I’m an estate and Medicaid planning attorney, so why talk about why prenups fail? It’s because it has all of the same hallmarks about planning ahead for the worst while hoping for the best that I do in my law practice, and because I have seen what divorce has done to the adult children of some of my clients. They were the people coming to me to make sure the “SOB” their child married couldn’t get anything from their estates, and I was able to put together a more extensive protective plan I nicknamed “in-law protection planning.”
I also quickly incorporated premarital agreements into my offerings in case the adult children of my clients needed that type of protection before marriage, and that ultimately led to my book The Divorce Firewall Strategy.
However, I also saw plenty of prenups fail, even those put together by other attorneys and not just the DIY ones. After years of looking into things, I have found 7 reasons why prenups fail.
The Main Reasons Prenups Fail:
- Not Disclosing Assets: Nothing ticks off a family court judge more than someone intentionally trying to hide assets in a legal process. If you are putting together a prenup but failing to disclose some large accounts and investments, then you can expect the judge to throw out the prenup. After all, things might have been done differently had your spouse known about those accounts before entering the marriage.
- “Springing the Prenup” Close to the Wedding: The operative word here is “duress.” When you are under the pressure of a big wedding, the invitations have gone out, and arrangements are being paid for… and now it is two months or less before the wedding, broaching the subject of a prenup while all of that is going on leads to the automatic defense of “duress.” And a judge is very likely to see that as true and throw the prenup out. Having the prenup finalized and signed at least six months before the wedding should be the minimum.
- A Big Disparity in Financial Positions. This is basically another type of “duress” defense in that the spouse is going to claim that they became financially dependent on during the dating and engagement process, and they only signed because they felt threatened that the lifestyle would go away if they didn’t sign. While on its own, one person having a lot more income and resources than the other spouse isn’t necessarily a reason for a judge to throw out a prenup, it’s a compounding factor if there are other reasons. It’s like enforcement by the police of a lot of seatbelt laws, meaning no police officer is going to pull you over just for not wearing a seatbelt, but if you are driving 20 miles over the limit with a broken taillight, not having your seatbelt on will definitely be a violation added to the ticket.
- Terms are Vague or Harsh: If you are going to have a prenup, then a generic, downloaded form without being specific is likely to get thrown out. Just stating if the marriage breaks up, “they get nothing of mine” is going to have a judge and the other attorneys laugh it out of court. Same thing if the agreement lists that although both parties are equally contributing everything to the household that one person gets the house and assets. While no one actually in a divorce is going to be happy with the outcome and will always believe they “deserved more,” a solid and detailed prenup that is objectively fair will be much more likely to be enforced by a judge.
- Not Following the Other Prenup Terms: Most women, and men, think of a prenup as a “divorce document” that’s only related to what happens if there is a divorce. The fact is that a solid prenup should be looked at as a strategic plan for the marriage. These agreements not only review terms of a possible divorce, but also details who pays for what during the marriage, whether or not either spouse will be allowed to not work, what constitutes their separate finances, how children are to be raised, and how joint finances are to be managed. However, most couples who have prenups slip into not following the terms of the prenup while the marriage is good. Over time, they ignore the clause about the wife continuing to work and verbally agree she can stay home with the kids. Husband switches financial firms and the new account opened with his separate funds, but he puts his wife’s name on account as a joint owner. Or, what would be to the horror of my estate planning clients when it’s their child, the child receives an inheritance that is 100% theirs but then pours it into buying their dream house and titling it jointly. All of these actions go against the terms of most prenups, so if you aren’t sticking to these terms during the marriage, a judge is not likely to enforce the prenup during the divorce. You can’t just let those things slide and expect the prenup to be solid.
- You Don’t Both Have Your Own Attorney: Any spouse in a divorce being handed a prenup to sign is going to claim they didn’t understand what they were signing. This argument goes completely out the door if they had their own attorney throughout the negotiation and agreement process. Attorneys are expensive, but paying for the fees up front to get a solid agreement in place often means you lose far less on the back end when there is a problem. This is true even if you have to pay the legal fees for yourself and your future spouse. Paying several thousand dollars for two attorneys up front can save you hundreds of thousands of dollars or more in a divorce.
- Review, Revise, and Reaffirm Regularly: A prenup should be reviewed and renegotiated every 3-5 years, or even more often if there are some major changes. If a wife is going to stay home to raise the kids, the prenup should be revised to reflect this as well as stating when she will return to work and what she would get in terms of alimony if there is a divorce beforehand. If one spouse lands a much better job, and the contributions to the household budget go from a 50/50 to a 75/25 split, then that should be in the revised prenup. The longer a prenup goes without being revised or even just reaffirmed, the more likely it is for a judge to throw out the prenup because there were so many big changes in circumstances. The media recently made a big deal of former President Trump and Melania renegotiating their premarital agreement as if there were some divorce threat by Melania if she didn’t get more money in a revised agreement, but the fact is this renegotiation was probably just a regularly scheduled occurrence that happened several times in the past… because it legally made sense.
Those are the seven big reasons that prenups fail, but just avoiding those mistakes is not really solid enough in my mind. So what should be done to make sure that you successfully get the ultimate prenup strategy in place? You have to do the hard work throughout the relationship and not just a few months before the wedding. For a solid strategy, check out The Divorce Firewall Strategy here: http://www.DivorceFirewallBook.com