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Prenuptial Agreements – Let’s Collaborate!

First, the Problem

 

The execution of a prenuptial agreement is almost always fraught with emotion and distress. Timing is crucial and can never be “right.” The issue always arises during a time when two people are excited to share the beginning of their lives together with everyone they care about in the room. It simply cannot be raised before the couple is committed to the marriage; before that time, the question is simply irrelevant. And, when all else is so positive, it is a negative issue to raise, suggesting distrust between the two lovers, raising the specter of divorce before they have even celebrated their nuptials.

 

Worse still, the negotiation of the prenuptial agreement is invariably adversarial. Traditionally, one spouse-to-be retains a lawyer, usually a trial attorney, to solve the problem, usually either because family has mandated that the fiancé execute a prenup or because 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 prenuptial agreement, and dictating whether the party or the attorney offers the draft prenup to “the opposing party” for review. (Notice that even the language is negative!) That party usually retains his or her own counsel to review the agreement, and the parties and/or their lawyers negotiate back and forth regarding the terms of the agreement.

 

The closer the parties get to their wedding date without a signed agreement, the greater the stress levels, and the more the wedding day itself is wiped clean of any romance.

 

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 legal malpractice complaint.

 

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In Florida, there are two ways to invalidate a prenup. One may do so by establishing that it was reached [6] under fraud, deceit, duress, coercion, misrepresentation, or overreaching. Or the challenging spouse may establish 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 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 the usual adversarial procedure of negotiating prenuptial agreements that can minimize the risk that the agreement will be invalidated. By opening the lines of communication and sharing information, parties attempt to reach a mutually acceptable settlement agreement that focuses on solutions based on the highest priorities of each party. Collaborative practice is a solution-oriented team approach guided by neutral professionals and each of the party’s attorneys.

 

Each party 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 both parties to generate an interests-based, “win-win” agreement. Together, the parties retain 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 team-oriented. The team focuses on the parties’ interests, rather than their positions. By exploring the parties’ interests, the team is able to 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 communication skills are not only constructive during the prenuptial process, but the lessons learned during the process will help the parties to better communicate going forward in their marriage.

 

Because the key to the process is that the parties maintain transparency, meaning that the parties will share information and openly communicate with one another, the likelihood of the less wealthy spouse later establishing that the agreement was reached [6] under fraud, deceit, or misrepresentation is diminished. Further, the presence of the team facilitator, who is trained to sense imbalances and to ensure that the parties’ needs are met, decreases the likelihood that a party 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 pay to optimize the chances that the agreement will not be overturned. Ultimately, if the parties do seek to dissolve the marriage, the wealthy spouse could save thousands and thousands of dollars by having reached the prenuptial agreement collaboratively.

 

Better still, by engaging in the collaborative process in the negotiation of their prenuptial agreement, the intelligent parties 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.

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