PRENUPTIAL
Are you getting married, and you want to protect your pre-marital assets in case your marriage ends in divorce? Our attorneys can draft pre-marital, or even post-marital, agreements so that you have peace of mind in your marriage.
PRENUPTIAL AGREEMENTS – LET’S COLLABORATE!
FIRST, THE PROBLEM
The execution of a prenuptial agreement is generally fraught with emotion and distress. Timing is crucial and can never be “right.” The issue arises when two happy people anticipate sharing the beginning of their lives together with everyone they care about present. It simply can’t be raised before they decide to marry; prior to that, the question is simply irrelevant. In the midst of a joy-filled time, a prenuptial agreement cannot but cast a negative shadow. It suggests distrust between the two lovers, raising the specter of divorce before they have even celebrated their nuptials.
[expand title=”CONTINUE READING…”]Worse still, the negotiation is invariably adversarial. Traditionally, one spouse-to-be retains a lawyer, usually a trial attorney, to solve the problem. This usually occurs because the family has mandated that the fiancé execute a prenup or s/he was married before and suffered the consequences of not having one. From that point forward, the lawyer runs the show, drafting the proposed agreement, and dictating whether the soon-to–be spouse or the attorney offers the draft prenup to “the opposing party” for review. (Even the language is negative!) The recipient usually retains his or her own counsel to review the agreement, and the two people in love and/or their lawyers negotiate back and forth regarding the terms.
The approach of the wedding date without a signed agreement, increases stress levels for the two people and spills over to their close friends and family, robbing the upcoming special day of any romance.
Despite that approximately half of marriages end in divorce, prenups are under-utilized. According to a study on behalf of Lawyers.com, while 28% of Americans believe that prenups make good financial sense, 25% believe that prenups are only for the rich and famous. Nineteen percent feel that prenups are unnecessary if the couple truly loves one another, and 15% believe that prenups doom a marriage from the start. However, divorced individuals feel differently. Forty-nine percent of divorced folks believe that prenups make good financial sense. And while nine percent of unmarried individuals say they would never wed without one, only one percent of American marriages actually have one. A study by Harvard Law showed that people are unreasonably optimistic about their chances of getting divorced, believing that they only have an 11% chance of divorce even though half of marriages end in divorce. Over half of the population studied believed that their chance of divorce was zero percent, and almost two thirds felt that divorce was more likely if a prenup was signed.
Many attorneys refuse to prepare prenups. They fear that an agreement will be challenged and set aside, causing their former client to be unhappy with their representation, and possibly subjecting them to a complaint of legal malpractice.
In Florida, there are two ways to invalidate a prenup. The first establishes that it was reached under fraud, deceit, duress, coercion, misrepresentation, or overreaching.
In the second, the challenging spouse establishes that the agreement makes an unfair or unreasonable provision for that spouse, given the parties’ circumstances. The trial court must find that the agreement is “disproportionate to the means” of the defending spouse. Once the claiming spouse establishes that the agreement is unreasonable, a presumption arises that there was either concealment by the defending spouse or a presumed lack of knowledge by the challenging spouse of the defending spouse’s finances at the time the agreement was reached. The burden then shifts to the defending spouse, who may rebut these presumptions by showing that there was either full, frank disclosure or a general and approximate knowledge by the challenging spouse of the defending spouse’s assets and income.
I once represented a husband whose wife challenged the validity of their prenup during the divorce, twelve years later. When they married, the wife had agreed to a settlement of one million dollars in the event that the marriage fell apart. The husband was worth approximately that much back then, but during the interim, he had worked hard and increased his net worth to approximately eighty million dollars. I was retained by his divorce lawyer when the prenup became a bone of contention in the divorce; apparently, the husband’s lawyer back then was an old family friend who had prepared the prenup, handed the husband four copies, and told him to get his fiancé to sign it. He had offered no additional instructions, despite that he knew that the wedding was right around the corner, and that the wife-to-be was an alcoholic.
The wedding was to take place on a yacht in the middle of the ocean. All of the couple’s family and close friends were aboard for the week long cruise that was to culminate with the wedding itself on the last morning, before they docked and the happy couple commenced their European honeymoon. Husband offered Wife the prenup to sign the night before the wedding. She had been drinking for days and there were no lawyers aboard to advise her.
We settled the divorce with a single payment of twenty-two million dollars. I then visited with the white-haired, straight-backed gentleman who had crafted the prenup; he was a well-respected member of the family law bar and an old acquaintance. When I explained the problem, he hung his head and sighed. I asked him to consider how to resolve it without my filing a lawsuit, but he had nothing else to say. I left. When I tried to reach him again, he was “not available.”
I filed the lawsuit. When his defense lawyer (a very collaborative trial attorney) phoned to discuss a trial plan, I told him, “Bill, let’s not waste any time on discovery. My client is willing to accept the insurance limits. You know all the problems with your case; I’ve outlined them in the complaint. What you don’t yet know is that your client lost his file on this prenup,” a discovery we had made in the underlying divorce case.
I had a check for the policy limits (a paltry one million dollars) in my hands seven business days later.
NOW, THE SOLUTION
The collaborative law process is a dignified alternative approach to negotiating prenuptial agreements that can minimize the risk of later invalidation. By opening the lines of communication and sharing information, parties attempt to reach a mutually acceptable settlement agreement that focuses on results based on the highest priorities of each client. Collaborative practice offers a solution-oriented team approach guided by neutral professionals and each of the clients’ attorneys.
Each client hires a collaboratively-trained attorney. While each attorney promotes his/her client’s interests, the attorneys and the rest of the team problem-solve together to help generate an interests-based, “win-win” agreement. Together, the couple retains a neutral financial professional and a neutral team facilitator. The financial professional assists the parties with their financial discovery, educates the parties about their options, and answers their financial questions. The team facilitator runs the meetings and helps the parties to manage their emotions so that the negotiations are as effective and friendly as possible. Rather than an adversarial, hostile climate, the collaborative environment is safe and supportive. The team focuses on the couple’s interests, rather than their positions. By exploring their interests, the team can formulate more options than traditional, positional negotiating allows.
The process encourages, and the team promotes mutual respect between the parties. The team educates and assists both parties to effectively communicate with each other, as well as to problem solve. These skills are not only constructive during the prenuptial process, but the lessons learned will help the couple communicate better in their marriage.
Because the key to the process is maintaining transparency, the parties will share information and openly talk with one another. As a result, the likelihood of the less wealthy spouse later establishing that the agreement was reached under fraud, deceit, or misrepresentation, diminishes. Further, the presence of the team facilitator, who is trained to sense imbalances and to ensure that their needs are met, decreases the likelihood that one of them may later claim that the agreement was reached under duress or coercion, or that it is overreaching.
Although the process may seem expensive at first because the clients are paying the hourly rates of four professionals, it is a small price to optimize the chances that the agreement won’t be overturned. Ultimately, if they divorce, the wealthy spouse could save thousands and thousands of dollars by having reached the prenuptial terms collaboratively.
Better still, by engaging in the collaborative process in negotiating the agreement, intelligent people will see the benefits of requiring the process in the negotiation of their divorce, if such an unfathomable development were to occur, and will include a provision mandating that in the prenup itself.
This is a blog post I published in twenty different LinkedIn discussion groups and Facebook chat pages, some for the public who are interested in divorce information and others for collaborative professionals only. Here are two of the comments I received.
• Greg Jurkowski
Automotive Repair Specialist
Why didn’t my lawyer tell me about this process back when I had to get a prenup signed? My fiancée ended up in tears and, after slapping my face in front of everyone, ran out of the room! It took me weeks to get our relationship back on track, and it was touch-and-go for a while. It sounds like this would have been a much more constructive way to begin our marriage!
• Roseann Vanella
Professional Family/Divorce Mediator/Online Publisher at FamilyAffaires.com/Contract Management Specialist
Joryn, great points!! I have successfully mediated a fair number of Prenuptial Agreements. I think the clients feel even less threatened in mediation and then each go on to a review attorney and then one of the attorney drafts the agreement. I think the public is finally realizing that there are alternatives. Thanks for bringing this out.
• Jeffrey Fink
Attorney, Mediator and Arbitrator
This is a great and timely article. It’s a logical next step in the evolution of Collaborative Law.
A group of us here in Boston submitted a proposal last month to put on a presentation at a Mass Collaborative Law Council advanced training program about using Collaborative techniques to prepare prenups and partnership agreements. We’ll have to explore it more if the proposal is accepted, but one question we all have is whether all the formal pieces of the “collaborative dispute resolution” model need to be there. For instance, does disqualification really play a role?
The other question we had was whether anyone had actual experience using Collaborative Law to do a prenup. I’ve used a small subset of the Collaborative tools for partnerships but never the full package. What’s been your experience?
I’ll share your article with the rest of the group. You’re on the cutting edge!
PRENUPTIAL AGREEMENTS: ABOUT THE PROCESS
If you have conflicting feelings about asking your fiancé(e) for a prenuptial agreement, you should know that most people do. It is a negotiation, which means you may not get everything you want and it sometimes causes stress in a relationship. Because of that stress, the collaborative process is the best way to come to an agreement.
Why?
Using the standard protocol to negotiate a prenup, one person usually retains a lawyer who prepares the documents and dictates a lot of the terms. In the event of a later divorce, the agreement may not be upheld if there was a big difference in the ability to bargain and the agreement that is eventually signed is considered unfair. But, a bigger concern in this scenario is that the other person does not usually get to communicate his or her wants or needs in an agreement and so the seeds of distrust may be planted.
The collaborative process would mean each of you has your own lawyer. Depending on the amount of assets, you and your lawyers could decide to involve a neutral financial professional (like a Certified Public Accountant) to deal with the financial disclosure that will be required from each of you. (That saves the expense of each of you getting your own CPA. CPAs are also better and cheaper than lawyers when producing financial statements.) In order for a prenuptial agreement to be enforceable, it will require each of you to be truthful about all of your financial assets and liabilities.
Some people go through emotional highs and lows while negotiating an agreement. If your lawyers and you believe that it is beneficial to have a facilitator during negotiation, then that could be included as well. The person would be an extra expense, but the facilitators are all people who are licensed and certified mental health professionals who can help the process go more smoothly. The facilitator does not provide you with therapy. The person is only there to help you understand each other’s interests and to avoid the seed of distrust or any other negative emotions which could arise during negotiations and that you do not need during a marriage.
The collaborative process can be used for many different types of conflict resolution or negotiations but it is ideal for family and marriage-related matters. In a divorce context, the collaborative process is usually much cheaper than a litigated divorce or the regular divorce process because it avoids court.
While this process can be cheaper with divorces, you should know that in the prenuptial context the process will likely be more expensive up front. That is because more time is taken to consider each other’s interest and emotions when coming to agreement.
My belief is that you have a much greater chance of starting your marriage off with no hard feelings between each other if you were to use the collaborative process.
Of course it is up to you how you want to approach things and you are not obligated in any way to use the people I put you in touch with, but I wanted to explain my opinion a little more for you.[/expand]
