Perspectives on Prenuptial Agreements

It's been my joy to create many prenuptial agreements over the years, and I've spent much time pondering how to navigate through a divorce in a creative and not reactive way. In other words, I’ve seen the whole arc of a marriage, from the hope of a beginning to the unraveling of an end. With that in mind, I've gathered ten clear-eyed insights for you to think about when stepping into marriage and considering a prenuptial agreement. These tips will become easier to apply once you understand that marriage doesn't necessarily promise a lifelong romantic and financial partnership without risks. Therefore, it's wise to think about protective measures. Like health or life insurance, it doesn’t wish disaster on you or express doubts about your future. It’s a simple, neutral act of practicality.

1.     Entering a marriage is simple. Exiting it isn't easy.

The allure of marriage is undeniable - the promise of lifelong love, sparkling diamond rings, a grand celebration centered around us, the prospect of adorable children, and a partner who truly understands and fulfills our needs.

Anyone can pop the question, and most adults can tie the knot. However, it's essential to remember that marriage, much like a roach motel, is easy to enter but challenging to exit.

Take New York, for example. The only requirements for marriage are a 24-hour wait period and certain familial restrictions to prevent marriages to close relatives, like your uncle. The fee is a mere $40.

But have you ever wondered about the cost of a divorce?

2.     Think of a prenup as a fundamental love contract.

In the early stages of a relationship, when everything is rosy, many find it simpler to maintain an optimistic outlook than when things turn challenging.

For a harmonious financial journey in your marital life, you were discussing and understanding financial commitments while deeply in love can be beneficial.

Discussing these issues just before you decide on a divorce, when negative emotions may be running high, might escalate a financially draining divorce. Even if it feels awkward, discussing potentially tricky issues earlier is best.

 3.     Grasp the fundamentals of divorce law.

It's always a good idea to become familiar with the legal aspects of marriage when you tie the knot, as it essentially forms a legal partnership overseen by the state.

In a friendly suggestion, you should look into the laws surrounding marriage.

For instance, have you ever considered the financial implications of your work benefits and your partner's professional development? Generally, courts don't split the increased value gained from a professional degree you may have sacrificed to help pay for. However, they're likely to distribute unvested restricted stock units (RSUs) you may have from your job, even if the payout only happens after a potential divorce.

Do you think this is equitable? If you have any doubts, please clarify how you envision this unfolding in an unfortunate divorce. In a prenup, you, not the court, must state the terms.

4.     Start the prenuptial agreement process shortly after getting engaged.

Prenuptial agreements are logical. Weddings are all about emotions. It’s easier to talk calmly and logically before wedding stress sets in. By putting a significant time gap between the nuts and bolts of a legal agreement and the confetti of a wedding, you will likely enhance the joy of your big day to its fullest.

5.     Maintain simplicity.

Make sure to keep things straightforward to avoid any potential legal challenges concerning the enforceability of your prenup. Focus on crucial matters such as distinguishing between separate and marital property—what’s yours and theirs—rather than incorporating lifestyle clauses that impose penalties for infidelity, which are hard to prove and may not be enforced by a court.

6.     Ultimately, it reveals financial details.

In New York, it's interesting to note that while there's a legal obligation to be open about your financial situation during a divorce, transparency isn't required before marriage. Suppose each of you had to fully disclose your finances before you could obtain a marriage license. In that case, it might offer valuable insights into your future spouse's financial habits and compatibility and even prompt you to re-evaluate your decision to marry without downside protection.

Imagine, for instance, you're about to tie the knot with a freshly graduated 27-year-old lawyer. They've just completed law school without any financial aid or parental support. Sounds great. But they might be bringing a hefty student loan debt into your marriage.

During the early years of your marriage, you've been working diligently.

This could mean a significant amount of your shared income might go toward paying off the student loan. Consequently, they might need help contributing as much to your shared living expenses and retirement savings. Fast forward ten years, and let's say the student loan is fully paid off. The only wealth accumulated over the years is your retirement savings, which you've consistently contributed.

Now, you might wonder: Will you get credit for all your spouse's payments toward their debt in a divorce? Unfortunately, it's unlikely.

You may also wonder if you must share your retirement accounts with your soon-to-be ex. Unfortunately, for you, likely.

7.     Choose whether to divide assets and debts or not.

I hold my trip to Italy dear to my heart as one of my favorite vacations. It's the only place I've visited where I didn't find myself craving the comfort of my home cuisine. Interestingly, they have a unique marital system where couples can choose between "community" or "separate" property arrangements upon getting married. With this step, the soon-to-be wedded pair can easily understand what will happen to any property they acquire during their marriage.

This fantastic idea could be beneficial if it went into effect in New York. It could save many couples the hassle of drafting prenuptial agreements. When they get their marriage license, they could check a box that they agree to keep their assets separate or shared. So, in situations like that of Britney Spears and Sam Asghari, where they divorced just 14 months after marriage, they could at least have a straightforward divorce. This is particularly useful if a couple doesn’t have children together and wishes to move forward to new and exciting chapters of their lives.

8.     Begin with a simple, transparent term sheet.

I often receive proposed prenups for review, even though no discussion had occurred with the other party involved about the terms of the proposed prenups.

My advice: talk first. Sit down and have a heart-to-heart discussion about any worries you may have about your marriage. Kicking things off with a simple term sheet could be an excellent first move. As you know, a term sheet is an informal document that lists the main points of the prenup.

This approach can be more manageable than diving straight into a complicated agreement, usually filled with legal jargon and hard to grasp if you don’t have a legal background. Sometimes, these agreements can be long and complex, using legal jargon instead of simple English. This can make it a bit tough for most of us to understand.

9.     Explain key terms in the agreement clearly. 

Just between us, a good number of divorce lawyers aren't particularly renowned for their skills in drafting agreements.

The reason behind this is straightforward: when individuals go through a divorce, their primary concerns aren't usually about complex future obligations to one another. They're more likely to be concerned with more immediate and clear-cut issues like child support, maintenance, custody arrangements, and property division.

When I think about who I consider to be the top-notch drafters of legal agreements, my mind often goes to corporate attorneys. They're constantly dealing with two parties with substantial budgets and navigating complex negotiations.

Their role often involves defining critical terms in the agreement. Similarly, your agreement must clearly explain essential terms, just as in corporate contracts. This way, if anyone must read and enforce this agreement during a divorce, there won't be room for misunderstanding claims. 

Make sure to define important terms such as:

•Separate Property

•Marital Property

•Termination Event (when the agreement comes into play)

•Estate Rights

10.  Ensure effective legal representation.

You should have legal help to prepare and review the agreement that you and your partner come up with, and it’s important to ensure that the other party has legal representation, too, and that they've thoroughly reviewed the agreement. This representation should be substantial and not just for show. To illustrate, some states, including California - a pioneer in progressive family law - have implemented unique regulations. For instance, they introduced no-fault divorce four decades before New York. They also enforce a 7-day rule, which mandates a whole week's gap between when you present the final prenuptial agreement to the other party and when both of you sign it.

To put it in simpler terms, judges are people too, and they could intervene if they feel one party is being exploited, regardless of the words in your agreement. Please check out Chapter 7 of my ebook for further reading, “Accept that the Court is Always Right.”