THE COST OF DIVORCE...
Who keeps the crypto in a divorce? Who keeps the embryos? More Americans prefer to figure it out before tying the knot.
Prenups are in fashion.
They are no longer stodgy arrangements used by the uber-wealthy to wall off their money. Their popularity is growing among everyday Americans.
About one in five adults who are either married or engaged had a prenuptial agreement, according to a 2023 survey by Harris Poll. The share was higher among younger adults who were engaged or had been married: 41% of Gen Z respondents said they had signed one, as did 47% of millennials.
When people get married, they are taking a clearer-eyed view of the financial realities of divorce. Some couples say they would rather discuss wealth imbalances before the wedding than after. Others are tying the knot later in life, once they have their own assets.
Not having a prenup, or having a shoddy one, can be a recipe for financial disaster. Some people expressed regret for not drafting one before marrying, or letting the details go unscrutinized. The author Belle Burden recently published a buzzy memoir chronicling her own financial fallout from a divorce, where she said the prenup didn’t protect her interests.
Divorce lawyers say that, done right, a prenup doesn’t have to be a mood killer.
“We pulled together sample provisions of a modern prenup, with the help of Julia Rodgers, founder of the website HelloPrenup, and Sherri Sharma, a matrimonial lawyer at Mosberg Sharma Stambleck Gross." (Excerpts have been edited and condensed.)
EMBRYOS
More than one million embryos are currently in storage at U.S. facilities, according to the American Society for Reproductive Medicine. Who gets them in a divorce? It is a thorny legal question that hasn’t been fully ironed out in the courts. Couples who plan to undergo in vitro fertilization are increasingly addressing custody of frozen embryos in prenups.
Upon a Termination Event, any of the Parties’ unused embryos shall continue to be stored and neither Party shall use the embryos for any purpose without the written consent of the other Party. If the Parties are unable to agree on the disposition of the embryos within five (5) years of a Termination Event, the Parties shall jointly instruct the storage facility to discard the embryos or donate the embryos to scientific research and shall promptly execute all documents required by the storage facility to do so.”
CRYPTO
Crypto has moved from the fringes of the financial world closer to the mainstream, and it isn’t unusual for people to own part of their wealth in bitcoin or other digital assets.
Any cryptocurrency owned prior to, or acquired during the marriage, and any appreciation, income, or growth of such cryptocurrency shall not be deemed marital or community property, regardless of the extent of increase in value during the marriage.
THE TRUST FUND
Private bankers and lawyers say that for wealthy families, an impending engagement is often a launchpad for a discussion about wealth and inheritances. Many of their clients come to the table with sophisticated estate plans that their parents may have conveyed to them, perhaps through a “trust reveal.”
That said, you still may need a prenup. “The prenup is that extra belt and suspenders,” Sharma said. ”
“Any and all present or future interests of a Party in any trust created by a third party shall remain the Separate Property of that Party. This includes, without limitation, all property held in said trust(s) and all distributions and income derived from said trust(s), whether the trust was established before or after the execution of this Agreement."
More than $100 trillion will move from older generations to offspring and charities through 2048, according to Cerulli Associates. The wealthy are often turning to complex trusts to pass down money.
DIVIDING ASSETS
When one spouse earns a lot more than the other, the two sides can work out terms. A hedge-fund manager might structure a prenup so that he and his partner divide the first $20 million that he makes after their wedding. After his first $20 million, he might keep $2 out of every $3 that he makes, rather than splitting his salary down the middle.
“Couples may agree on lump-sum payments at the time of divorce, based on how long they were together. For ultra-high-net-worth couples, these payments can go up to $1 million a year or higher. Typically, payments cap at a certain number of years, Sharma said.
Upon a Termination Event, Party A will pay Party B a tax-free cash distributive award based on the length of the marriage, equal to $100,000 per full year of marriage.
Lawyers caution against prenups that bar the less wealthy spouse from building joint assets during the marriage. Those terms can create dependency rather than a real choice to stay, and are vulnerable to being challenged in court.
Partners can also negotiate terms such as a payout tied to the birth of a child and property that is in both of their names. ”
PETNUPS
Roughly 29% of married and unmarried people said pet-related conflicts made their breakups more difficult, according to a MetLife Pet Insurance survey of 1,000 Americans last year. Nearly half of owners said they would sign a “pet prenup” that laid out how they would share responsibilities if they split.
Party A and Party B agree to share physical custody and pet costs, including veterinary, medicine, and pet-food costs associated with Beatrice, a Maine coon cat.
NONDISCLOSURES
Some individuals might not want their friends and family members to know about their wealth or prenups, and they certainly don’t want it spread on social media.
Neither Party shall disclose, reproduce, disseminate, use, or permit any third party to disclose, reproduce, disseminate, or use any Confidential Information without the prior written consent of the Confiding Party. These confidentiality obligations shall survive indefinitely.”
FEELING EQUITABLE
Jackie Combs, a divorce attorney, said the prenup conversation often focuses on the wrong thing. Couples argue over who keeps what if they split. The better question: What does the less wealthy spouse actually have access to during the marriage?
She tells clients to imagine themselves in two decades. They might have children by then, or have left the workforce. Prenups that are inked before a couple first gets married may need to evolve over time, and some couples pen postnups.
“Does the agreement still feel equitable to those future versions of yourself and your spouse?” Combs said.
Entire article above courtesy of Dalvin Brown & Gunjan Banerji, The Wall Street Journal
Royalty-free photo courtesy of Google’s Gemini
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Ms. Spirio is a prenuptial lawyer with experience in negotiating and writing Prenuptial Agreements as well as Domestic Partnership and Co-Habitation Agreements.
If you are considering getting married or entering into a domestic partnership, for a no-obligation initial 15-minute consultation on the benefits of having a Prenuptial or Domestic Partnership Agreement or Co-Habitation Agreement and personal service, contact Spirio Law today!
The number to call is (631) 277-8844. When you call, we will gladly answer any and all questions you may have about our legal services, including No Court Divorce: Collaborative Divorce & Mediation.
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