One of the most reported on aspects of the Bill and Melinda Gates Divorce announcement, is that the couple did NOT have a PreNup. At the time of their marriage in 1994, PreNups were VERY uncommon. Today, that is changing. Should you consider a PreNup? The answer is probably yes!
TEST YOUR Pre-Nup IQ
1. My parents want me to do a PreNup so my Fiancee has no claim on assets I will, one day, inherit from them. I read somewhere that gifted or inherited assets can’t be touched in a divorce. Who is right?
You both are. You are correct that the law excludes gifted and inherited assets from partition in a divorce. This is the correct answer, IF YOU ARE ON A GAME SHOW! In real life, however, the majority of states are so-called “Equitable Distribution” (as opposed to Community property). This means that the judge has very broad discretion to order whatever he or she deems necessary to achieve their notion of “equity”. It is far better, in my opinion, to deal with these issues on the front end.
2. We are on a tight budget. Can we share an attorney?
No. PreNups have been invalidated by courts when both parties were not independently represented by counsel of their own choosing. A better way to keep costs down is for each party to give some serious consideration to what they would each need in order to remain secure, or to be made whole in the event of a divorce. This can greatly reduce the dreaded “billable hours”.
3. A Pre-Nuptial Agreement only benefits the wealthy spouse. T/F?
False. A good Pre-Nuptial agreement should protect both spouses. A PreNup which is completely one sided, will probably be invalidated by the court. If, for example, one party put his or her career on hold or turned down out of state promotion opportunities for the sake of the marriage, these are factors that should be addressed within the PreNup. Ideally, this document will ensure the financial security of both spouses in the event that the marriage does not work out.
4. How can I bring up the topic with my fiancé?
Treat it as a normal part of your overall planning. Going into a marriage, you will certainly be revising your estate planning. Failure to do so would trigger the “default” inheritance rules written into your state law. Creating a PreNup should be no different from your estate planning. They both provide security in the event of a crisis (death or divorce). Proper planning for both possibilities can prevent us from enduring the consequences of “one size fits all” rules created by our state legislatures!
5. A PreNup only deals with financial issues. T/F?
False. A PreNup provides a structural framework to deal with any and all sources of actual or potential conflict. Lifestyle clauses dealing with overspending, gambling, weight gain, substance abuse issues, infidelity, tv time, social media parameters and Pet custody, can be addressed within a PreNup.
6. I heard that PreNups can be invalidated. If this is true, why should I even bother?
It is not likely that a properly drawn PreNup would be thrown out. PreNups subject to challenge, fall into 3 clearly defined categories:
A PreNup is vulnerable if it gives everything to one party and nothing to the other. Any contract is subject to challenge if it is so one-sided as to be “unconscionable”. I have also seen PreNups invalidated by a court when one party was not separately represented by counsel. The third category of a weak PreNup is a document created under duress. Courts are inclined to find duress if the PreNup was signed too close to the wedding. While the law does not spell out a strict timeframe, my rule of thumb is that the document should never be signed after the invitations have gone out.