Death and Taxes - The Blog

Ask Amy Tackles Prenuptial Agreements

This morning's Ask Amy column (available without registration through the Washington Post, here) addresses  prenuptial agreements.  Here's a portion of the question:

I am engaged to a woman whom I have been dating for 18 months. We plan to get married next year. We each have children from previous marriages, are 50 years old and are well-paid professionals. I am financially secure, and she is tens of thousands of dollars in debt because of poor spending habits.

I told my fiancee that I want a prenuptial agreement. I will ay off a portion of her debts and take care of all of our common living expenses -- housing, cars, food, utilities, insurance, etc., so that she can pay off her debts with her income, then put away some savings for herself. We will keep our finances separate. I can do whatever I see fit with my money; she can do the same with hers.

I told my sons about my marriage plan and my intention of leaving them a portion of my money if something happens to me. I will also leave some to my fiancee and some to my ex-wife to give her a bit of a financial safety net should she need it....

When my fiancee found out what I told my sons, she became very upset. She bitterly complained that it was not fair to her and that she was being slighted. I have no doubt that she loves me, and I love her. We really do enjoy being with each other.

I do think that she is not being gracious enough.

I think Amy's answer is a good one.  Prenuptial agreements are a negotiation, and involve two parties.  There is no way a prenup (or a marriage?) is going to work if the one party makes all the decisions and forces them down the other party's throat.

Sometimes I Run, Sometimes I Hide, Sometimes I Blog About Britney and K-Fed

Against my better judgment, I'm hitting you (baby!) one more time with information about the Britney Spears - Kevin Federline premarital agreement.

The Smoking Gun has this re-post of the couple's agreement re. their September 18, 2004 "faux" wedding ceremony.  What in the world is that? Some details:

At the time, Spears and Federline apparently were itching to get hitched, though negotiations over their pre-nuptial agreement had yet to be finalized. So the couple brought in the lawyers to draft a separate document regarding their planned "faux" marriage and "alleged" wedding ceremony. With no prenup in place, the couple signed the agreement--which was first obtained by Us Weekly--in advance of their purported September 18, 2004 "wedding." They agreed that their blessed union would not be legally valid until the pair later finalized details of Federline's dowry. In her divorce petition, Spears lists October 6, 2004 as the date of her marriage to Federline.

So the timeframe looks like this:

September 14, 2004: "Faux " wedding agreement is signed.

September 18, 2004: "Faux" wedding takes place.

October 6, 2004: Actual wedding takes place.

We still don't know when the prenup was signed, although I've heard it was the day of the wedding (which one?).

There has been speculation that the faux wedding/real wedding stuff was necessary to avoid problems with prenup validity under California law.  The section of the California Family Law code governing premarital agreements can be found here.  Note the language of §1615(c)(2), which requires that:

The party against whom enforcement is sought had not less than seven calendar days between the time that party was first presented with the agreement and advised to seek independent legal counsel and the time the agreement was signed. (Emphasis added)

So, it may have been that the couple intended to marry for real on September 18, 2004, but Mr. Federline wasn't given a draft of the premarital agreement and advised to hire an attorney until September 12th or even later.

A couple of other points:

1. The Smoking Gun's statement that the couple "agreed that their blessed union would not be legally valid until the pair later finalized details of Federline's dowry" may be funny (K-Fed has a hope chest?), but it really isn't accurate.  The September 18 agreement says that the parties intend to sign a prenup, but it doesn't make the wedding conditional upon a prenup.

2. Courts have traditionally hated to enforce premarital agreements in cases where there is unequal bargaining power between the spouses.  This reluctance stems from the fear that the "poor" spouse is under duress to sign the agreement.  I think this provision from the September 18 agreement may be an attempt to solve this problem while actually making things worse:

KEVIN waives the right to allege at a later date that he was under duress in entering into a Cohabitation/Prenuptial Agreement in the future before a valid wedding between the parties as a result of their "faux" wedding ceremony on September 18, 2004.

Would you as a judge give any weight to a statement by Mr. Federline that he wasn't under duress when he signed an agreement he hasn't yet signed, but plans to sign in the future?  I certainly wouldn't.

Oops! Britney Did It Again

And by again, I mean "split up with someone" -- in this case, husband Kevin Federline.  You'll remember that Ms. Spears' union with Mr. Federline came soon after her quick marriage to Jason Alexander (childhood friend, not the pear-shaped "Seinfeld" star) was annulled.

This article on Ms. Spears' divorce plans suggests that her prenuptial agreement played a big role in the timing of the divorce:

She filed [for divorce] two years and one month from the day of her marriage, on Oct. 6, 2004. Her prenup, according to legal theorists, evidently carried increases for Federline for every year of their marriage. And those deadlines, they say, likely had 30-day grace periods.

Hence, Nov. 6 would have been Britney's last chance to get out of paying a third year of alimony settlement to a basically talentless slacker who was a drain on her finances.

I love the term "legal theorists" -- makes it sound like there's a thinktank somewhere with folks pondering the terms of various prenups.  However, if I was a member of such a thinktank, I would point out the following (which I previously reported here):

There's also a question of whether Britney Spears' prenup with Kevin "K-Fed" Federline would be invalidated if the two divorced -- the prenup was signed on the day of their wedding (a definite no-no).  The prenup appears to have so confused and disoriented Mr. Federline that he wound up wearing a tracksuit with the words "Pimp Daddy" on the back to the actual ceremony.

Premarital Agreements and Disclosure

Premarital agreements are becoming more and more common, but they are still controversial -- a lot of people are horrified by them.  However, even if you are one of these people, I think you can find value in one part of the premarital agreement process: where each spouse discloses his or her financial information to the other.  I would take this a step further, and also do what Mary Hunt, the founder of DebtProofLiving.com, suggests in an article in today's Wall Street Journal:

Ms. Hunt advocates sharing credit reports before marriage, which can reveal a runaway spender.  "It's more important than a blood test.  It's a character reference." 

This piece of advice comes in an article written by Jeffrey Zaslow, entitled "Financial Infidelity: When It's OK To Shop Behind Your Spouse's Back."  The article is well worth reading (as is most everything Mr. Zaslow writes) -- you can find it here (subscription required).

Celebrity Prenups!

Monday night I was flipping around on the TV, and came across a show entitled "Celebrity Prenups" on VH1 -- here is a link with more info.  The show was a bit ridiculous (are reporters from Modern Bride and US Magazine really experts on prenuptial agreements?), but made some interesting points.  Essentially, celebrity prenups fall into three categories: good, bad, and really bad (aka non-existent).

Good: Donald Trump's attorneys evidently have more skill than his hairstylists.  Mr. Trump has been divorced twice, and both prenups have been upheld.

Bad: Steven Spielberg's prenup with Amy Irving didn't hold up because Ms. Irving wasn't represented by an attorney.  (That the prenup was written on a napkin also probably didn't help matters.)  There's also a question of whether Britney Spears' prenup with Kevin "K-Fed" Federline would be invalidated if the two divorced -- the prenup was signed on the day of their wedding (a definite no-no).  The prenup appears to have so confused and disoriented Mr. Federline that he wound up wearing a tracksuit with the words "Pimp Daddy" on the back to the actual ceremony.

Really Bad (aka Non-Existent). For a show about celebrity prenups, this program sure spent a lot of time discussing parties who took a big hit because they didn't sign a prenuptial agreement prior to marriage.  Falling into this category: Michael Douglas (with respect to his first wife, Diandra Douglas) and Harrison Ford (with respect to his second wife, screenwriter Melissa Mathison).  Jessica Simpson may also be added to this list in the near future.

Premarital Agreements and Insurance

When most people think about premarital agreements, they think "divorce."  However, as I indicated yesterday, these types of agreements usually apply to other scenarios as well, including (but not limited to) the death of a party during the marriage.   With respect to death, the major concern of the parties may be that they would prefer to leave most (or all) of their property to someone other than their spouse (children of a prior marriage, siblings, parents, etc.).  In Illinois, a surviving spouse has certain rights to a decedent's property, and most premarital agreements contain some type of waiver of these rights. 

That being said, sometimes it is appropriate to include a provision in the premarital agreement, requiring one party (or both parties) to leave property to the other upon death.  I have found that the easiest way to effectuate this gift upon death is through the use of life insurance, for a number of reasons:

-Life insurance rates are pretty reasonable;

-It's easy to monitor compliance with a requirement to keep life insurance in force (you can just ask your spouse for proof every year that he or she has paid the premium); and

-Life insurance is easy to collect upon a spouse's death -- it's a non-probate asset, and the proceeds can usually be obtained by presenting the decedent's death certificate and beneficiary forms to the insurance company.  This means no waiting for a probate to be completed.

Life insurance can be especially important if the parties have (or plan to have) children together, and indeed the requirement to keep insurance in force can be made contingent on this fact.  For instance, I recently drafted a premarital agreement requiring both parties to obtain life insurance on their lives until no child of theirs is under the age of 21.

Premarital Agreements: A Short Introduction

This post is adopted from an article available -- in html and pdf -- on my regular website, jas-law.com.

1.) I represent individuals who want to enter into a premarital agreement (aka prenuptial agreement) with their spouse-to-be. Premarital agreements come at the intersection of Estate Planning Avenue and Divorce Attorney Boulevard, so estate planning attorneys and divorce/family law attorneys both tend to practice in this area of law.

2.) Premarital agreements aren't just for rich folks - they're for anyone who is concerned about losing control of their property as a result of marriage (including but not limited to people who were previously married, and individuals who own their own business).

3.) The first key to an effective, enforceable premarital agreement is independent representation. That means each party to the agreement must have his or her own attorney, even if the parties share the same views on what the premarital agreement should say.

4.) The second key to an effective, enforceable premarital agreement is full disclosure of each party's assets to the other. This makes sense - if you are agreeing to give up the right to another person's property, you should know exactly what you're giving up.

5.) The typical premarital agreement covers three scenarios: during the marriage, upon divorce, and upon the death of a spouse. Illinois law gives spouses certain rights under each of these scenarios, but a premarital agreement may be used to change (or eliminate) these rights.

6.) Perhaps the simplest and most common type of premarital agreement is what I call the "yours is yours, mine is mine" agreement. As its name indicates, each party has separate property during the marriage, and neither party has the right to the other's property upon divorce or the death of one spouse. This doesn't prevent either spouse from making gifts to the other during life or upon death (e.g. in a Will); however, neither spouse is required to make such gifts.

7.) Premarital agreements can be amended or even revoked at any time if the parties agree to it.