It is common for owners of businesses to want a prenuptial agreement prior to marriage. There are many good reasons for having a prenuptial agreement: It can protect the business from intrusive discovery on divorce or death; it can avoid management having to spend precious time on producing documents; it can accelerate the time period of the divorce proceedings; it can maintain privacy of the company’s finances; and it can reduce expense to the business owner and company.
However, prenuptial agreements are a complex combination of business document and social contract, with a powerful overlay of emotion. After all, they are broached at a time of contemplation of a future of togethernessand partnership. It should come as no surprise that drafting, discussing and negotiating one is far different from the typical contracts business owners are used to negotiating. Approached the wrong way, a prenuptial agreement can appear to put up a wall, saying, “I love you, but …”
Approached the right way, a prenuptial agreement can actually strengthen the bonds of marriage and encourage a productive, healthy discussion of finances and expectations. Many religions require a discussion of finances in premarital counseling. But talking about money is very difficult and not a topic many people are used to discussing.
Statistics show that for married couples, money presents more opportunity for conflict than sex or children, and money is a regular cause for divorce. Yet money is still a taboo subject. We’re taught it’s impolite to talk about how much something cost or how much money someone earns. It can symbolize the comfort of being taken care of and loved, and bring up issues of dependence and survival. It can symbolize power and control. Will talking about it reveal our attitudes and inner thoughts on these topics? Perhaps, but that is why it is often required in premarital counseling.
Keeping these emotional components of money in mind, how you approach the topic and negotiation of a prenuptial agreement will greatly impact its likelihood of success. The exact same reasons that cause a dissolution of a marriage (lack of communication, distrust, financial and emotional insecurity, power and control) can be turned on their head to improve a marriage.
Here are some tips for success if you are contemplating a prenuptial agreement for yourself or one of your children.
First, start the discussion gradually and communicate fully. Don’t spring the topic on your fiancé cold. Try to both express your reasons for wanting one and gather from your fiancé concerns s/he may have with entering one.If your fiancé is strongly opposed to or offended by the topic, give it a rest for a while. It will be essential to explore with your fiancé his or her concerns so as to adequately address those concerns while protecting your interests. A good middle ground can usually be achieved.
Second, broach the subject several months in advance of the wedding, and preferably in advance of or immediately following the engagement. Prenuptial agreements take several months to negotiate from beginning to end. The worst possible situation is to be negotiating and signing the agreement within the eve of a marriage. Neither of you will feel secure with a last-minute negotiation.
Third, give thought in advance for the purposes of the agreement and how you will introduce the topic. Is it intended to protect very specific assets only, such as stock in a family business? Is it your social obligation to other business owners to protect the business on death or divorce? Does your business or family have a policy of having all owners enter a prenuptial agreement to protect the business? Are there children from a prior marriage to whom you have obligations? It is essential to understand why you want to protect assets as fully as what you want to protect.
Fourth, consider how and where you will approach the subject with your fiancé. A private, calm setting is best to allow full sharing of thoughts and feelings about the agreement.
Fifth, give thought in advance to what your fiancé’s strongest concerns might be so that you can be better prepared to address those in your initial discussions. Is your fiancé financially secure in his or her own right, or will the agreement need to provide additional financial security? Will your fiancé view a prenuptial agreement as counter to the partnership of marriage? Will the agreement be viewed as establishing power and control, or conversely, eliminating power and control?
Sixth, be prepared to fully disclose your assets and your net worth. There must be full disclosure of all of your assets, including values, for the agreement to be binding. This can be challenging, especially if your fiancé has previously had little or no indication of your net worth. Further, your net worth on paper may far exceed cash in the bank and your lifestyle. Be prepared to discuss how you view your assets and net worth.
Seventh, if you reach a point where you are having difficulty discussing the agreement with your fiancé or moving past an issue, consider professional help. Marriage counselors can work wonders to facilitate a healthy discussion of money and partnership. Counseling prior to marriage can result in a stronger, healthier marriage.
Finally, keep in mind that the end goal is to get married. Some give and take will be required, but in the end, the agreement should foster marriage and strengthen your partnership.
Susan Gell Meyers is a partner with Warner Norcross & Judd LLP.