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The Truth, the Prenup, and Your Bargaining Power
When dopamine, the brain chemical creating the passion in a relationship, runs strong, the heat is on; you have found your mate! So, intensely fascinated, you plan to elope. Oops! Mr. Right has no intent of losing his tightly guarded business and assets in a messy divorce. Suddenly, Ms. Sexy and Beautiful feels she is not trusted. That heat turns to pain, and will turn to ice if this lack of trust remains.
Both go to an attorney to get a Prenuptial Agreement. She believes any children in the marriage entitle her to the assets; after all, she will be his wife. He knows, though, he nearly lost everything the last time he divorced, and he will not take that risk again. This is the end of many romances.
There is an alternative, a healthy way to save both parties, and to build a dynasty. Before we look at the solutions, let us examine some of the demands of creating a premarriage agreement.
Definition
A premarital agreement, known as a Prenuptial Agreement or “prenup,” is a contract between two prospective partners before they marry. This signed commitment usually describes what each party's rights will be if they divorce or when one of them dies. Premarital Agreements most commonly deal with issues of property and spousal support—who is entitled to what property and how much sustenance, if any, will be paid if divorced.
Increases Divorce Likelihood
The future spouse pushing for a Prenuptial Agreement lacks faith; and, obviously, feels uncertain about the marriage. Assuming a divorce, before the wedding, presumes a lack of fairness from the partner.
Seeds Discontent
There is usually an “initiator” spouse, and a “compliant” spouse. The latter is less aggressive, and is likely to react later in the marriage by remembering his or her partner as being callous. This pattern permeates through the marriage, seeding discontent. When tensions rise, this effort to control provides fuel for retaliation.
Marriage is a mixture of a complicated set of laws, customs, expectations, and culturally based understandings. A premarital agreement upsets this balance. Love and trust are a matter of surrender. Entering a hard-core negotiation about a the heart wounds at least one of the parties, and most likely both, with unintended long-range consequences. This even includes the possibility of plotting the death of the partner.
Shows lack of Sensitivity
Lacking sensitivity, some lawyers setting up Prenuptial Agreements may have no particular interest in feelings and emotions or how the “opposition” is likely to react to suggestions. This prenuptial contract is business to them, as it should be. Although there may be some counseling, it is usually about how to protect the client, and not couple counseling. Each lawyer represents one of the people to be married, and only ensures his or her client has the better deal.
Sometimes, only one party of the engaged couple can afford legal counsel, thus presenting to the lesser positioned partner a document to sign. Feeling befuddled, or uncomfortable, yet not wanting to lose the opportunity for the marriage, the weaker member often signs away his or her future.
Hammering out the details of a premarriage pact is not romantic; it can destroy a portion of a couple’s love forever. Being betrothed conjures up images of candlelight dinners and walks in the moonlight. Although marriage is a financial partnership as well as a romantic one, discussing property and finances, at the same time as the possibility of divorce, mars an otherwise beautiful time.
Because a marriage revolves around both trust and financial responsibility, it is necessary to look seriously at the assets and to consider plans. That healthy exercise, though, does not include a discussion about divorce.
The Business of Marriage
In a purely legal sense, marriage is a business. Each partner is to come into the union with equal responsibilities. They build a life together, have children together, and reap the rewards together. Unfortunately the business of a marriage involves deep feelings and commitments, and cannot be treated as a cold, hard transaction.
In the Drawer?
Often the causing party (or the lawyer) states, “You can just put the premarital agreement in a drawer and forget about it.” That is not true. The premarital agreement cannot be forgotten and is legal when signed.
Equal Bargaining Power
When married previously, a Prenuptial Agreement is more applicable if the bargaining power is unequal. The final arrangement, though, can be coercive and lacks fair and equivalent consideration.
Leverage
One partner may try to use leverage on the other by beginning Prenuptial negotiations close to the wedding and after the invitations are sent. This is not conducive for arm’s-length bargaining about a financial contract that may affect the next 50 years of a person’s life.
All Power
The contract at the heart of the any premarriage accord involves the largest financial settlement a person ever makes. It includes all property—past, present, and future; earned, and unearned—of each of the spouses. Even mediators may lack the long-range vision of what occurs to the power imbalance in the parties when helping clients to negotiate a financial accord.
Mediators need to realize the arrangement proposed by “both parties” is likely to be the thoughts of one, while the other party feels compelled, and does not admit it. Although all motivations and feelings should be exposed and discussed in the mediation before continuing, it is often not possible. Speaking the truth, especially in a love connection, is more than likely, the most difficult risk each of the partners takes.
Communicating Truth
The skill of handling communication amid conflicting and deep feelings develops, usually, long after the wedding day. Untrained in appropriate methods of self-expression, emotionally upset people usually sling words at each other, rather than admit how wounded they feel and distressed at the behavior of the other. Not learning this skill at the beginning of the marriage, creates greater anguish during prenuptial negotiations, and later fosters an excuse to kill the alliance between the two.
Alternative Solutions to a Prenup Agreement
Within the intricacies of an Irrevocable Trust are incredible opportunities and creative solutions to a myriad of problems. One resolution is to have joint assets handled by Trustees. Turning over a portion of one’s wealth to those skilled in asset management provides a long list of benefits the average person has never heard about.
There are many Trust types, some are Revocable, while others are not. Those Revocable allow the Grantors to change the terms of the Trust and cancel it before they die. This is how all Living Trusts are designed. Although, when a Grantor dies, the Revocable Trust becomes irrevocable. This means its terms are cast in stone and cannot be changed after he or she passes.
The Irrevocable Trust is set up when one is still alive. Giving assets to third-party Trustees removes ownership, and holds the possibility of drastically reducing personal taxes. The Irrevocable Trust offers a unique solution to a Prenuptial Agreement, and the Common-Law Irrevocable Trust offers the most thorough and flexible solution, making the union more secure, and especially ensuring the future of the children.
Frank C. Ozak is the general manager of Charles Arthur Enterprises and has contributed to both Volume I and II of the Art of Passing the Buck. These books, designed to teach the public how to handle the major ingredients of inheritance, share the experience of more than ten Trust Administrators. More information about passing on wealth is found at www.passingbucks.com or e-mail Frank Ozak him at passingbucks@gmail.com.
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