Pre-nups No Longer Just for the Wealthy
New trend may decrease divorce fees for many attorneysDavid E. Rovella
The National Law Journal
September 1, 1999
Two up-and-coming New York lawyers, both in their early 30s, knew each other for years before love took hold. They eventually married, went on a honeymoon to Europe--and split up three days later.
The wife's attorney, Franklin S. Bonem, of New York's Proskauer Rose L.L.P., says that he spent most of the year after the fleeting, 72-hour marriage working out a tortuous divorce and splitting their $750,000 in assets. (The wife got to keep the oversized wedding ring, notes Mr. Bonem.)
This sort of horror story, family lawyers say, may be driving an increasing number of well-off 20- and 30-somethings to seek prenuptial agreements to protect their individual assets. It is a cultural and economic shift that may eventually make divorce less painful for couples--and less lucrative for lawyers.
George S. Stern, president of the 1,500-member American Academy of Matrimonial Lawyers (AAML), says that one of the reasons more couples whose names aren't Trump or Gates are getting prenuptials is that their parents, who plan to give them some of their hard-earned savings, insist on it. But the key factor, most agree, is a desire among young professionals to protect money earned in the booming economy and technology market.
Mr. Stern, a name partner at Atlanta's Stern & Edlin P.C., explains that, in addition to marrying older and having more individual assets, many couples also realize that prenuptial agreements function as insurance policies against protracted, emotionally brutal divorces.
Recently, state courts have made the divorce process much more complicated, holding that many items once thought to be individual property--from pensions to professional licenses--are marital property whose value is subject to division. "Even for a mom-and-pop grocery store, you have three or four experts mucking around," says well-known New York divorce lawyer Raoul Felder, who says that he does a large (and increasing) practice in prenuptials. There are more accountants, evaluators and real estate experts to assess and testify to the value of marital assets, he says, leading to higher legal bills for clients.
And although much of the influx of prenuptial work is attributable to a general increase in personal wealth, lawyers say that working-class couples may soon be inking their own prenuptials as well. "If you're going to get married and you don't want a prenuptial," cautions Mr. Felder, "you should see a psychiatrist, not a lawyer."
SURGE IN PACTS
"It used to be people had pensions and worked for companies forever," says Jane E. Lessner, a partner at Philadelphia's Fox, Rothschild, O'Brien & Frankel L.L.P., who says that she does 50 prenuptials per year. "As that has changed, asset pictures for middle-class people have changed. IRAs, 401ks and houses are the primary marital assets that drive much premarital planning."
According to the U.S. Census Bureau, 19.4 million adults--10% of the adult population--are divorced, up more than seven percentage points from 1970, with more than a million divorces finalized every year. Over the same time period, the median age of first marriages has increased from 20.3 to 24.8 for women, and from 22.8 to 27.1 for men.
An official of the American Bar Association's Family Law Section says that although there are no statistics for the number of couples that sign prenuptial agreements, family lawyers agree that there has been a surge in their use by new couples. And while she adds that spouses entering their second (or third) marriages have contributed to the increase, the prospect of another painful legal battle isn't always enough to keep even those couples from challenging the prenuptial.
"A new layer of dispute in the divorce process has been added," says Joan F. Kessler, of Foley & Lardner. "There are usually challenges to the validity of the prenuptial, and if that fails, the challenge is to the process of tracing what assets are covered by the prenuptial."
In the long run, though, says Mr. Bonem, who heads Proskauer's matrimonial practice, the business of divorce law will eventually suffer as more people use prenuptials.
"These agreements are regularly enforced, and it is almost impossible to have them set aside," he says. Instead of spending three years in a divorce, Mr. Bonem says, today's couples who decide to split up tomorrow will spend only a few months' worth of legal fees dividing any marital property not covered by the pact.
EDGE OF THE WAVE
The National Conference of Commissioners on State Laws saw the first signs of the prenuptial wave 16 years ago, when it approved the Uniform Premarital Agreement Act (UPAA), which has been adopted in some form by 26 states. Like normal contracts, prenuptials must be voluntary and not contain terms considered to be "unconscionable," and both parties must have the benefit of full disclosure of each other's assets.
"In many states back in the '70s, you could not have a prenuptial that even contemplated divorce," says Mr. Bonem. "Now the sky's the limit."
Almost anything can be addressed in a prenuptial: ballet tickets, awards in negligence suits, custody and visitation rights to the family cat. Custody and child support are exceptions that cannot validly be included.
Some of the strangest aspects of prenuptials lie in conditions laid down for behavior during the marriage. One California lawyer told a story of a man who tried to have his prenuptial require his wife to have sex with him not less than twice a week (a patently invalid requirement, the lawyer noted). Another spouse wanted the other to agree always to buy the groceries, clean and cook.
Not surprisingly, the process of negotiating the agreements can make them self-fulfilling prophecies. After nine years together, a fairly well-off couple in their late 20s decided to marry. The husband-to-be wanted a prenuptial, and his partner agreed, says Foley & Lardner's Ms. Kessler, who represented the woman. "The negotiations were very tense," she says. "Our client learned about a side of her companion in the course of negotiating the agreement that was a very different picture than the man she had been with for nine years." They completed the agreement and got married, says Ms. Kessler, "but six months later, she was back in our office looking for a divorce."
Connolly Oyler, a sole practitioner in Santa Monica, Calif., was one of the first family lawyers to draft prenuptial agreements, starting in the 1960s. He says that when there is no equivalency of assets between the two spouses, the resentment this creates in the poorer spouse, or the "out spouse," will inevitably poison the marriage.
"I just did one with a 55-year-old woman and a 62-year-old man," says Mr. Oyler. "They both had a lot of assets. One was a widower and the other divorced. That made some sense--they wanted a written understanding, particularly because they both had children from previous marriages. But in most cases it's an older, wealthier man who wants the agreement, and 100% of the women forced to sign them resent the males."
Many female lawyers disagree with Mr. Oyler's view that prenuptials almost always come at the woman's expense. Today, they say, the new surge is being driven in part by wealthier, more assertive women protecting their own assets.
"We're raising the consciousness of women executives to protect themselves in even the second or third marriages," says New York divorce lawyer Cecile C. Welch. "They go out to work. They build up assets. They should protect themselves."
Susan K. Carter, of Los Angeles' Wasser, Rosenson & Carter P.C., agrees. "More and more women are professionals now," she says. "In prior years, when there were not that many women who were professionals and women were homemakers, they were not out in the business world and did not think of things that way."
This shift toward an equal financial footing may be making couples more pragmatic about seeking a prenuptial, but attorneys say the process is still fraught with land mines that can explode even the strongest relationship.
Divorce lawyers complain that a vague legal standard governing prenuptial agreements has allowed much "recreational litigation" over perfectly valid prenuptials. The UPAA says that prenuptial agreements can't be unconscionable, which is a bar against overreaching, concealment of assets or "sharp dealing" that leaves one spouse in a financial position the court considers unjust.
Mr. Oyler is handling a divorce in which his client, the husband, was not represented by counsel when he entered into a prenuptial agreement written by his wife's lawyer. As luck would have it, the husband's assets increased and hers decreased during the marriage. In the divorce, the wife is challenging the validity of the agreement her lawyer drafted.
"It's a 20-page document--she had competent counsel," says Mr. Oyler. "And what she doesn't get is that by challenging it, she will lose credibility when it comes time for custody matters." Ms. Kessler says that courts have become less willing to entertain "buyer's remorse" when it comes to prenuptial agreements. "The courts see both partners to many marriages as active [in] the business world and seem to think that less oversight or protection of a presumptively weaker spouse is necessary."
Some divorce lawyers advise clients to amend prenuptial agreements during the marriage to keep them up to date as their financial status changes. The longer a marriage lasts, the more chance there is that a prenuptial agreement will be modified or thrown out by a court because of changes in circumstance.
Most family lawyers interviewed say they do not relish the fine line that prenuptial negotiations force them to walk. "When people are getting divorced, they are already adverse," Ms. Carter explains. "But with a prenup, you have two people who are supposedly in love starting out by negotiating, one against the other. They want to feel great and get what they want all at the same time. In reality most of them are just unromantic business deals."
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