marital Elective Shares / Intestate Share
    • First $50,000 up to 1/3 by Elective Share
    • ½ plus $50,000 (if kids) by Intestate Share
    • Know about testamentary substitutes
    • The blessing and curse of joint assets

–           These topic headings, form the basis for the next informational series on preserving individual property and inheritances for all your heirs following a second marriage.

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