During prenuptial agreement mediation sessions, the mediator can elicit the views and concerns of the less-moneyed spouse in a safe environment where these concerns can be addressed.
By Laurie Israel, Family Lawyer and Mediator
When a couple is about to marry and one of the parties requests a prenup, it almost invariably sets into motion a series of extremely negative interactions at a time when love should rule the day. The terms embedded in the prenup contract itself often cause harm to the marital relationship both before and after the wedding.
Which is More Important: Risk Containment or the Health of the Marriage?
The negotiations between the two lawyers involved in the prenup can be quite painful for the couple. After all, the essential aim of almost all prenups is to withdraw marital rights from the less-moneyed partner in favor of the more-moneyed spouse (although most prenups do contain some protection for the less-moneyed partner). Usually, the rationale is “asset protection” and “risk containment” if the marriage ends in divorce.
Sometimes there are good reasons to have a prenup, even in first marriages. But unfortunately, most attorneys do not look at the health of the marriage as a goal when they are working with a client on a prenup. The result can be a damaged relationship before the wedding even takes place. The tenor of the negotiations and process in formulating a prenup will never be forgotten, and the content of the resulting prenup can contain financial terms that often cause the marriage to be imbalanced at the outset. (See examples below.) Following the rubric of “risk containment,” the attorney drafting the prenup may have made divorce more likely.
Prenuptial Agreements Are Often “Inconsiderate” and Require No Consideration
Part of the perils of prenups is that, unlike a commercial contract, “consideration” is not required for a prenup to be binding. Isn’t it quite odd that a couple may have less protection when going into a marriage than when signing an ordinary business contract? And think of the basic meaning of “consideration” – having regard for the needs of another. Is a more-moneyed future spouse being inconsiderate with their (and their lawyer’s) demands? Maybe so. And a prenup attorney often furthers this inconsiderateness in their financial advocacy for their client, without keeping their eye on the ball – the success of the upcoming marriage.
What if There is an Extreme Difference Between the Parties’ Asset Growth During the Marriage?
It is also quite odd that most states deem prenuptial agreements enforceable unless the terms of the agreement are “unconscionable” at the time of divorce.
Unconscionability is an extremely high standard to overcome. A prenup can be enforced where the more moneyed spouse had $300,000 of separate assets which has grown to $10 million, and the other spouse’s assets have grown to be less than $300,000 at the time of divorce. The prenup would still likely be deemed “conscionable” under the rules of enforceability. Think about what the less-moneyed spouse’s knowledge about this growing disparity in assets (and security) might have done to the marriage. Studies show that marriages thrive on generosity. Prenups, as written by lawyers, are generally the antithesis of generosity.
Enter Prenuptial Agreement Mediation
Mediation is a process where the two upcoming spouses meet with a neutral mediator to discuss and formulate the financial terms of their upcoming marriage. It’s a three-way process, where the mediator obtains the facts (especially the financial ones) and facilitates a discussion between the parties of terms they both agree on.
Mediators are trained to “level the playing field.” In the prenup context, this especially means eliciting the views and concerns of the less-moneyed spouse in a safe environment where these concerns can be addressed. An experienced prenuptial agreement mediator will be able to lead the parties towards solutions they (and their attorneys) may not have thought about. In this way, the result can be something other than a “zero-sum” game, and consideration can be provided to the less-moneyed spouse, in all senses of that word.
Prenuptial Agreement Mediation: What are the Steps?
During the mediation sessions, there is a wide-ranging discussion of assets, income, possible inheritances, and marital goals. Terms need to be envisioned as they might play out in a long marriage.
One of the important issues to discuss during the prenuptial agreement mediation sessions is the concept of “contribution” to marriage: the financial and the non-financial. With many couples – even millennial couples – one of the spouses may put their career on the back burner to support the homemaking and child-rearing functions of the marital unit.
When one of the parties is engaged in a business, “contribution” to the marriage becomes an especially important issue to take into account. The danger is that many prenups give all the increase in the value of the business to the owner-spouse. This puts a stress on the marriage because the spouse engaged in the business would be putting forth some of their efforts toward separate financial gain while the other spouse would be putting forth 100% of their efforts toward the marriage.
The mediator creates a term sheet from these discussions. The mediation clients review and give their input on the term sheet between sessions and during subsequent sessions. The term sheet includes provisions to address possible divorce. It also may include terms relating to the financial conduct and decisions made during the marriage. The term sheet should also include terms if the marriage ends in the death of one of the spouses, with at least a floor (minimum) percentage of the decedent’s assets in most cases being bequeathed to the surviving spouse.
After the term sheet is written and agreed to, the next step is to locate reviewing attorneys for the prenuptial agreement mediation clients. It is preferable for the mediator to designate a list of preferred reviewing attorneys for the clients to choose from. My sense is that that the reviewing attorneys should be family lawyers, as so much of the prenup consists of divorce terms. I also think it is preferable for the mediator to be a practicing family law attorney.
If the mediator is a practicing attorney in the state in which the clients reside, the mediator can create the first draft of the prenuptial agreement. This is often very helpful, as the mediation clients can review the draft, and the draft can be revised to meet the aims of both parties. After that, it will be sent to the reviewing attorneys to review on behalf of their respective clients. Reviewing attorneys should and can provide helpful input. The mediation clients can confer with them at any time during the process.
The result is a peaceful process that leads to a healthy prenuptial agreement that can be embraced (note choice of word) by both parties to the upcoming marriage.
Originally published on FamilyLawyerMagazine.com December 2018
Laurie Israel is a principal of Israel Van Kooy Law, LLC. She is the author of “The Generous Prenup: How to Support Your Marriage and Avoid the Pitfalls” (Integrity Registry Press, 2018), which is available through Amazon, other online book retailers and at www.laurieisrael.com.