Prenuptial Agreements

You Should Have a Prenup if…  You have assets such as a home, stock or retirement funds  Own all or part of a business  You may be receiving an inheritance  You have children and/or grandchildren from a previous marriage  One of you is much wealthier than the other  One of you will be supporting the other through college  You have loved ones who need to be taken care of, such as elderly parents  You have or are pursuing a degree or license in a potentially lucrative profession such as medicine  You could see a big increase in income because your business is taking off, or that garage band you play in has just gotten a contract with a big record company. Marriage is an emotional and financial union

Prenup vs. Death  Intestate Succession Absent a Will: Absent a Will: Spouse can elect 1/3 of estate in most statesSpouse can elect 1/3 of estate in most states Prenups protect children of prior marriage

Uniform Premarital Agreement Act adopted in Nevada  Agreements must be: In writing In writing Signed by both parties Signed by both parties  PMA must be: Fair and reasonable Fair and reasonable Understandable Understandable Not procured through fraud, misrepresentation or non-disclosure Not procured through fraud, misrepresentation or non-disclosure

Choice of Law Controlling law of PMA Controlling law of PMA State where it was signed State where it was signed

Unenforceable PMAs  PMAs are unenforceable if: Not executed voluntarily Not executed voluntarily Look at time issue [how close to the marriage]Look at time issue [how close to the marriage] Agreement was unconscionable at signing Agreement was unconscionable at signing Before signing: Before signing: No fair and reasonable disclosure of assetsNo fair and reasonable disclosure of assets No waiver of disclosureNo waiver of disclosure Inadequate knowledge of property and financesInadequate knowledge of property and finances Key: Each party should be represented by independent counsel

Overcoming Challenges to PMA  Prove: That the Disadvantaged Party: That the Disadvantaged Party: 1. had opportunity to consult independent counsel1. had opportunity to consult independent counsel 2. was not coerced2. was not coerced 3. possessed “business acumen” (knowledge)3. possessed “business acumen” (knowledge) 4. aware of financial resources & rights forfeited4. aware of financial resources & rights forfeited Provide attached list of assets Provide attached list of assets Sogg Factors

What’s in a PMA?  PMA can cover: Property rights Property rights Transfer, exchange of property Transfer, exchange of property Disposition of property upon separation, marital dissolution, death, or other event Disposition of property upon separation, marital dissolution, death, or other event Modify/eliminate alimony/support Modify/eliminate alimony/support Provisions of a will Provisions of a will Life insurance death benefit Life insurance death benefit Any other matter agreed on Any other matter agreed on Note: Child custody & support may NOT be adversely affected by PMA

What Can’t Be Included?  Wife loses $100K if wt > 120 pds  1 football game on Sunday  $10,000 fine if rude to in-laws  Sex 3 times per week  Random drug testing with $10,000 fine  Husband will take out the garbage  Wife will care for the house

Celebrity PMAs  Tom Cruise/Katie Holmes $3 m each year married up to $33 m (expires 11 yrs) $3 m each year married up to $33 m (expires 11 yrs)  Catherine Zeta-Jones/Michael Douglas $2.8 m each year married/$5 m bonus if he cheats $2.8 m each year married/$5 m bonus if he cheats  Denise Richards/Charlie Sheen (divorced) $4 m penalty for cheating $4 m penalty for cheating  Nicole Kidman/Keith Urban $640K each year married/forfeits all if drugs/alcohol $640K each year married/forfeits all if drugs/alcohol  Britney/K-Fed (divorced) $2 m for 2 yrs of marriage $2 m for 2 yrs of marriage

The Trump  “No prenup… no nup.” Ivana: Ivana: 14 million14 million $350K annual alimony$350K annual alimony $300K annual child support$300K annual child support homes and car homes and car Marla Maples: 4 year-marriage clause Marla Maples: 4 year-marriage clause Donald served her weeks before the anniversaryDonald served her weeks before the anniversary She got $1 m, property, child supportShe got $1 m, property, child support SHE cheated….SHE cheated….

Drafting Considerations  PMAs should include language it was: 1. executed voluntarily 1. executed voluntarily 2. not unconscionable 2. not unconscionable 3. fair and reasonable disclosure of property provided 3. fair and reasonable disclosure of property provided 4. each party had adequate knowledge of assets/obligations or WAIVED 4. each party had adequate knowledge of assets/obligations or WAIVED 4. each party had independent legal counsel 4. each party had independent legal counsel

Modifications  May be oral Unless Unless  Agreement requires writing Drafting note: All PMAs should require modifications to be in writing

Rock Solid Prenuptial Agreement  1. Time Sign at least 30 days before weddingSign at least 30 days before wedding  2. Representation Separate Attorneys for partiesSeparate Attorneys for parties  3. Disclose All Assets Most frequent reason for invalidationMost frequent reason for invalidation  4. Fair & Reasonable Terms  5. Don’t Commingle Assets  6. Signed & Witnessed

Softening the Blow  Sunset Clause Prenup can expire in 10, 20, 30 years Prenup can expire in 10, 20, 30 years Jack Welch: expired after 10 yearsJack Welch: expired after 10 years Jane Beasley Welch got $150 million at divorce Jane Beasley Welch got $150 million at divorce Drafting Note: May want to increase the benefits but PMA should not expire