Posts Tagged ‘Prenuptial Agreement’

This morning, I saw a news report about a company that offers divorce insurance. I did a double take. Divorce insurance? What is that?

The company that offers the divorce insurance is called Wedlock. WedLock is offered by SafeGuard Guaranty Corporation, a company created by John Logan. The insurance startup based in Kernersville, NC and underwritten by Prime Insurance Company, a surplus lines insurer based in Salt Lake City, Utah.

Cost and Benefits of Divorce Insurance

Insurance plans start at approximately $16 per month “unit” of coverage, which equals $1,250 in benefits. You can buy additional units at the same price — and keep going right up to 200 units, or $250,000 of coverage. As long as you continue paying the premiums, the company adds $250 of coverage every year per unit. The kicker is that there is a five year waiting period before benefits are available (for an extra premium the waiting period can be reduced to three years).

The policy is designed to cover the costs of divorce, including attorney fees, moving expenses, new digs, child support and alimony. However, it does not appear that there are any restrictions on how the benefits must be spent. It should be noted that if a couple pays for the insurance with community property funds, any benefits payable would also be community property.

I frequently advise my clients regarding the necessity of having all types of insurance, liability insurance, life insurance, earthquake insurance, and professional malpractice insurance. Did you know you can even get insurance for your wedding reception?  However, I’m not sure divorce insurance is something I would recommend.

The average cost of divorce in Southern California is approximately $70,000. Add that to the fact that nearly half of all marriages end in divorce, insuring against this risk does not seem like a bad idea.  That said, I just can’t think of a good way to start the conversation to purchase this insurance. It seems to me that purchasing divorce insurance may ensure you do get a divorce.

A Better Alternative

I think a better approach would be to have a prenuptial agreement.  If you are already married, rather than purchasing insurance, invest in a postnuptial agreement.  In previous posts, I have discussed my views on these agreements. In my opinion, both pre- and post-nuptial agreements can actually strengthen a marriage.  When done correctly, the process of preparing one of these agreements reinforces the intimacy and responsibilities that are essential for a healthy marriage (or will streamline the divorce process).

If you are contemplating getting married and need a prenuptial agreement, or if you wish that you had one, please contact Laura L. Thatcher at Robinson-Thatcher, LLP.

Wishing you peace.

For various reasons, I have had postnuptial agreements on my mind for a while lately. This mental light bulb burning in the back of my head wasn’t caused by Tiger Wood’s unfortunate marital problems. Although the fact that I was visiting my mother in Florida while it probably helped it burn a little brighter, as I felt a completely unmeritorious personal connection to the whole unfortunate situation based on the fact that I was 10 miles away from where it all happened.

There are a several situations in which post-nuptial are warranted: 1) Salvage In order to put a Band-Aid on a relationship that is damaged in the hope that you can avoid divorce; 2) Time Travel You thought about getting a prenuptial agreement before you got married, but never actually got around to it and now you wish you could go back in time….; and 3) Course Correction Although your relationship is necessarily in immediate danger, the warning signs indicate that you would have smoother sailing fin financial issues were taken out of the mix.

Avoiding Impending Divorce

Following almost immediately on the heels of the public disclosure of Tiger Woods and Elin Nordegren’s personal tragedy, the press reported details of a revised prenuptial agreement leaked by “a lawyer familiar with the couple’s negotiations.” According to that unnamed source Nordegren would be paid many, many millions to stay with Tiger and “to be a dutiful wife in showing up with him at social events and in public as if they were still the perfect couple, and sign a nondisclosure form that will prevent her from ever telling her story.”

If this is true, I am the lawyer in me is deeply concerned about the ethics of the lawyer who leaked this information. That said we can learn something from the experiences of others who go before us.

A post-nuptial agreement allows a couple to plan for the equitable distribution of savings, investments, real estate and personal property in the event of a divorce. As such, it is a flexible document that can be structured to accommodate a couple’s specific needs and goals that suit their needs as opposed to what would happen by default under California law. Having the freedom to control what happens to your finances during marriage, in case of divorce or in the event of one spouse’s death allows the couple the freedom of time to work on the personal issues that are behind the threat of divorce. Keep in mind that no California Court will enforce provision that either tries to waive statutory child support obligations or to bind the court regarding child custody or visitation.

Oops! I Forgot to Ask For A Pre-Nuptial Agreement! Now What

Another common scenario where a prenuptial agreement is frequently valuable is in the case where the couple getting married simply neglects to have a prenuptial agreement prepared before the wedding. (There are many reasons this might happen, from fear that one’s fiancé would reject the idea, to a simple reluctance to go through the hassle of ONE MORE THING before a wedding).

I have a client who thought that a pre-nuptial agreement would be a good idea, but after spending years in court seeking a divorce from his ex wife, when it came time to re-marry, he couldn’t bear the thought of dealing with more lawyers, so married his second wife without a pre-nuptial agreement. Now, many years down the road, the client wonders if that was a good idea — although the marriage is strong, it leaves his business and his children from his previous marriage subject to California’s community property laws.

In this situation, a post-nuptial agreement was a solution to my client’s worries. My client gained the certainty that all of his children – both from his first marriage and with his current wife – would be provided for financially in the event something happened either to him, or in the event he were to get a divorce. He also protected his business (and business partners) should something happen to him. Finally, his current wife received assurances that she would also be provided for in the event that something were to happen to her husband. The benefit of certainty is often reason enough for your spouse to agree to a post-nuptial agreement.

Um, Honey, I’m Sorry, but I Lost the House in a Poker Game

That is one of the last things anyone ever wants to hear. Unfortunately, in a community property state, it’s possible, especially if one spouse has a gambling or drug addiction. If during the course of your marriage, your spouse develops an addiction or other behavior which can significantly affect your family’s financial well being, a post-nuptial agreement is one way of protecting the family’s security. Especially when there are children involved, a prenuptial agreement which makes the largest family assets the separate property of the “healthy” spouse can protect the whole family from the often tragic consequences addition may have on a family.

In general, I am willing to wager that most people think that prenuptial agreements are only for the rich and famous or the very suspicious.  Well, not any more they aren’t.  In today’s increasingly complex world, premarital agreements are becoming an essential component to marriage.

Why would I want a Prenuptial Agreement?

The following is a list of reasons you may want to consider a prenuptial agreement.

• You have children from a previous marriage or relationship. When you have a family from a previous marriage or relationship, your legal and financial concerns are often very different than for people who are marrying for the first time.  A well drafted prenuptial agreement will help assure that your assets are distributed according to your wishes so that neither your first family nor your new family are cut off the event that you pass away or your new relationship breaks down.
• You plan to quit your job to raise your children. A prenuptial agreement can be a powerful tool to protect a stay at home parent, as it can provide for future security for a spouse who has sacrificed their career to raise a family.
• You own property or have significant investments. A prenuptial agreement can protect property you accumulated prior to the marriage, as well as any appreciation in the value of that property.
• You own a business. Without a prenuptial agreement, your spouse could own part of your business in the event your marriage ends.  Your business partners may not appreciate this.  A prenuptial agreement can prevent a spouse from becoming an unwanted partner in your business.
• A prenuptial can be a useful estate planning tool. A prenuptial agreement can ensure that your estate plan works as you designed it. 
• Your partner has a lot of debt.  If your partner has a large debt load prior to your marriage, a prenuptial agreement can ensure that you will not be responsible for the debt in the event of the dissolution of your marriage.

When presented with the idea of a prenuptial agreement, many people automatically put up road blocks and objections.  However, with some thoughtful planning and understanding, these objections can be successfully eliminated and even turned into powerful arguments in favor of a prenuptial agreement.

• Prenuptial agreements are not romantic.  Well, no they are not.  But a lasting marriage is not based on romance alone.  Qualities such as the ability to talk openly with each other about finances, children and the future are the foundation of a lasting marriage and a successful prenuptial agreement requires all of these components.
• A prenuptial agreement means we don’t trust each other. A successful prenuptial agreement requires honesty and full disclosure about each party’s assets, debts and desires.  Couples who truly do not trust each other would not be able to engage in the honest discussion that prenuptial negotiation requires.
• We Are Never Going to Get Divorced.  In today’s society, relationships often break down. In addition, a premarital agreement can define what happens to assets in the case of death, not just divorce.
• Prenuptial agreements always favor the husband/wealthier party.  As discussed above, a prenuptial agreement can provide future stability for a stay at home parent.  They can also ensure that the less wealthy spouse is financially taken care of (even if it is not the same asset split that a court might give in the absence of a prenuptial agreement).
• Prenuptial agreements are expensive. Couples should plan on spending approximately $1,500 for the drafting of a prenuptial agreement, and additional legal fees for the reviewing partner. However, when the costs of an ugly contested divorce are factored in, a premarital agreement is well worth the investment.

If you decide a Premarital Agreement is right for you, there are some things that you should consider:

• Both parties should be represented by separate attorneys.
• The premarital agreement should be discussed and prepared well in advance of the wedding.  In California, the agreement should be signed at least seven days before the wedding.
• Be honest, any concealed assets or debt could invalidate the prenuptial agreement,
• An open and honest discussion of assets, debts, children and aspirations should strengthen the marriage, not weaken it.

If you are planning on getting married and would like a premarital agreement, or are considering whether a premarital agreement is right for you, I invite you to contact me.