Prenuptial agreements are not always necessary when embarking on a marriage. They usually create more problems than they solve. The parameters set forth in the agreement sometimes causes a couple to become economic adversaries during their marriage. This can result in marital strife, and even divorce.

On the other hand, prenups can be very useful in creating marital equity in a number of situations, among those being if a future spouse owns a business (either his or her own, or a family business), has future inheritances and/or interests in trusts, or if one or both parties are embarking on a second marriage having children from their first marriage.

But there are problems even in generating these necessary prenups, a principal one of which is the process itself.

Typically, the process starts with the more-moneyed spouse being advised by a financial planner or lawyer (or family member or friend) to get a prenup drawn up, at which point, the prenup becomes a ping-pong match between the initiator’s lawyer and the lawyer for the less-moneyed spouse. The future spouses are unfortunately caught in the middle and are usually left bruised by the process.

In working with clients wishing to have prenups, I have found that mediation is often the best first step.

This process begins with the couple working with a neutral mediator. For a prenup, the mediator should be someone well-versed in divorce law, business law, tax law, and estate planning. The clients provide the mediator with all the necessary financial information so that they (and the mediator) can obtain a complete and accurate picture of each of their financial situations. This picture will include information relating to the clients business interests, expectancies from inheritances and gifts, as well as present and future interests in trusts.

During the sessions (these days, conducted mostly via Zoom), the mediator will guide the couple through discussions of the various possibilities for terms they may wish to enter into in their prenup. I like to call a prenup a “financial plan for the marriage” which is essentially what it is. This gives the sense that a prenup is (or can be) a cooperative and collaborative process between two people who wish to marry each other.

The mediator can help the clients brainstorm about various options that they may not have thought of – ones that can create a “win-win” situation for both parties. The end result, after a number of sessions, is a simple and clear Term Sheet in plain English that sets out their jointly conceived financial plan for their marriage. Unlike the usual attorney-to-attorney negotiations, the couple generally enjoy the mediation sessions, and find that it helps support their relationship and maintains their positive feelings about the future of their marriage. In many instances, these mediated sessions may even result in an enhancement of their relationship.

Once the Term Sheet is finalized by the clients, the next step is for the clients to each choose an attorney to review the terms on their behalf.  As a prenup mediator, I use the internet to search for a list of 6-8 attorneys in the state in which the clients reside and who I believe will understand the couple’s goals as expressed in their Term Sheet, and not just treat the prenup as an exercise in asset protection. (The problem is by just protecting assets of one spouse without giving corresponding security or benefits to the other, there will likely be a significant financial inequity in the marriage resulting in marital discontent.)

During the process of choosing their respective attorneys, the couple and I have a session (which is actually quite fun) to look at the website or web presence of each attorney on the list that I have compiled. The clients determine which attorneys might be a good fit. It’s somewhat like a beauty contest. The clients then decide who they each would like to approach to be their respective reviewing/drafting attorney. It’s generally important to use a “newly chosen” attorney rather than a client’s prior attorney or a “family” attorney.

After that, I as the mediator, arrange to meet (via Zoom) with both of the clients’ chosen attorneys. During that meeting, I share some background about the couple and how they decided on the terms they chose for the prenup. I also provide a detailed explanation of the Term Sheet.. This saves a lot of attorney time and serves to expedite the process.

The mediator can also transmit (securely, of course) to the reviewing/drafting attorneys all the financial information that the mediator received from the clients. The mediator can stay in the mix, if and as needed, to solve problems or issues as and if they occur or just review the drafts that come from each of the attorneys. The clients have the benefit of starting with a simple Term Sheet, rather than seeing draft after draft generated by attorneys as the document reaches completion. This saves wear and tear on everyone!

So, the next time you suggest that a client gets a prenup, think about starting the client on the path of beginning with mediation, developing a Term Sheet in structured mediation sessions with his or her intended, and then consulting with separate attorneys to get the prenup drafted and finalized. I’m fairly sure the outcome will be a more equitable, and surely a more peaceable one, for everyone involved!

As published on www.mediate.com on September 25, 2022.

Laurie Israel
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