Article

Four Ways to Mess Up a Prenuptial Agreement

Happy senior couple sitting next to each other on the ground

Dear Clients, Colleagues and Friends,

You’ve been married before, and while you’re really excited about your new relationship, you’ve seen how things can unravel – and how expensive and difficult it can be to disentangle yourselves financially. Or maybe you’re looking forward to your first marriage, but you’ve got a valuable business that is your main asset and source of income, and you don’t want it to get bogged down – perhaps threatening its very existence – in a divorce lawsuit. What’s the solution?

A “prenuptial agreement” is a contract made before marriage in which husband and wife agree what property will be divided, and what will be off-limits, in the event of a divorce. “Pre-nups” are very common among second marriages, where businesses are involved, where one partner has significantly more wealth than the other, or where there are children from a prior relationship that need to be protected and provided for.

A divorce court will begin from the assumption that everything either party brought to the marriage – including insurance policies, retirement accounts, and business interests – should be divided evenly. If this is not what you want, a properly written prenuptial agreement will allow the court to bless a different arrangement – made before a relationship goes sour.

Here are the four best ways to do a prenup WRONG, dramatically increasing the likelihood that it will fail to keep you out of a messy, expensive fight that ends with your key assets in the hands of your ex:

DON’T coordinate the creation of your prenup with your estate plan – or a thorough update of your estate plan. I’m working on a contested estate where there is conflict between the dead fellow’s trust and the prenuptial he signed with his surviving second wife – and it’s causing significant problems negotiating a settlement with his stepchildren.

DO IT YOURSELF, or without qualified legal assistance. As you might imagine, negotiating a prenup requires the help of a lawyer who is both technically expert and sensitive to the delicate emotional ground you’re treading.

RUSH the agreement, and fail to fully catalog and disclose all assets. If a court senses that one side – especially the less-wealthy spouse – was pushed into signing, the judge may throw the whole agreement out.

DON’T get qualified legal counsel to assist both spouses. A fundamental principle of contract law is that, to be enforceable, a contract has to be a “meeting of the minds.” If one spouse – especially the less wealthy or financially savvy one – doesn’t have an experienced lawyer to explain the meaning of the agreement and how it is likely to be interpreted in the event of a divorce, it significantly increases the odds that a court will rule the agreement invalid.

Already married? You can still agree to deviate from the default property division rules of divorce law in a “post-nuptial” agreement. These are, if anything, a bit trickier to navigate, but still work.

If you would like to find out whether a prenuptial agreement might be appropriate for you, call me.

 

Best Regards,