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Congratulations - You’re Getting Married!

If you’re reading this there is a good chance you’ve decided about getting a prenup. After all, a prenup is a form of insurance. We don’t want to use it, but it's good to have it just in case.

What is the main purpose of getting a prenup? To have some form of protection for your marriage assets in case things don't work out. A prenup agreement lists all assets from both spouses then describes a divorce workout plan.

But as you're thinking about a traditional prenuptial agreement before getting married, you need to consider three problems that are inherent to traditional prenups. Here are a few problems you might encounter...

• Money and Time
• “That” conversation and the signature issue
• Court Challenges

Problem 1: Money and Time. According to Business Insider, the cost of a traditional prenuptial agreement is about $2,500 dollars. Other sources place the cost of a prenup at at a much higher price depending on the complexity of the prenuptial agreement and how many hours an attorney puts into drafting it, since attorneys charge by the hour.

Excerpt from Business Insider article, October 20, 2018.

Even if you were to get a pre-made prenuptial agreement from legal form website, the cheapest ones cost almost $1,500 dollars and close to $2,000 in some cases. And there’s no guarantee that the agreement will work. Keep on reading to see why.

You also have the time factor. It takes time to discuss the agreement with your fiancé, both disclose all assets and schedule time with attorney. The lawyer will draft the agreement, itemize all real estate and bank accounts for both soon to be newlyweds, edit for omissions or accuracy, then another visit to sign it. Time is just as valuable as money when your on countdown to the wedding date.

Problem 2: “That” conversation. Actually asking your fiancé to disclose his or her financial condition and assets, and then sign a prenup. This is a very invasive process and no hiding allowed. That bank account your mother setup for your future must be disclosed too.

This is perhaps the most difficult aspect of a traditional prenuptial agreement: having to discuss it with your spouse, get an agreement then two signatures. You will need to disclose what kind of assets you have (not disclosing assets can jeopardize a prenup) as well as liabilities, who is going to get what, etc.

And that’s assuming the prenup is not going to spoil the romantic period before the wedding or cause the wedding to be called off. Can you hear this question, “are you more concerned about money or love?”

Problem 3: Court challenges. Even after a prenup agreement is signed with the full consent of both spouses, it can still be challenged in court. A prenuptial agreement is essentially a marriage contract between the two spouses. And precisely because it is a contract, it can be challenged even if you pay top dollar to an expensive lawyer. In fact, some law firms specialize in challenging prenuptial agreements in court.

Want an example of a prenup invalidated in court? Here’s TWO: Donald Trump’s and Steven Spielberg’s.

It’s true. Donald Trump had 4 prenups with his first wife Ivana Trump. One signed before their 1977 marriage and 3 follow up prenups. When they divorced in 1987, a New York court invalidated the last version of the prenup because Ivana successfully argued she did not have proper legal representation when she signed it. Why? Because the lawyer Donald Trump got her to look over the prenup worked with Trump’s personal lawyer at the time.

In the case of film director Steven Spielberg, Forbes Magazine published in 1997 that Spielberg’s prenup with his wife Amy Irving was also invalidated because a court in California found Irving was not properly represented by a lawyer when they signed an informal prenup in a scrap piece of paper. As a result, a Judge declared that Irving was entitled to half of Spielberg’s $100 million fortune.

Excerpt from Forbes magazine, July, 19, 1997.

That means that at least in California and New York, signing a prenup without one of the spouses being represented by a lawyer can invalidate the prenup agreement.

In fact, a court can invalidate any prenup if the court finds it to be “unconscionable.” That is, even if the prenup seemed fair at the time of marriage, the court can determine it is unfair at the time of the divorce and invalidate it. That has already happened in a court in New York in 2018. A court decided that the terms of the prenup were unfair to the wife because at the time of the divorce the wife was unemployed and took care of the children...

Excerpt from the 2018 decision by the Appellate Division of the Supreme Court of the State of New York on Taha v Elemity, which revoked a prenuptial agreement on the basis of being unconscionable at the time of the divorce.

So no, a conventional prenup is not a guarantee.

Now, remember how Steven Spielberg’s prenup got invalidated because his wife didn’t have proper legal representation when they signed it? That means that if you don’t want the prenup challenged in court, you don’t just have to ask your fiancé to sign a prenup; You have to ask your fiancé’s lawyer review it before signing.

And that can REALLY spoil the romance.

Oh, and by the way: a court can also invalidate a prenup if it’s signed too close to the wedding date. For a prenup to be valid, both spouses require enough time to fully understand what they’re getting into when they sign it. So if the prenup is signed a few days before the wedding, the probability of getting the prenup invalidated increases.

So a conventional prenup can have nasty surprises during divorce proceedings. How could you have known the future?

In other words a regular prenuptial agreement is complicated!

ISN'T THERE SOMETHING EASIER?

YES - a Prenup Trust

What is that?

It's a Trust for your pre-marriage assets. What you do is transfer what you own personally before marriage (real estate, bank accounts, stocks) to a private trust that you control.

For example: your savings account, stock in a startup, a house, a rental property, or an inheritance.

A living trust distributes your estate. A prenup trust holds your assets.

There is no need to discuss any assets in a prenup trust with your new spouse. You can always share any of it with your spouse at a later date, but think of it as a one way mirror for now. 

The transfer of your real estate, bank accounts and stocks to the trust is relatively simple. And since they are owned by the trust, they are NOT part of joint ownership assets. As long as  you do not financially share them with your spouse, this generally keeps them safe from divorce proceedings.

In other words, if you fail to use a trust, any bank accounts or property in personal name can be in jeopardy. But if the bank account or other property is owned by your trust and never mixed in with marriage assets they can be very difficult to challenge in divorce court.