Why Every Couple Should Have a Prenup

Note: Our Podcast, “Why Every Couple Should Have a Prenup”, was created to be heard, but we provide text transcripts to make this information accessible to everyone. All transcripts on our website are created using a combination of speech recognition software and human transcribers and could contain errors.

Jaime: Welcome to A Year and a Day. I’m Jaime H. Davis, board-certified family law attorney at Gailor Hunt. On this show, I talk with lawyers, psychologists, and other experts with the goal of helping you navigate divorce without destruction. In this episode, I’m talking with Lisa Zeiderman, the managing partner at Miller Zeiderman LLP, about the world of prenuptial agreements. Lisa is not only an accomplished matrimonial attorney, but she is also a certified divorce financial analyst specializing in complex divorce cases for high net worth individuals. Her remarkable achievements include being recognized as one of Crane’s New York’s notable women attorneys for 2022 and earning the title of a Hudson Valley Best Lawyer in 2022. In 2021, she was honored as the best family law attorney for client satisfaction by the American Institute of Family Law Attorneys. Lisa is also a founding member of the American Academy of Certified Financial Litigators and plays an active role on the panel for attorneys for children. Thanks for joining me, Lisa.

Lisa: Thanks so much, Jaime, for having me.

Jaime: So today we’re going to talk about prenuptial agreements, premarital agreements. What is a prenuptial agreement and why should a couple consider entering into such an agreement before getting married?

Lisa: So essentially a prenuptial or premarital agreement is a contract between those two people who are going to be getting married. And they are contracting as to what would happen in the event of divorce. What could happen in the event of a separation, and also what could happen in the event of their death, something that sometimes people overlook. It essentially sets forth a path for them so that they can be completely transparent about what their goals are in terms of monetary considerations for their marriage. So, for example, many prenuptial agreements will deal with issues such as spousal support, whether there’s going to be spousal support. If so, how could it be calculated? Or is everybody going to waive spousal support? How assets are going to be divided? And very importantly, how separate property is going to be handled? And we can talk about what separate property is, but essentially it is to protect any premarital property that you may have come into the marriage with or inheritances or gifts that you get from family during the marriage and to make sure that those assets are delineated so everybody knows what they are and that they are also then dealt with in terms of how they’re going to be divided.

Jaime: Gotcha. I mean, what I tell folks is with a prenup, it really is your opportunity to rewrite what your state’s divorce laws would otherwise do for you. If you don’t like what your state statutes say about separate property or marital property or spousal support, you can change that with your contract.

Lisa: That’s 100% true. And that is exactly right. This gives you the ability to set forth, I mean, unless you’re doing something that is outrageous, okay, but other than doing something that is completely outrageous or unconscionable or putting somebody into complete duress, it’s you and your partner setting a roadmap, essentially, for how you’re going to deal with your assets, your liabilities, and also your income later. The only thing that you will not be able to contract for is for children that are not born at the time that you actually enter into this prenuptial agreement. So if you have children, actually, there are certain things you can contract for. In your prenuptial agreement, depending upon the state, of course, as well.

Jaime: At what point in a relationship should a couple consider a prenuptial agreement? Like, is there a better time to broach the subject?

Lisa: So I would say this, first of all, there’s a worse time.

Jaime: Okay.

Lisa: So I’m going to start with the worst time to bring this up is like, you know, two weeks before the wedding. When the invitations have been set, the venue has been booked, the guests are like practically getting on the plane. The flowers are all ordered. And you actually hand this prenuptial agreement to your partner and say, oh, by the way, that is the worst time to actually have this conversation. And I can’t tell you how many of those prenups we see all the time. Oh, you know, this will be just like my brother’s prenup, or this will be just like my sister’s prenup, or, you know, by the way, everybody signs a prenup, I forgot to tell you, or my lawyer’s been working on this, and now it’s done, here it is. You know, all of those kinds of things don’t really give somebody the opportunity to think about it, to absorb the information, and to make an educated decision about it. It’s really quite unfair. And I think that that starts off a relationship and a marriage on the wrong foot. I think the sooner that you have the discussion, I mean, look, you’re not going to have this discussion on the first date. But certainly, you know, you’ve been dating, you know, for a while. And it’s something certainly to bring up. It’s something that should be part of the conversation. You know, someday I’d like to get married, maybe not to you, okay, but someday I’d like to get married. I always envision having a prenuptial agreement. What are your feelings about that? Or I, you know, I just got out of a marriage. Just so you know, there’s no way that I would get remarried again without a prenup. I went through a difficult divorce. These are the conversations that can be part of dinner conversation, you know, over a drink. It doesn’t have to be a huge, let’s sit down and have this discussion. It can be part of the conversation that you have on a normal basis. And I think the sooner that that conversation takes place, the better.

Jaime: Yeah, I would agree with that. I mean, telling your fiance two weeks before the wedding that you’re going to require a prenup doesn’t really garner a lot of trust. And I think it could make your fiance a little wary about actually proceeding with the wedding, you know, In this situation, I think more time is absolutely better. Not to mention, you want to make sure the lawyers have time to draft it and deal with any changes that need to be made and actually negotiate the terms if you want to have a really solid binding contract.

Lisa: Absolutely. And, you know, I think that there is this theory, I think, that people often give the prenup right before the wedding because they feel like then there’s no option other than for the other person to sign it. But as you say, and I think it’s 100% correct, is that you’re not garnishing any trust. And the relationship should be important enough to you that you have this conversation ways before the actual date of your marriage. You know, we’ve had. Prenups that are signed literally the day of the rehearsal dinner, right? Or the morning of, you know, the wedding, all of those kinds of things, because they were so tight. And I can’t tell you that they were not fraught with a lot of anxiety for people. And it’s not just, you know, your anxiety, it’s going to be the anxiety of family members too, because they are going to, you know, feel that anxiety as well.

Jaime: Yeah, and so much money goes into planning a wedding, planning a reception. There’s a lot on the line if you can’t get that agreement signed and you’re potentially going to call off the wedding, especially if guests have started to arrive. I mean, that’s a huge deal for a family.

Lisa: It really is. And a prenup, first of all, it should set forth all of the finances that each of you have. Second, it should deal with both liabilities and assets. And there may be liabilities such as school loans, for example. Such as credit card debt, mortgages. One of you may have a home coming into the marriage, either condo, a co-op. Um… You know a house there may be uh… Retirement accounts this questions about what should happen in terms of retirement accounts going forward and he needs a host of things to be considered whether you’re going to keep your income separate and apart from each other and just share perhaps a joint bank account and use that account before paying joint bills how the joint bills going to be paid Again, a lot of questions, considerations. What is going to happen in the event of someone’s death? What’s going to happen in the event to, you know, in New York, we have a right of election, which is automatically you would normally get a third of somebody’s estate. What’s going to happen to that? Is there a lot of separate property in someone’s estate? How is that going to be dealt with? You know, should someone get, A third of the estate if they’re only married for one year and maybe there’s many, many millions of dollars in that estate, maybe not. But again, all of these are questions and they are all complex questions and somebody should have time to absorb the information.

Jaime: And your experience, is there a particular of prenuptial agreement that you see more often? Like for example, do folks more often decide that title to the property will control who receives it? Or is there something else along those lines that you typically see?

Lisa: So we are seeing more and more for either people who have gone through marriages already or for younger people who both have careers that sometimes they want to keep their assets very separate. So they may have one joint account and then everything else is separate and whatever is in one account in their name is going to be theirs. And if they put into the joint account, then it will be shared. And if there’s a jointly titled home, then that will be shared. There may be a separate property credit for someone if they put a down payment, for example, or did capital improvements with separate property, maybe there’s going to be a credit for that type of situation. So we are seeing more and more of that. The title is going to control, which is not the law, of course. So that is a perfect example of what you were saying earlier, which is that you can contract away the law, essentially. Now, I also think you have to keep in mind that different states have different laws and you have to be careful to make sure. You know, I’m familiar with New York law, and I do a lot of New York prenups. And so I’m very familiar with law in New York. There’s also statutes that we like to put in. We like everybody to understand in the prenuptial agreement what would happen if they actually didn’t have a prenup, what factors would be considered, for example, in equitable distribution and spousal support. We see more and more waivers of spousal support because, again— a lot of people who are younger or who are going through second or third marriages.

Jaime: Yep. I’m familiar with North Carolina law. And here I would say that the experience is very similar to what you’re describing in New York that. Title controlling, who receives the property, seems to be more prevalent. Again, lots of spousal support waivers here as well. I really like a title control prenup, and I encourage my clients to generally proceed with those, mainly because I think they’re really easy to follow so that you’re not unintentionally creating marital property that you’re going to have to divide with your spouse, right? Like, if you don’t want to share it with your spouse, don’t put their name on it. If you get your paycheck, put it in a checking account in your name and buy things from that account. On the other hand, if you would like to make a gift of marital property to the marriage, by all means, put it in the joint account. I just feel like it’s very clean and easy for folks to remember how to follow the terms.

Lisa: I think that’s right. I would say, you know, Again, I think the only cautionary words that I would have is that if you are going to be a stay-at-home spouse or parent, then you need to negotiate something a little different, right?

Jaime: Absolutely.

Lisa: Sometimes people look at these prenups as, well, they’re only for the people who have the money. But actually, these prenups could be really useful for the people who don’t necessarily have the earnings or the finances or the inheritances because it actually will help those people ensure that if they are, for example, the spouse who’s going to be taking care of the children or the spouse who’s not going to be working full-time. And instead may be there to be more supportive of the other spouse’s career that that person is being taken care of. And so it’s important to understand what all those parts are so that you can negotiate correctly for your client.

Jaime: Yeah, that’s a great point. And I think it’s really difficult too if you have a younger couple and maybe right now they are both employed outside the home. They think they want to have children, but they’re not sure yet which spouse is going to stay home with the kids, you know? Some of this is a little bit about trying to predict the future and figuring out what may be better for you in the long run. I think that’s not always the easiest thing to do.

Lisa: I think that’s right. I think that That’s 100% correct. And I think that it’s really important, this goes back to time, right, but that this all be thought out. And I see particularly, as I said, for this non-moneyed spouse, that it’s really important. The other thing that goes into a lot of these are issues of waivers of legal fees, issues of waivers of expert fees. Those are all also really, really important issues. And you need to make sure that you’re not waiving things that you’re going to be sorry for. So, for example, there is some public policy law that legal fee waivers, particularly when it comes to custody disputes, are not something that is actually allowable. And there’s case law. Now, judges could go a few different ways on this. And so you have to be careful, again, because you don’t want to leave yourself in a situation where you don’t have enough funds to deal with the custody of your children if there was a litigated custody case. The other thing I would say that we put in prenups, which is also important, is if there is a family home, how is that going to be dealt with, right? So is it going to be sold? Are you going to divide the proceeds? Is someone going to be allowed to stay in the house for how long? Is someone going to not have to vacate if there’s children until there’s a custody agreement in place? Because you don’t want a situation where it says, well, you know, the other person is vacating in 60 days and there’s young children and that puts that person at a disadvantage in terms of custody if there’s no custody agreement or custody order. So we’re careful about that, making sure of how appraisals are going to take place. You know, it should really be truly, okay, it should outline all of these things, whether there’s going to be more of a shift toward marital property or more of a shift to separate property, right? Where is that going to be? And so, again, making sure that all of those things are included. And if they’re not included, that they’re included to the extent that you reserve your rights to either come to a further agreement at some other later point or to go to court if you have to or whatever it is.

Jaime: Yeah, I mean, I think the goal of a prenup should be to reduce conflict in as many areas as you can in the event that the couple does eventually separate, right? Like, you don’t want to spend all the time, money, and effort into coming up with a prenup only to have it be set aside later. I mean, the goal should be, okay, we hope we don’t separate. But if we do, we both know what the rules are. And hopefully we can just follow the terms of our contract, divide our things, and go on our merry way.

Lisa: Exactly. That’s exactly right.

Jaime: So let’s talk a little bit about disclosure. How does financial disclosure work in the context of prenuptial agreements?

Lisa: So, again, I think that depends upon the couple, right, whether they’re going to disclose things like their bank statements, their tax returns. We owe, we owe always have a basically a schedule A and a schedule B which sets forth assets and liabilities for each of the parties. We like to exchange some tax returns. Because that’s helpful in terms of income so at least the last year’s tax return. And then the question is, if there are certain trusts If there are inheritances, how much of that are you going to disclose how much is going to be required. A lot of that is up to the couple, you know, and that also gets involved. With family too, right? You know, the tricky part about these prenups is that there’s a lot of emotional issues that actually go with them. Right? Sometimes what you’re protecting is your family’s legacy essentially, right? It is the monies that you didn’t necessarily earn that maybe even your parents didn’t earn. Maybe it was your grandparents who earned it and then it passed through. Maybe it was your parents who earned it. And they want to make sure that essentially a stranger in the street, as I would say, is not actually going to be receiving monies that they worked for their entire lives. And so I think that’s really important. Family businesses also really important. How are family businesses going to be dealt with? You know, if it’s a family business and it’s been built and you’re coming in as, you know, as one of the partners now, or you’re going to be taking over eventually, or you’re running a piece of it, you know, people don’t necessarily want their family businesses to be discoverable. And so that may be something that goes into a prenuptial agreement as to what’s going to not only happen now in terms of discovery, but what will happen later in terms of discovery. And that’s going to be very important. It’s an enormous undertaking to open up some of these family businesses, real estate businesses, you know, any kind of these, any kind of business. That has been built and may be worth many, many millions of dollars, and to start to have discovery and tax returns and all of that, that’s probably not going to happen at a prenup stage. I’m going to say that. It’s probably never happening. The family’s just not going to want it.

Jaime: Right. Yeah, I mean, one of the things that we include in our prenups to address that issue is that we just provide that if there are certain family businesses, that the values provided are estimations of value and that the other spouse is satisfied with the estimation. They understand they have the right to ask for more discovery and they waive the right to do that. And I think that can help in those cases.

Lisa: I agree. I do agree with that.

Jaime: So in the event of a separation, How are prenuptial agreements enforced and what factors might invalidate them?

Lisa: So when you actually start your divorce action, we always put in, you know, unless we’re setting it aside, that enforcing the terms of the prenuptial agreement and that goes in part of our relief. And hopefully the prenuptial agreement is clear and everybody can sort out what the prenuptial agreement says and then sort out the details after that. If we’re looking to set it aside, so for example, you know, we talked about last minute, right? Last minute is definitely an issue. No lawyer, definitely an issue. Another language, perhaps somebody is, you know, doesn’t even understand the language of signing this prenuptial agreement, had no time to review it with a lawyer. Maybe the other spouse’s lawyer, like, handed it to them and said, sign it. It’s so unfair that it would shock the conscious that somebody would actually sign it. And. Then the question becomes, is it unfair now or was it unfair then? That’s a whole other area now that is being explored. Was somebody under such duress that they had to sign it? That’s a little tougher, but I think it’s important that, again, timing. Disclosure, having your own lawyer, those are all really important pieces as to why a prenup will stand up as opposed to why it will not.

Jaime: Yeah, so in North Carolina, we require both procedural and substantive unconscionability to invalidate the prenup. There has to be some sort of bargaining naughtiness, we call it, something untoward that happened in the negotiation. If somebody was not being forthcoming with their disclosure or duress or those sorts of things. And then also the prenup itself has to be so one-sided, as you mentioned earlier, to shock the conscience. There seems to be a pretty high bar in North Carolina to actually setting aside a prenup. I would say for the most part, it is an uphill battle. And of course, there are always exceptions. Let me just say that, that, you know, there are certainly some that can be invalidated. But I don’t know, is that similar in New York as well?

Lisa: Yeah, I mean, I think it’s a high bar. But I think sometimes people actually meet that high bar.

Jaime: Sure.

Lisa: You know, I think that the bar is high because. People are encouraged to enter into agreements with one another, because obviously that simplifies the litigation process going forward. It makes it easier. People should be able to contract for what they actually want to do in their marriage. So there’s a lot of public policy about the fact that these prenups should be upheld. That being said, there are reasons, certainly, where I have seen that It is so unconscionable that it does shock the conscience and somebody was not represented or somebody just had no idea or it was like all of those factors together. And I think that there is something to be said for that.

Jaime: Sure. You touched on this briefly earlier. Are there certain provisions that cannot be included in a prenup?

Lisa: So one thing for sure is if you do not have children at the time that you are getting married and signing your prenup, then you cannot contract for custody. You cannot contract for child support. You can’t contract for anything to do with children. You know, we also talked about public policy issues as to waiving all rights to legal and expert fees. I think that’s another area that you have to be careful about. I would say those are the two main straightforward areas that are clearly, you’re definitely on shaky ground. The children, it’s not even shaky ground. It’s just not going to be upheld, period.

Jaime: Right.

Lisa: But the legal fees, you know, it depends what it is, depends on the circumstances at the time, all of that.

Jaime: In your experience, what common misconceptions or myths about prenuptial agreements have you seen?

Lisa: So I think the first and the most important one in my mind is that prenups are only for the wealthy. And that if you’re not wealthy or if you don’t have the income, the prenup does no good for you. That is absolutely a myth and a misconception in a lot of different ways. And we kind of touched on this earlier, but prenups can be there to protect you. So for example, Often we see women particularly, but sometimes men who have been a stay-at-home parent for, you know, 18 years, 19 years, 20 years, right? They haven’t been out in the workforce, no prenup. And now they are looking for spousal support or some division of assets, et cetera. And maybe spousal support in the jurisdiction that you’re in is not that generous. And maybe you had a great lifestyle. That could have all been contracted for. And then you wouldn’t be sitting there in a courtroom having to prove your lifestyle or having to, you know, prove that, you know, your spouse is making millions of dollars each year, why they’re only willing to give you, you know, a couple of thousand dollars each month, right? So these are areas that you could have protected yourself before you decided to leave the workforce and to stay home for 18 years. And it could have been a conversation even in a post-nup. And I know that post-nups are not valid in every state, but they are in New York. And so it could have been a conversation. Look, you want me to stay home and you want me, you know, I understand we’re going to build your career and not necessarily my career. And that I’m going to be the one supporting you and I’m going to be the one supporting our children. And you’re going to be the one who is going to work every day and, you know, traveling for work and doing all those things. But I need to be covered at the other end of this. Because I won’t be able to move up that ladder in the same way that you can. And I can’t get back that earning power that you will have at the end of a relationship if this ends. And so it’s a place to say, I’m going to receive. You know, some percentage of the salary, or I’m going to receive some percentage of the assets, maybe a greater percentage, or I’m going to receive blank per month, whatever that is. Okay. And that is something that can be negotiated. So I would say that that is probably the biggest myth. The other thing that I see a lot is that people sign these prenups, they put them away, they don’t think about them, and they don’t follow them. So the myth that this prenup is going to protect you if you don’t follow it is also a myth because you need to follow your prenup. Otherwise, you’re going to end up in chaos, right? And yes, your prenup will be upheld likely, but it’s going to take a lot more time and litigation and all of that to undo probably what you’ve done.

Jaime: What do you think is the biggest drawback, if any, to having a premarital agreement?

Lisa: So I think the biggest drawback is if people are entering into it and it’s completely unfair. That’s drawback, obviously. If you haven’t negotiated it, if you feel… So inclined that you want to be in this relationship and want to be married but you haven’t protected yourself, I think that’s the biggest drawback to having a prenup because you could be waiving, um, certain things that you would have received in a divorce, maybe automatically, um, And now you have this prenuptial agreement that actually doesn’t protect you at all. In fact, it’s worse than not protecting you. It actually, it’s something you shouldn’t have signed. And as a result of signing it, you actually are worse off than you would be if you had not signed it.

Jaime: Are there any alternatives to prenuptial agreements that a couple may want to consider when planning their financial future together?

Lisa: Alternatives. So I would say, well, certainly postnuptial agreements are a possibility. We talked about that. I would also say that there are ways to keep your separate property separate, even if you don’t have a prenuptial agreement, but they become more difficult. People don’t always do what they’re supposed to do, but it can be done. There are ways to do it, but you have to be super careful. About protecting your separate property and making sure that it doesn’t get commingled with marital property and making sure that you don’t spend it down when you should be spending down the marital property essentially.

Jaime: And just to clarify, when you’re talking about separate property, are you referring to property that the person came into the marriage with as well as anything they may have received as an inheritance or a gift from a third party?

Lisa: Yes, exactly. Exactly. And I think there’s a misconception that sometimes people believe that just because there’s an inheritance during the marriage, that that actually means that, um, that person is entitled to the inheritance, the other person is entitled to the inheritance, which is not actually accurate.

Jaime: Right, that’s a great point. What should a person look for in an attorney to assist them in creating a prenup? And how can they ensure a fair and balanced process?

Lisa: So I think you should certainly, when you interview your attorney, you should find out, do they actually draft these prenups on a regular basis? Are they familiar with the law? Are they asking you good questions in terms of what your desires are, what discussions you’ve had with your soon-to-be spouse about the prenuptial agreement? What are the goals in terms of you and your spouse? I think that that’s what’s important, is that the person is listening to those goals. They may actually offer advice or suggestions or recommendations. But the most important thing is that they’ve asked the question so that they actually understand what your goals are in terms of your marriage and your finances.

Jaime: What advice can you offer to individuals who are considering a prenuptial agreement to protect their interests and assets?

Lisa: So I think that first and foremost, make sure that your disclosure is really good, solid disclosure so that it’s very clear what your assets are. Also, make sure that you’ve given enough time to the other person, that the other person has a lawyer. Even if you’re the one with the assets and you want to help the other person pay for the lawyer, that’s fine. But make sure that they have their own lawyer. And make sure that it’s very well delineated in terms of what is going to happen to your assets, both the assets that you have now and the assets that you will accumulate in the future.

Jaime: How do you feel about the couple signing together? Like, do you have any problem if both of them go to the same bank or wherever to sign it and notarize it?

Lisa: No, I don’t have any issue. The only thing I would say is make sure that you’re doing it correctly and that you give your lawyer enough time to review it. You know, sometimes people do this and then they sign it wrong, the notary’s wrong, the certificate of conformity, you know, if it’s out of state is wrong. I can’t tell you how many times we get them back and then they have to actually go back and sign them again. So it’s fine to do it as long as you follow the directions.

Jaime: Before we wrap up today, is there anything else that you would like to discuss about prenups?

Lisa: So I think that the main thing is, look, this is my favorite topic to talk about because I think that prenuptial agreements avoid so much. You know, contested issues later. I think that they’re really great to do. And I think that Um, It’s really about making sure that it is fair, that you are being financially transparent And fair, by the way, is relative, right? What baby fair in your view, it may not be fair in your spouse’s view. So it’s good to have these discussions now as opposed to. Three, four, five, 10, 15, 20 years from now, right? When somebody is just, just has no idea of why they got themselves into this situation. So I think having this discussion and then being financially transparent is really important.

Jaime: Well, Lisa, thank you for joining us today.

Lisa: Thank you so much. It was really fun, Jaime. And I loved our conversation. And everybody should be doing these prenups.

Jaime: Absolutely. I couldn’t agree with you more. Thank you everyone for listening. If you like this episode, be sure to follow the show wherever you get your podcasts so you don’t miss the next one. While the information presented is intended to provide you with general information to navigate divorce without destruction, this podcast is not legal advice. This information is specific to the law in North Carolina. If you have any questions before taking action, consult an attorney who is licensed in your state. If you are in need of assistance in North Carolina, you can contact us at Gailor Hunt by visiting divorcestuff.com. I’m Jaime H. Davis and I’ll talk with you next time on A Year in a Day.