Tag: Agreements

Israeli Prenuptial Agreements are Kosher

Whether Israeli prenuptial agreements are kosher is a big question in the holy land as Israel’s version of Real Housewives, Nicol Raidman, has filed for divorce from her former oligarch and billionaire industrialist husband Michael Cherney.

Israeli Prenuptial Agreement

Land of Milk and Honey

Nicol Raidman is a businesswoman, socialite and former reality TV celebrity in Israel, who recently announced she is divorcing her billionaire husband in what is shaping up to be the most expensive divorce lawsuit in Israeli history, Channel 12 news reported Monday.

After 11 years of marriage, Raidman and industrialist Michael Cherney are dissolving their union. But Raidman is alleging that Cherney has failed to honor his prenup with her, which promised her $25 million (NIS 86 million) in any settlement.

She is now planning to take Cherney to court and demanding hundreds of millions of shekels under their prenuptial agreement.

Prenuptial agreements are generally enforceable in Israel, if authorized before a notary, a marriage registrar, or by the family court or the religious court. In fact, former Justice Minister, Ayelet Shaked, called on couples getting married to sign prenuptial agreements to ensure that husbands will not withhold a get, or Jewish writ of divorce, from their wives.

In Israel, where all divorces are subject to religious law, the norm has left thousands of women in legal limbo due to husbands who refuse to grant divorces. The phenomenon has received a lot of attention in recent years as rabbis try to battle husbands who are “get-refusers.”

Some Jewish groups mandate its members require couples to sign a prenuptial agreement to avoid such scenarios. The agreement, commonly referred to as a “halachic prenup,” generally penalizes the husband financially for refusing to give the get.

Florida Prenuptial Agreements

I’ve written about prenuptial agreements before. Prenuptial agreements are not just for celebrity sports figures, and they are about much more than just resolving uncertainty in a marriage.

Any couple who brings any personal or business assets to the union can benefit from one. They are also important to have in place before a couple starts investing in businesses, properties and other investments. But prenups are frequently challenged in court.

Florida has both case law and a statute to help lawyers, judges and the parties determine if a prenuptial agreement is enforceable.

For example, Florida courts must consider things such as fraud, duress, coercion, in addition to the unfairness of the agreement, and whether there was any financial disclosure.

Real Housewives of the Holy Land

Cherney’s lawyer told the network that any and all claims would be made to the court rather than the media. Raidman is known to be a close friend of Prime Minister Benjamin Netanyahu’s wife Sara.

In 2011-2013 Raidman took part in the Channel 10 reality television show “Me’usharot” based on the US show “The Real Housewives.” She has launched her own luxury clothing and perfume brands.

Cherney, an oligarch who made his fortune in the former Soviet Union, is a close confidant of Yisrael Beyteinu party leader Avigdor Liberman. The couple have two children.

The Times of Israel article is here.

 

Prenuptial Agreements Take Center Field

Prenuptial agreements take center field, former Cardinal center fielder, Jim Edmonds, is finding out. That’s because his estranged wife, Meghan King, is trying to strike out their prenuptial agreement after the divorce was filed. Can prenuptial agreements be challenged?

Prenuptial Agreement Center Field

Play Ball!

Baseball is back in the news this summer, and retired slugger Jim Edmonds, is not having a great season. The four-time All-Star, who played 17 seasons most of which with the St. Louis Cardinals and California/Anaheim Angels, was hospitalized for pneumonia earlier in the year, and now admits he tested positive for the coronavirus.

But striking out a prenuptial agreement is the play of the day. Prenuptial agreements set out what property stays yours, what property does not, and ensure that your assets stay in your family line for the benefit of your children from another relationship and other reasons. Prenups can even be used to limit your exposure to paying alimony.

But can Meghan get out of her prenuptial agreement? Jimmy Baseball’s divorce is at a standstill until a judge decides if his prenuptial agreement is valid.

Florida Prenuptial Agreements

I’ve written about prenuptial agreements before. Prenuptial agreements are not just for celebrity sports figures, and they are about much more than just resolving uncertainty in a marriage.

Any couple who brings any personal or business assets to the union can benefit from one. They are also important to have in place before a couple starts investing in businesses, properties and other investments. But prenups are frequently challenged in court.

Florida has both case law and a statute to help lawyers, judges and the parties determine if a prenuptial agreement is enforceable.

For example, Florida courts must consider things such as fraud, duress, coercion, in addition to the unfairness of the agreement, and whether there was any financial disclosure.

Batter Up!

According to reports, Meghan herself has publicly explained the agreement was done at her urging because she didn’t want Jim’s family to think she was trying to take his money.

The mom-of-three openly discussed the matter throughout her time starring on the Bravo reality TV series and explained why she was so adamant about moving forward with a prenup.

“Way before we ever got engaged, I suggested him getting a prenup to protect his feelings about our marriage, about where my heart is coming from. And honestly, a big part of the reason, totally aside from the whole marriage thing, why I wanted it is to protect the children because I never wanted the children’s mothers or the children to think that me as their step mom or as this new person in their life was going to take things from them.

Jim, 49, has four kids of his own from previous relationships. He and Meghan welcomed three kids, daughter Aspen and twin boys Hart and Hayes, during their marriage. They split custody 50-50.

Additionally, reports say Jim is paying Meghan “more than three times” the amount of child support that’s been suggested by the court and continues to foot the bill for many of her living expenses. He is letting her live in one of his homes in St. Louis and is paying the mortgage and all the bills for that house. He gives her money for her full-time nanny and housekeeper.

He pays for practically every single expense related to the children. And, if that wasn’t enough, he pays half the rent on her Los Angeles beach house. Jim has been beyond generous to Meghan and provides full financial support for his children,” the rep asserts.

Meghan has told E! News:

“I’m looking forward to putting this behind me amicably and I don’t wish to discuss the private details of my divorce at this time.”

In an Instagram comment shared by Meghan and captured by tabloids last month, she shot down one follower’s claim that she’s received “serious child support” from her estranged husband.

“Girl I have a career thank you very much!” she wrote back. “That child support is not buying me gold and baubles. It barely pays for groceries for my tribe!”

The E!-online article is here.

 

Five Simple Reasons for a Prenup

If you’re planning on getting married this year, you may be thinking about getting a prenuptial agreement. If so, you would not be alone. More and more people have requested prenups in the past few years. Here are five simple reasons why you should consider a prenuptial agreement before you get married.

Prenuptial Agreement

Prepare for the Worst

While I have written on the topic of prenuptial agreements before, U.S. News and World Report offers an article with some pros and cons about prenups you may want to consider. For example, entering a prenup can help you prepare for the worst.

If you watched your parents’ divorce – or have close friends who have divorced – you understand that divorce can happen to anyone.

What you may want to consider is that divorce can be planned for, so that its consequences are less severe on you. For example, a prenup can eliminate stressful issues relating to alimony, property division and your inheritance.

Protection from Debt

A prenup can also protect you from your spouse’s debt. Debt is probably one of the most common reason for a prenup with people going through first-time marriages. Sadly, part of divorce means taking care of debt that was incurred during the divorce.

In a perfect world, both people walk away responsible for the debts they created. Unfortunately, that is not the law.

The problem with debt is especially important today considering how much student debt people are carrying. No one wants to get divorced and add their ex’s graduate school debt to their own. A prenup can help you in dividing debts before they become a problem.

Transparency

A prenup forces you to commit to full transparency when it comes to talking about your finances.

If you openly talk about a prenup, chances are you’ll become better as a couple at discussing details about your finances and other concerns about marriage.

During your conversations with your future spouse, you may also learn some important things about your partner. You may, for example, find out before the wedding that the person you’re going to marry has numerous lawsuits and years of unpaid taxes, what your role as a parent will be, and other issues.

Protect Valuables

A prenuptial agreement can protect valuable assets you want to stay in your family. For example, your grandmother’s diamond ring, that has been in a family for generations, and has acquired a personal significance and sentiment far beyond its market value, could be an heirloom you want to add to an agreement.

A prenup is meant to govern how assets such as investments, grandmother’s diamond ring, and property will be handled if after the marriage you decide to divorce.

Because of the importance of a prenup, if your future spouse comes to you with a prenup, and you haven’t been involved in writing it, you’ll want to bring in your own attorney.

Focus on Your Future

A prenup forces you to focus on the future. This may be a prenup’s biggest advantage and disadvantage. You are able to decide now how to handle and prepare for a future event.

The problem of course, is that no one knows what the future will bring. One person can leave a marriage much wealthier than the other. Or it could go the other way, and you could be contracted to pay your partner far more than you’re able.

That uncertainty about the future doesn’t mean you shouldn’t get a prenup. Generally, if you or your partner has a lot to lose in a possible divorce, you should consider getting a prenup. If you own a business, have a large retirement account or assets you want to pass onto your children, a prenup is essential.

The US News and World Report article is here.

 

Goin’ Down for a South Park Prenup

When your marriage is no longer ‘awesome-o’, and your house cannot be described as a ‘Casa Bonita’, what do you do? If you’re Trey Parker, co-creator of South Park, you file for divorce, ask for joint custody, and enforce your South Park prenup.

South Park Prenup

Fishsticks

According to documents obtained by TMZ, Trey Parker recently filed for divorce from his wife, Bookie Parker, a former exotic dancer. The parties were married in 2014, and Trey lists their date of separation as February 28, 2019.

Trey filed the divorce petition in Los Angeles, and they had one daughter together before getting married. Their daughter may have worked on the show, voicing the character Ike, Kyle’s adopted Canadian brother.

Parker, who also co-created Broadway Smash “The Book of Mormon” with long-time creative partner Matt Stone, was previously married to Emma Sugiyama. The couple divorced after two years of marriage.

Parker, 49, asks for his daughter’s legal and physical joint custody. He is also seeking to terminate spousal support on the basis of the couple’s prenuptial agreement.

Lucky for Trey, he reportedly has a prenuptial agreement. These days, the prenup has become more important than ever. People are marrying when they are older, and more people are better informed about the implications of marriage.

And for people like Trey Parker, they are marrying a second time. Like Trey, more people marrying a second time look to have a prenuptial agreements prepared.

Florida Prenuptial Agreements

Prenuptial agreements aren’t just for wealthy Hollywood people like Trey Parker, entering second marriages, they are important for any couple planning to marry. I have written extensively on prenuptial agreements.

A prenup can help keep your non-marital property yours. The property you brought into the marriage is yours – mostly. But over time it is common for people to start mixing things up. Inheritance funds get deposited into joint accounts; properties get transferred into joint names…and all for good reason.

Unfortunately, tracing commingled property is expensive, and hard to prove. But, if you put it in writing at the beginning, you might be able to avoid this task, and save some money down the road.

Prenuptial agreements also help you to change the law. For example, right now in Florida, there were two bills recently introduced at the Legislature, and an ongoing debate, about alimony. When you go to court, a judge has to follow state law regarding alimony.

However, through prenuptial agreements you can modify Florida’s legal standards for awarding alimony, you can terminate it outright in many instances, in addition to modifying what the current law says about the amount of support and the duration of the alimony period.

Second Marriages

This is a second marriage for Trey. For second marriages, a prenup is an especially good idea. What some clients don’t realize is that going through a second, third, or fourth divorce can be more complicated than first-time divorces.

In multiple divorces, couples are older, and have less time to make up for losses. Also, couples are competing for dwindling resources. Child-support, alimony, and dividing up of the retirement accounts may still be pending, and there can be little left to divide in a second divorce.

Some can simply state what assets each party has brought into the marriage, and what assets each party will take away if the marriage ends. Or, if there is a disparity in incomes, you can add to the contract how much the lower-income spouse will receive.

Imaginationland

As noted in the article, Trey is asking the court to enforce the prenuptial agreement he signed with Boogie Parker enforced. Trey has a net worth estimated to be $500,000,000 from his ventures as the co-creator of South Park and play The Book of Mormon among others.

Trey’s first marriage to This is also Parker’s second marriage after previously being married from 2006 to 2008.

The New York Daily News article is here.

Image attribution Gage Skidmore

 

Prenups and Immigrants

You met on a warm sunny beach in an exotic country and now want your soulmate to join you in the United States . . . but obviously you want a prenup to protect yourself. Will your prenup protect you from having to support your immigrant spouse if something goes wrong?

prenups and immigrants

Immigration Basics

Many are not aware that since 1996, the U.S. requires all immigration petitioners to promise they will pay financial support to certain classes of foreign nationals. The way the government required support is guaranteed is the famous, Form I-864, Affidavit of Support.

Most family-based immigrants and some employment-based immigrants use Form I-864 to show they have adequate means of financial support and are not likely to rely on the U.S. government for financial support.

The form requires you to promise to maintain the intending immigrant – your new wife or husband – at 125% of the Federal Poverty Guidelines (“Poverty Guidelines”) and to reimburse government agencies for any means-tested benefits paid to the noncitizen beneficiary.

But what if you and your future spouse waive this support in a prenuptial agreement and want to waive the support requirements?

Florida Prenuptial Agreements

I’ve written about prenuptial agreements before. Prenuptial agreements, or prenups, are agreements you sign with your fiancé before marriage that outline how you two would end up in case of divorce or death.

A prenup can resolve things like alimony, ownership of businesses, title of properties, and for purposes of this post, spousal support and alimony. There are many other concerns that can be addressed in the prenup:

  • Caring for a parent
  • Going back to school
  • Shopping habits
  • Credit card debt;
  • Tax liabilities;
  • Alimony and child support from previous relationships; and
  • Death or disability

A few of the points of a prenup, is that you get to decide on the amount of alimony, the terms of support, or whether you will pay any alimony at all. Or can it? Because prenuptial agreements can limit how much alimony you pay, you might think that you are safe if you sign Form I-864. You might be wrong.

Building a Prenuptial Wall

The I-864 form is required in all cases where a U.S. citizen or permanent resident has filed an immigration petition for a foreign family member including for a spouse. The form is a serious concern for anyone signing a prenup.

Why? Because whether you can even may enter into a prenuptial agreement that waives a sponsor’s duties to a non-citizen-beneficiary under the I-864 is an open question in courts.

Some courts have held that prenuptial agreements which waive I-864 rights are unenforceable, while other courts have enforced the waiver in prenuptial agreements over the I-864 form. There is a split among courts.

The split decisions between different courts about the right to waive I-864 support rights creates a lot of uncertainty into whether a sponsor and beneficiary spouse can waive enforcement of the I-864.

Are a beneficiary’s I-864 rights in the nature of private rights under a contract, or would allowing waiver of I-864 enforcement allow an end-run around an important public policy?

The law is not as well settled as we lawyers like. If you are thinking about marrying a foreign national and residing in the United States, you are not alone. About 7% of U.S. marriages involve one or more foreign-born spouse.

Information about form I-864 is available here.

 

A Prenup Guide Down the Amazon

Twenty-five years after marrying, Jeff Bezos announced he is filing for divorce from MacKenzie. Unless there is a prenuptial agreement to guide them, investors holding high-priced shares of Amazon will be wondering if they should proceed to checkout.

Prenup

Prime Divorce

According to CNN, the Bezos are the world’s richest couple, and they recently announced they are getting a divorce “after a long period of loving exploration and trial separation.”

The divorce could drastically reduce Bezos’ stake in Amazon and open the door for his wife to become one of its largest shareholders, with new leverage at the company.

Given that Amazon launched after the pair were married, virtually all of Jeff Bezos’ current $137 billion net worth could be considered community property and have to be equally divided.

But is there a prenup or post-nup agreement to guide them?

Florida Prenuptial Agreements

I’ve written about prenuptial agreements before. Prenuptial agreements are about more than just resolving uncertainty in a marriage.

When a spouse is also the CEO of Amazon, they can be a guide past dangerous price swings. For example, when the CEO of Continental Resources was getting divorced, shares of his company dropped 2.9%. Conversely, when Rupert Murdoch announced his divorce, shares of News Corp gained 1.4%.

Why? Because in Rupert Murdoch’s case, the divorce announcement stressed the parties’ prenuptial agreement, that there would be no spin-offs, and a divorce would have “zero impact” on the company

A prenuptial agreement (or “prenup” for short) is a contract between people intending to marry. A prenup determines spousal rights when the marriage ends by death or divorce. This can be especially important in second marriages.

If you divorce without a prenup, your property rights are determined under state law, and a spouse may have a claim to alimony while the suit for divorce is pending and after entry of a judgment.

That’s where prenups come in. Prospective spouses may limit or expand state laws by an agreement. Prenups are also used to protect the interests of children from a prior marriage, and to avoid a contested divorce. Prenups can be a reliable guide down rough rivers if they’re done right.

Proceed to Checkout?

It is not known whether the Bezos have a prenuptial agreement. It’s also unclear where they might file for divorce. Assuming there is no agreement, the Amazon CEO may need to either sell off or transfer half of his stake in the company to fulfill an equal split for the divorce.

Unlike other tech CEOs, Jeff Bezos’ control over Amazon doesn’t come from having a majority of voting power at the company, but rather from a strong leadership track record over two decades.

Divorce without a prenup can hit publicly traded companies hard. CEOs might be forced to sell or transfer shares as part of a property division. Selling shares can reduce a CEO’s influence and impact decisions regarding corporate strategy, asset ownership, and board composition. Divorce also impacts productivity, concentration, and energy levels because divorce is stress, and divorce can change appetite for risk.

The CNN article is here.

 

Heartbreak Postnuptial Agreement

Lisa Marie Presley, daughter of rock legend Elvis Presley, is as happy as a ‘hound dog’. A judge in her divorce from Michael Lockwood recently ruled that her postnuptial agreement waiving alimony is valid.

postnuptial agreement

Are You Lonesome Tonight?

Although she is single, the daughter of music legend Elvis Presley is not without her riches. The family court ruling means she won’t have to pay her estranged husband spousal support, according to court papers obtained by TheWrap.

In an order handed down Aug. 17, a judge found that a 2007 post-nuptial agreement signed by Presley and Lockwood in which they waived spousal support in the event of a split, is valid.

The Wonder of Postnuptial Agreements

I’ve written about various marital agreements before. Postnups are written agreements signed after a couple gets married, or have entered a civil union, to settle the couple’s affairs and assets in the event of a separation or divorce.

Postnuptial agreements are enforceable in divorce cases. But, there are two separate grounds by which either spouse may challenge such an agreement and have it vacated or even modified.

First, a spouse may set aside or modify an agreement by establishing that it was reached under fraud, deceit, duress, coercion, misrepresentation, or overreaching.

The second ground to vacate a settlement agreement contains multiple elements. Initially, the challenging spouse must establish that the agreement makes an unfair or unreasonable provision for that spouse, given the circumstances of the parties.

To establish that an agreement is unreasonable, the challenging spouse must present evidence of the parties’ relative situations, including their respective ages, health, education, and financial status.

With this basic information, a family court judge may determine that the agreement, on its face, does not adequately provide for the challenging spouse and, consequently, is unreasonable.

In making this determination, the trial judge has to find that the agreement is “disproportionate to the means” of the defending spouse. This usually requires some evidence to establish a defending spouse’s financial means. Additional evidence may also be necessary.

Keep in mind that this standard for avoiding or modifying the agreement happens when a couple is not in the midst of litigation against each other. This does not govern marital settlement agreements entered into during the course of divorce litigation.

Return to Sender

According to the papers, the agreement was arrived at the year after Presley and Lockwood married, and before the couple’s twins were born.

The order purportedly said that the post-nuptial agreement stated that:

“in the event of a judgment of nullity, legal separation or dissolution of marriage, neither party shall be obligated to pay spousal support to the other.”

The court added that Lockwood didn’t read this because it didn’t interest him, but he signed documents containing that language, twice, initialing every page on the July 2007 copy, and his attorney “signed the November 2007 version.”

Viva las agreements. The Wrap article is here.

 

World Emoji Day ????

Incredibly, I overlooked World Emoji Day. Although late, in honor of yesterday’s World Emoji Day, it’s worth pointing out that my new article on emojis and legal ambiguity in agreements, which was recently published in the Florida Bar Family Law Section Commentator, will make anyone ????.

Ambiguous Divorce Agreements

Emojis

I’ve written about emojis before. Originating in Japan in 1998, emojis are small digital images used to express an idea or an emotion in electronic communications.

Today, roughly 70 percent of the public uses some type of social media.  Social media has changed many of the ways in which we communicate. For one thing, social media has increased our use of emojis.

One report found more than 92 percent of people use emojis on social media. Emojis have spread to the business world, where nearly half of workers add emojis to professional communications, and companies use them to increase sales and brand awareness.

Emojis in Court ????‍⚖️

Emojis are increasingly turning up in court, especially in agreements, and ignoring them would be like calling a witness to the stand and ignoring their facial expressions.

Emojis fail the ‘duck test’: if it looks like a duck, and quacks like a duck, then it is probably a duck. That’s because emoji meanings can be so puzzling, a “duck” emoji, may mean anything but a duck.

For example, a U.S. federal court recently held that a “Smiley” emoticon =) converted an email into a joke, the email meant the opposite of what it said, and a criminal defendant’s lawyer did not violate the Sixth Amendment by sending the prosecutor an email joking: “stipulate that my client is guilty. :)”

An Israeli court awarded damages based on emojis after a prospective tenant sent a landlord a text about a lease agreement saying: “Good morning ???? we want the house???????? ????‍ ✌ ☄ ???? ???? just need to go over the details. . .” The landlord removed his ad, then the tenant disappeared. The court awarded the landlord 8,000 shekels.

Ambiguity: What does ???? Mean?

There are unique issues with emojis, rendering them hard to interpret. For one thing, there’s no definitive source as to what emojis mean.

That unknown can make agreements in an email, a text or an actual marital contract, ambiguous. Marital agreements are interpreted like any other contract. Basic interpretation begins with the plain language of the contract, because the contract language is the best evidence of intent.

Courts are not supposed to rewrite terms of an agreement if they are clear and unambiguous. Anyone seeking to show a court any evidence outside a fully integrated contract, must first establish that a contract is ambiguous.

A contract is ambiguous when its language is reasonably susceptible to more than one interpretation. That’s where emojis come in, they can be very ambiguous. Emojis are also small, making them hard to read. Interpreting an emoji can depend on what kind of device they appear in. For example, a 24-inch computer monitor displays thing differently than a 4-inch phone screen.

Emojis don’t always mean the same thing universally, so there can be many different meanings depending on which country you are in. For example:

????

The “Folded Hands” emoji symbolize “please” and “thank you” in Asia. However, in the U.S. it means: “I’m praying,” and frequently, “high-five”!

????

The “Pile of Poo” emoji is a pun on the Japanese word for excrement (unko), which starts with the same “oon” sound as the word for “luck” and is complimentary in Japan. But, in the U.S. the emoji is used to express contempt. Strangely, Canadians use the emoji the most.

Information on World Emoji Day is available here.

 

When to sign a Prenuptial Agreement

More and more people are using prenuptial agreements. The belief that a prenuptial agreement is only for the rich and famous is fading away. Increasingly, prenups are becoming more widely used. But can the timing of the prenup be an issue?

Prenuptial Agreement

Florida Prenuptial Agreements

These days, the prenup has become more important than ever. People are marrying when they are older, and better informed about the implications of marriage. Many people have married before. So, more people look for prenuptial agreements.

Prenuptial agreements aren’t just for people entering second marriages, they are important for any couple planning to marry. I have written extensively on prenuptial agreements.

A prenup can help keep your non-marital property yours. The property you brought into the marriage is yours – mostly. But over time it is common for people to start mixing things up. Inheritance funds get deposited into joint accounts; properties get transferred into joint names…and all for good reason.

Unfortunately, tracing commingled property is expensive, and hard to prove. But, if you put it in writing at the beginning, you might be able to avoid this task, and save some money down the road.

Prenuptial agreements also help you to change the law. For example, right now in Florida, there has been an ongoing debate about alimony. When you go to court, a judge has to follow state law regarding alimony.

However, through prenuptial agreements you can modify Florida’s legal standards for awarding alimony, in addition to modifying what the current law says about the amount of support and the duration of the alimony period.

Second Marriages

For second marriages, a prenup is an especially good idea. What some clients don’t realize is that going through a second, third, or fourth divorce can be more complicated than first-time divorces.

In multiple divorces, couples are older, and have less time to make up for losses. Also, couples are competing for dwindling resources. Child-support, alimony, and dividing up of the retirement accounts may still be pending, and there can be little left to divide in a second divorce.

Some can simply state what assets each party has brought into the marriage, and what assets each party will take away if the marriage ends. Or, if there is a disparity in incomes, you can add to the contract how much the lower-income spouse will receive.

Timing of Prenups

But many people are afraid of prenups. They are afraid prenups take the romance out of getting married. That’s too bad. As I’ve written about before, there are a lot of concerns prenups can handle:

  • Will you have to care for an older parent
  • Who pays or supports the house when going back to school
  • Agreeing to spending habits
  • Who pays for what credit card debt
  • Who handles the costs of a business
  • Who pays the taxes
  • What happens if someone dies or becomes disabled

The truth is that prenuptial agreements can put a damper on things because people wait too long to address them. Clients make appointments for a prenup a few days before the wedding.

As a result, there may not be sufficient time to prepare and review the agreement, and it could be challenged as unfair.

If you want a prenuptial agreement, then talk to your future spouse about one at the beginning. Being upfront about your needs, and not springing it on them at the last minute is proper planning. Proper planning and allowing a lot of time will protect the agreement accusations of undue pressure.

If the prenuptial agreement is drafted, signed and put away long before the wedding, you will better protect yourself, and have some protection against challenges about bad timing.

 

Prenuptial Agreements in Jeopardy

Many people are starting to notice that the new tax law could wreak havoc on their prenuptial agreement. If you are planning on getting married this summer, here’s a few things to consider before signing that prenup.

Prenuptial Agreements

I’ve written about prenuptial agreements before. Prenuptial agreements, or prenups, are agreements you sign with your fiancé before marriage that outline how you two would end up in case of divorce or death.

A prenup can resolve things like alimony, ownership of businesses, title of properties, and even each spouse’s financial responsibilities during the marriage.

There are many other concerns that can be addressed in the prenup:

  • Caring for a parent
  • Going back to school
  • Shopping habits
  • Credit card debt;
  • Tax liabilities;
  • Alimony and child support from previous relationships; and
  • Death or disability.

A few of the points of a prenup, is that you get to decide on the amount of alimony, the terms of alimony or whether you will pay any alimony at all, and how to divide movie royalties and other assets.

And because prenuptial agreements can impact how much alimony you agreed to pay or received, the new tax overhaul comes into play heavily in your agreement.

Tax Law Overhaul and Alimony

The new tax law offers an avenue for challenge because courts will likely have to consider how the law has changed since the contracts were created.

For example, beginning in 2019, people paying alimony will be no longer be able to deduct their alimony payments. That little change in the law could mean they effectively pay double in post-tax costs compared to what they had previously agreed to in their prenups.

President Trump, who pushed the new tax law, told New York Magazine in 2006 that his prenup with Melania Trump made his marriage stronger despite being a “hard, painful, ugly tool,” he didn’t disclose any details of the agreement.

More than 60% of divorce attorneys said they had seen a rise in the number of clients seeking prenups in the previous three years, while just 1% reported a drop.

There aren’t hard numbers, but it’s fair to say that prenups have become more popular in recent years as younger Americans delay marriage, and the divorce rate has skyrocketed for people over 50 who often use prenups if they remarry.

Prenups and New Tax Changes

If prenuptial agreements aren’t amended to factor in the tax changes, it will be up to divorce attorneys to settle — or judges to decide — whether the amounts or formulas still stand for couples who divorce starting in 2019.

Even if both parties agree to an adjustment in alimony, they’ll need to agree on exactly how much to cut the payers’ obligations. Divorcing couples could end up hiring rival accountants as expert witnesses to sway judges.

For those in the top income-tax bracket — the likeliest to have a prenup — being able to deduct the payout from taxable income had been a big saving because every dollar in alimony reduces the payer’s taxable income by the same amount.

Top earners in high-tax areas like California and New York City can face marginal tax rates close to 50 percent. Without the deduction, a spouse who agreed to write a $10,000 check each month could be on the hook for what is effectively almost $20,000 in pre-tax income.

Lawmakers said they eliminated the alimony deduction to end what they called a “divorce subsidy” under the old law.

The change, which raises an estimated $6.9 billion over the next decade, doesn’t affect divorces and separation agreements finalized before the end of 2018.

However, next year the newly divorced won’t be able to deduct alimony payments, but recipients will get the money tax-free (previously, the payments had to be reported as part of their taxable income).

Ultimately, the change could hurt alimony recipients. Payers could plead with judges to revise their obligations given the new law — a valid legal argument given that many prenups specifically mention that the payments are intended be deductible.

Those potentially reduced payments are likely to overpower the benefit recipients get from being able to receive the payments tax-free because they tend to be in lower tax brackets than the payers.

The Bloomberg article is here.