A prenuptial contract may not save a failing marriage I but it can prevent much of the financial pain of parting.
BY LOIS BRENNER
Originally printed in New Woman Magazine, November 1988
SUSAN AND JEFF MET IN LOS ANGELES. AFTER MAJORING IN film at UCLA, Susan had spent her 20s writing unsold movie scripts and working part-time in public relations. Jeff, with a Stanford MBA, had been recruited by an investment-banking firm, where he worked 12 .to 15 hour days, traveled weekends on business, and earned a six-figure salary.
By the time they decided’to marry, Susan was a sought-after freelance, and Jeff was putting all his savings into the formation of his own venture-capital company. When they parted six years later, Susan was running a profitable public relations
business with more than a dozen employees, while Jeff’s firm was on the brink of bankruptcy. During the divorce, Susan’s emotional distress was compounded by the shock of having to share the value of her business with Jeff, who had been consoling himself over his own financial reverses with a sympathetic secretary.
If Susan decides to marry again; she will be a prime candidate for a prenuptial contract—a legal document that spells out in advance who gets what when a marriage goes wrong. (With a prenuptial contract, Susan and Jeff could have arranged to keep their businesses as separate property rather than merged into community property under California law.)
As an attorney who often draws up such contracts, I see many young women finding good reasons to overcome their romantic aversion to an arrangement that, after all, contemplates the end of a marriage before it even begins.
“I consider getting married a career change,” 28-year-old Mary Ellen told me. She was planning to put-her fashion-design career on hold for several years in order to marry Harvey and have children. Harvey, an executive in a family-owned manufacturing company, was being pressured by his father and brother to prevent his stock from falling into the hands of an “outside” in the event of death or divorce.
The proposed prenuptial contract Mary Ellen was given by Harvey’s lawyer made it clear that Harvey’s first loyalty was to his father and brother. The contract asked Mary Ellen, in the event of Harvey’s death, to renounce not only control of his stock but its value as well, which easily could have been reserved for her under a buyout clause or by insurance without giving her a voice in the family company. “It’s as if he’s hiring a wife and children,” I told her. “His estate still belongs to his father and brother.”
After long discussions, Mary Ellen decided to delay the wedding and let her biological clock go on ticking while the two of them worked on the question of just how committed Harvey would be to his future family.
In my New York City practice, I have drawn up prenuptial contracts in situations ranging from those of young couples with no assets other than the down payment on a cooperative apartment or small house to complex agreements involving the inheritance of large fortunes. What do they have in common? Often the negotiations provide a litmus test that brings out clearly the line between love and greed.
Sandra and Brian meet in college, fall in love, and decide to marry after graduation. Sandra’s father, a real estate developer, has put a vast tract in her name in order to minimize his taxes. When Brian is asked to give up any claim to the property, he refuses. Sandra decides to give up Brian.
Fred, a fortyish bachelor, is the potential heir to $10 million. He proposes to Elise, whose total assets are a sable coat and a Cartier watch. When asked to sign a prenuptial contract that would give her comfortable support but no part of Fred’s inheritance in the event of divorce, Elise dissolves into tears. Against the advice of his lawyer, Fred agrees to go ahead with the wedding without a contract.
Amy, two years out of college, while working as a management trainee at a bank and saving up to pay for tuition toward an MBA degree, falls in love with Roger, who is just starting medical school. Since both their parents are divorced, they are acutely aware that marriage may not be forever. To compensate Amy, who will delay heradvanced degree by working to support Roger until he finishes his training, they decide on a prenuptial contract. It will provide that in case of divorce Roger will either pay for Amy’s postgraduate work or give her a share of the future value of his medical license.
Postponement or even cancellation of wedding plans is one possible result of deliberations over a prenuptial contract. But if the reasons for deliberation reflect a serious problem, the outcome may be preferable to facing the issues years later in the heat and anger of divorce with the fate of children at stake.
Engaged couples may be reluctant to draw up prenuptial contracts because the process undeniably tests each partner’s commitment. But there are two important reasons for women to consider such contracts.
• The no-fault divorce laws have made marriage more of an economic arrangement than ever before. In some cases, laws don’t compel ex-husbands to take care of women and treat wives like members of a dissolving partnership. No one would dream of going into a business partnership without a written understanding of who gets what if the partnership breaks up.
• Today many women bring more assets and earning potential to a marriage. As Susan discovered in divorcing Jeff, the new divorce laws can take away part of women’s hard-earned success in the absence of any other legal arrangement.
If you decide that a prenuptial contract is economically desirable, there are a few psychological hurdles to face. How do you go about making an agreement without damaging your relationship with your future husband? Here are some guidelines.
Examine your motivations. Some couples share their reasons for wanting a prenuptial contract before consulting a lawyer. In other cases, the one with the most assets to protect may see a lawyer first and then discuss a proposed contract with the other. In either event, it is helpful to examine together the intentions behind the cold legal print in order for both to arrive comfortably at an agreement.
Think about your goals. Each of you should draw up a list of major assets and think about which assets you would like to keep as separate property. It’s helpful not to reach any hard-and-fast decisions at this stage.
Get all the facts. Each of you should consult your own experienced matrimonial attorney to find out what can and cannot be done in your state. Each statesets its own standards for what happens to property in case of death or divorce. A lawyer will advise you how best to achieve your goals under those laws and later will translate your agreement into a binding legal contract. (The cost will run from a few hundred to perhaps several thousand dollars, depending on the complexity of the assets.)
Negotiate differences. Even though each of you can understand the other’s concerns, there still may be qualms about particular provisions in the contract. (“Okay, you’re going to keep the house because it’s paid for out of your inheritance, but if we divorce after five or ten years, what do I do about a place to live?”) If one of you is considerably wealthier than the other, the agreement may spell out various methods of property division and support arrangements in the case of divorce, depending on the length of the marriage. If one spouse is going to support the other through a medical or law school, the contract may include a formula for dividing the future value of the professional license. If you find it difficult to work out details, use your lawyers as buffers to keep the bargaining from becoming too heated between you.
Avoid deadline pressure. Some couples see their lawyers two or three weeks before the wedding. You should start the process’ at least three months before that. You do not want to be settling important issues after the invitations are inthe mail.
Make sure the contract will hold up. A prenuptial agreement will be most binding when each member of the couple makes full and honest disclosure about assets, income, and liabilities; when each is represented by a lawyer and signs without duress and coercion; and when the provisions are reasonable enough so that a court will not later nullify the contract. If you have any doubts, question your lawyer closely.
Even with the best of intentions, the process of working out a prenuptial contract may bring out insurmountable problems. Some clients find that the personthey plan to marry is much· more controlling, greedy, or even paranoid about money and property than they had realized. In my practice, about one out of every ten clients who consults me about a prenuptial contract ends up canceling or postponing the wedding. Another one out of ten gets married without signing a contract because the future spouse objects.
But in other cases, the results can be a confirmation of the strengths of a relationship. One client, Karen, a successful lawyer in her 30s, was marrying for the
first time. Her fiance, Phil, a businessman in his 40s, had three young children from a previous marriage. Karen and Phil planned to have a baby together, but Phil wanted to set aside most of his savings to pay for the college education of his three children. Karen readily agreed. “I fell in love with Phil,” she explained, “because he’s a warm, loving, responsible man. I wouldn’t want to marry someone who could turn his back on his own family. When we have children of our own, I’m confident that we’ll be able to provide for them out of what we earn and save together.”