Say ‘I Don’t’ to Unfair Prenups

Anyone who is about to say, “I do,” has probably heard, “With divorce rates so high, you need to protect yourself with a prenup.”

But do you really need one?

Today’s story began with a call from my client, Reggie, whose son, Jake – also my client – was preparing to remarry after a bad divorce. His new bride’s name was Michelle.

From just $107.88 $24.99 for Kiplinger Personal Finance

Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues

CLICK FOR FREE ISSUE

Sign up for Kiplinger’s Free Newsletters

Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.

Profit and prosper with the best of expert advice - straight to your e-mail.

Sign up

“Our estate-planning attorney drafted a prenup that he called standard and wants Michelle to have it reviewed by her own lawyer. I told her to call you for an appointment, and it is on my dime. I’ve just emailed it to you.”

Now, I’ve reviewed these agreements for years and given opinions on just how fair they were. But this time was different.

I was being asked to tell a client’s future daughter-in-law if it would be OK for her to sign a prenuptial agreement, which would be an obvious conflict of interest. I would normally decline. However, when I learned the name of the lawyer who drafted it, all bets were off as there was a risk she would just sign it to make everyone happy.

In the past, this particular attorney had revealed poor judgment, violating rules of professional conduct. Additionally, any attorney who claims to have a “standard” prenup is the last one you want to hire, as every premarital agreement should be tailored to the couple’s specific situation and needs.

When it arrived, my fears were realized. I immediately scheduled an appointment for Michelle with a family law attorney whose competence I respect.

Not Something to Be Taken Lightly

As Plainfield, Massachusetts, family law attorney Laurie Israel writes in The Generous Prenup: How to Support Your Marriage and Avoid the Pitfalls:

“Couples are told that prenups are crucial, and occasionally they are. Their accountants, business associates, lawyers, and family members tell them to have one. But you rarely hear or read about just how dangerous for the health of your marriage a prenup can be,” Israel says.

I ran by her the prenup that Michelle was being asked to sign.

“Dennis, this is bad news,” she said. “It would convince her that she was marrying a selfish person who would use and then could drop her in a moment, with no repercussions.”

That was exactly what I thought.

Now, ask yourself, “If I was given something like this to sign, what would it make me think of the person I was about to marry?”

In the prenup, under the heading Sole and Exclusive Agreement of all Rights – Fairness, the agreement states: “Both parties accept the terms of this agreement as the fair, and exclusive settlement of all rights and claims, now or in the future. This Agreement and its terms are not one sided, harsh, oppressive, surprising or unfair for either party.”

Want to bet?

Jake manages and will soon take over his father’s oilfield service business. With no prenup, through his efforts, as the business grows and becomes more valuable, that increase in value would be considered belonging half to the wife if they divorced.

But the prenup says, “Regardless of the time husband devotes to the business, which would be considered as marital or community property, or efforts by wife to make it more profitable, wife has no claim to its increase in value. Also, no claim on contributions to husband’s retirement account from community funds. Wife waives any claim for spousal support in the event of divorce.”

Remember that part about, “This Agreement and its terms are not one sided, harsh, oppressive, surprising or unfair for either party”? When I read that again, my blood boiled.

“It’s obviously not true,” Israel pointed out, “but if Michelle signs it, the prenup will most likely be upheld when Jake drops her when she is 50 years old.”

Bad Prenups Can Take a Wrecking Ball to Marriage

Attorney Israel explained why prenups can be so destructive:

“Michelle’s future spouse has painted himself as selfish, uncaring and overly concerned about money. Inherently unfair, this prenup is undervaluing time the non-employed spouse has dedicated to keeping house, raising the kids and so on. A lifetime of bad memories is created as the person you loved now wants to take things away from you!

“The basic premise of a good marriage involves connectedness and sharing at every level, but prenups (especially those in first and early-in-life marriages) can change that. In these cases, there is no better way to destroy your marriage before it’s even started than to have a prenup,” she strongly maintains.

One of the ways you show your love is to be generous to your spouse with money. Finances and creating a good livelihood and security are very important to a marriage. Take that away and your marriage will limp along.

Situations Where Prenups Could Make Sense

Attorney Israel is not anti-prenup in all situations. She maintains that in many situations prenups are necessary and can serve to create peace in a marriage. “In cases where they’re not needed or unfairly drafted,” she says, “they can foster simmering corrosiveness that can lead to the deterioration of the marriage.”

“If it is a second or later-in-life marriage, especially where there are children of the first marriage, it is often important for the couple to define the financial plan of the marriage. People in this situation often wish to balance financial loyalty and support with each other and loyalty to the children of the prior marriage. In order for this balancing to occur as they intend, having a prenup is often a good step in this situation,” Israel says.

“Another very good reason to have a prenup, even in a first or early-in-life marriage, is if one of the future spouses is engaged in an ongoing business, whether he or she has created it, or whether it is a family business.” She adds, “It is important if the business was not started after the marriage that the business-owner spouse be free to operate and own the business, and even retain it if the marriage ends in divorce.

“Although, it’s equally important to give the non-business owner fair treatment and compensation for the efforts of the other spouse during the marriage.” She goes on to add, “This will involve sharing the income of the business as marital property during the marriage, and also perhaps to pay the non-business spouse the increase in value of the business produced by the work of the other spouse during the marriage, although it can be paid in other property and assets.”

This advice struck a chord with my own clients, Reggie and Jake. The prenup presented to Michelle was overhauled to remove the clearly unfair and overreaching items. Once the changes were made, Michelle agreed to sign, and the couple were able to move forward.

One Way Prenups Can Relieve Some Stress

One very useful feature of prenups, attorney Israel adds, is their ability to require alternative dispute resolution techniques if there is any financial dispute at the end of marriage, whether it ends in divorce or ends in the death of one of the spouses.

“This usually takes the form of requiring mediation or collaborative law, first, followed by binding arbitration,” Israel says. This keeps the divorce out of litigation in court, which can be a primary aim of a prenup, especially when one of the spouses had a bad divorce that included lengthy and expensive litigation.

“What this does is help take the stress out of a marriage, because if it ends in divorce, the couple knows that there will be a peaceful solution to resolve any questions that might exist.”

Tips on How to Draft a Prenup

It's important that a prenup discussion be entered into at least several months before the planned wedding date. It’s often best, Israel maintains, if those discussions are facilitated by a neutral lawyer mediator, who can provide options and make sure the discussions take place without rancor.

“The aimed-for result is a prenup that is fair to both parties, and in which they can truly sign the required statement in the prenup, that each of them believes its terms are fair and equitable, and are not one-sided, harsh or oppressive.”

Final Thoughts on Prenups

Concluding our interview, Attorney Israel offers this advice:

“If you choose to be married, do it fairly and generously. If you decide not to opt for a prenup, trust in the tradition of marriage as a sharing of everything, including finances. In that case, you can trust in the laws of your state to treat both of you fairly should you decide to end your marriage.” If you decide on having a prenup, “Make sure the prenup is one that both of you can subscribe to, and that it responds fully to the financial concerns and aims of each of you as you enter into the marriage,” Attorney Israel advises. “That way, the prenup can create goodwill rather than create the source of marital conflict, which could weaken or ultimately destroy the marriage.”

Available on Amazon, The Generous Prenup should be required reading of all those people who are so quick to say, “We’ve got to have a prenup!” as well as an insightful guide for couples who decide to embark on a prenup.

Dennis Beaver Practices law in Bakersfield and welcomes comments and questions from readers, which may be faxed to (661) 323-7993, or e-mailed to Lagombeaver1@gmail.com. And be sure to visit dennisbeaver.com.