January 9, 2024 • 61 mins
Hi, welcome to MediatorPodcast.com, a podcast and video series about mediation, negotiation and collaboration. My name is Melissa Gragg, and I'm a valuation expert and divorce mediator in St. Louis, Missouri – specializing in divorce and partner disputes.
Today we are talking about premarital agreements and protecting assets before your second marriage or really any marriage with Susan Myres. Susan has been practicing family law in the Houston area since 1982 and she formed her own firm, Myres & Associates, in 2011. Her strength is being able to see options and alternate paths to achieve the realistic goals of her clients.
Melissa Gragg
CVA, MAFF
Expert testimony for financial and valuation issues
Bridge Valuation Partners, LLC
melissa@bridgevaluation.com
http://www.BridgeValuation.com
http://www.ValuationPodcast.com
http://www.MediatorPodcast.com
https://www.valuationmediation.com
Cell: (314) 541-8163
Susan Myres
Managing Partner
https://www.thehoustondivorcefirm.com/our-team/susan-myres/
https://www.linkedin.com/in/susan-myres/
https://www.facebook.com/myresfamilylaw
https://www.linkedin.com/company/myres-&-associates-pllc/
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Hi, welcome to mediator podcast.com, a podcast
and video series aboutmediation, negotiation and
collaboration. My name isMelissa Greg , and I'm
evaluation expert and divorcemediator in St. Louis,
Missouri. Today we're talkingabout premarital agreements and
protecting your assets beforeyour second marriage, or really
(00:20):
any marriage with Susan Meyers.
Susan's been practicing familylaw in the Houston area since
1982, and she formed her ownfirm, Myers and Associates in
2011. Her strength is beingable to see options and
alternate paths to achieve therealistic goals of her clients,
and that is always needed indivorce and family law.
Welcome. How are you, Susan?
Speaker 2 (00:43):
I'm very well, thank you very much for the
invitation.
Speaker 1 (00:46):
Well, this is a topic that is kind of near and
dear to my heart because I seea tremendous amount of divorces
ending , um, or marriagesending in divorce that didn't
have a plan in place for thefinances. And so I think in e
(01:06):
and we are talking aboutpremarital agreements, but
they're also called prenuptialagreements. And that might be
like traditionally what aperson understood as a prenup,
right? Are they really the sametype of agreement or are they
completely different?
Speaker 2 (01:27):
They're they're the same type of agreement. It's an
an agreement that is executedbefore a marriage, but I don't
wanna get that confused with ,you could have a cohabitation
agreement where there's not anintention to marry. So these ,
uh, prenuptial, premarital,pre-marriage, all of that is in
contemplation of a marriage.
(01:48):
And most of them will have aprovision in it that says, if
y'all don't get married, thisis null and void. There's even
a post-marital agreement, butwe'll talk about this some
other time.
Speaker 1 (02:00):
Well, and it , it's interesting because I think
that in general, you know, whenI dissect a divorce, I, I think
that when people get married,they go down, get, you know,
justice of the peace , they getthe merit certificate, and they
just jump into this legal kindof a , you know, arrangement,
but they don't have aconversation about the finances
(02:21):
and maybe they don't even haveany money. So they're like, ah
, you know, we'll figure it outdown the road. Right? So I
think that even taking thetaboo off of these agreements
and starting to just say, youknow, how could these
agreements be used to protectyou, to develop a way to
(02:42):
amicably split? If, if thatcould happen. And a lot of
these we're seen in the secondor third divorces because you
could have , you know, married,young, divorced , young,
widowed and, and other types of, um, situations. So it kind of
gets us to understanding first,like what are some of the legal
(03:03):
issues that you would evenconsider when you're getting
married for the second or thirdtime, and maybe you have some
assets, or maybe you just wantto be more intentional this
next time. Like, what are someof the things that we would
wanna consider initially?
Speaker 2 (03:22):
Okay , there's a, a long list of things that people
should consider. First place,you need to start with this .
Where do we live? Where are wegoing to live? 'cause I can't
predict where people are gonnalive at the end of their
marriage, but we do know wherethey're starting off. I think
you , most couples either theylive together and they've
experienced some of thiscommingling, other assets or
some sort of expectation. But Ithink one of the best benefits
(03:47):
of a marital agreement, whetheryou execute it or not, is that
there is a conversation aboutyour expectations, because
people get a divorce becausetheir expectations are not met.
But if they don't put theirexpectations vocally so that
there's an understandingbetween the two of them ,
they're doomed. They'reabsolutely doomed. Unless by
some magic they were in syncwithout talking about it. You
(04:09):
know, I expected to stay homewhen we had kids. I expected
you to work when you had kids.
I expected that you wouldcontribute financially. I
expected you to take care of mefor the remainder of my life.
All of those expectations, ifnot spoken, are going to cause
problems. So, you know whereyou live, you know what your
expectations are. And then forthe second and third and fourth
(04:30):
and fifth marriages, we worryabout things, elements that
will happen to you. Do we havechildren from our first, second
or thirds? Do we need to worryabout that? Do I have a lot of
debt that I'm bringing into amarriage? Not just the assets
you need to worry about. Do Ihave debt related to it? Do I
have streams of income? Am Igoing to lose an alimony stream
(04:51):
from a prior marriage becauseI'm going to marry second or
third time? There's reallyunlimited things that each
couple need to look at. If theyhad a horrible divorce in
number round number one, let meassure you, you better have a
premarital agreement in roundnumber two to avoid at least
some of the horror. Becausedivorce work is as difficult or
(05:17):
as simple as the clients andtheir counsel want to make it.
Why do people get divorced?
Their expectations weren't met.
Why do they get married?
Because they think that's abetter alternative. And, you
know, we're finding that themarriage rate went down, the
difficulties continue, but thedivorce rate really is about
the same. It looks like it'slower, but it's only because
(05:38):
the marriage rate's lower. Andwhere we're seeing more
divorces are the maturecouples. Those mature couples
may be on their second orthird. I I this afternoon. I've
got an arbitration with amature couple. There's a
premarital agreement. Andthey're both, they both have
kids , uh, both have adultchildren actually, and
grandchildren. So it is, it issomething that is happening.
(05:59):
People need to talk about it.
And I do think that the moreour famous people talk about
their premarital agreements,the more comfortable the rest
of us are talking aboutpremarital agreements. It's,
when you think about it, youhave to get a, you had to be
trained to drive a car, right?
(06:19):
You have to go through lessonsand you have to get a license.
You have to pass a test. Well,there's no test to get married
and look at the consequences ofthe I dos. There are fi
fiduciary duties or financialduties there . You know, there
, there really are a lot ofduties that pop into existence
different from jurisdiction tojurisdiction. So why not know
(06:42):
what those are? And if youdon't like how your
jurisdiction is gonna dissolveyour marriage, whether by death
or divorce, 'cause remember,every single marriage ever will
end, Melissa. There's noexception. You either die and
get out of a marriage or youdivorce and get out of a
marriage. Those maritalagreements address both issues.
(07:05):
So one of the ways that , tothink about it, the very best
one of these agreements isdrafted by somebody who has
family law background andsomebody who has estate
planning background. Becausethen we think about all the
alternatives. You know , youknow, it, we are raised on two
questions. What if and whatabout, and that's what marital
agreements can do for ourcouples. That's just, it just
(07:28):
makes things easier.
Speaker 1 (07:30):
Well, and, and I think that it, in the past,
it's been used in a lot ofdifferent varieties. I think
when you get into secondmarriages, you have some estate
issues. And the estate issuescould be around, you know,
where your money is going toyour children, you know, and,
(07:51):
and they are adult children andthey're concerned about this
second marriage and things likethat. But if I look at a, an
agreement, right? Um, and, andwe just start to break it down
in a couple different,different like buckets of what
you have to consider. One ofthe things that you already
(08:13):
talked about, which is kind ofthe first bucket in my opinion,
is the state issue, right? Andso, and you, and you
beautifully kind of wentthrough it, but divorce in
general is a very statespecific issue. And so when
we're talking about theseagreements, you know, it's not
(08:33):
like going and borrowing somefriend's agreement and writing
up something. It's, it's moreof a conscientious, you know,
like you talked about actuallydiscussing these things. You
know, like if, 'cause if you'renot on the same page about them
before you get married, it'snot gonna get any better after
you get married. But can, canyou talk more about how, why,
(08:56):
why the state structure isimportant and what impact that
just has generally on divorce?
Speaker 2 (09:03):
Sure. Each state will have a law or statutes,
whether or not they approve ofmarital agreements. Every one
of our jurisdiction does. Butfrom there, it stops. So, for
example, in Texas where Ipractice, we have a
presumption, a legalpresumption that marital
agreements are valid, whoever'schallenging, it has the burden
of proof and it's limited. Uh,if it's unfair, we really don't
(09:25):
care. And , and you , my mythinking is once it's west of
the Mississippi, it's a freefor all . We expect adults to
make decisions east of theMississippi. We do find a
little bit more paternalisticrules. For example, I think
it's Connecticut, that theywill not approve a premarital
agreement that does away withalimony or spousal maintenance,
(09:47):
even though everybody's gotemployment and whatever their
circumstances are, it's notapproved. Now, it may still be
the effect at the end of theirmarriage, but that is against
their public policy. In Texas,we don't have any problems with
you waiving spousalmaintenance. We , the only
places that I think all of ourstates agree is we will not let
(10:08):
you impact negatively childrenof the marriage. We may let you
impact children outside of themarriage. Like, sure , and my
money will never go to yourchildren when I pass, or
whatever those rules might be.
Um, so it does matter becausestate that is a state-driven
law. Each state has its ownbackground as to where they,
(10:32):
their basis was. For example,Texas is from the Spanish law.
And the Spanish law was acommunity property state. We've
got 13 states that arecommunity property, California
being one of them . Here's oneof the oddities in our state.
Your passive income on yourpre-marriage , uh, estate. So
you've got a investment accountand that investment has
(10:54):
interest and dividends and itrolls over and you just keep,
you just park it there and yougive some instructions to your
account manager In California,everything that's in that
account will be your separateproperty period. If you add
community to it, that will becommunity. But if you just
leave it there and it justkeeps rolling, whatever, it's,
you're separate. In Texas, wedon't let your passive income
(11:15):
be your separate property. Wesay it's community property. So
that's a perfect example of ifyou know the differences
between your jurisdictions, yousay to your clients in every
state in the country, thiswould be passive income. That
is always gonna be thatperson's separate property. So
giving that up is not a hugecommitment unless the sole
(11:35):
source of all of their incomeis this passive income. So it ,
you have to know, there has tobe full disclosure, what do I
own? What are the, what are thestreams of income? What do I
owe? What are my debts outthere? You know, some of our
high professionals have veryhigh liability issues if they
are surgeons or pilots, and thekinds of things that when they
(11:57):
do things wrong, it is veryexpensive. So we talk about
that. They may have businessesthat have really complicated
investment , um, platforms andobligations and cash calls and
all those things that coulddrain a , a community or a
marital estate. And if youwanna make sure that that
doesn't happen, that's a greatconversation for a business
(12:20):
owner to have with anon-business owner. But it ,
full transparency, this is whyI want to keep this business my
separate, all of the expenseswill be taken care of by my
separate funds, and we will, ifI ever have to borrow against
our community stuff or ourjoint money, my separate has to
pay us back. So you, those arethe kinds of things that are
(12:42):
important to know about. Buthere's, here's our reality,
Melissa, I can't think abouteverything in their future.
I'm, I'm doing a couple rightnow where there is no way, no
way the drafters could haveanticipated the disaster their
language has created. Mm-Hmm.
. But that's,it's a contract. And we expect
(13:06):
adults to think about theircontracts when they take future
actions. And sometimes whenyou're married to someone, you
forget. So if you get a maritalagreement, and I know it's not
what we talked about earlier,you need to review it
periodically to make sure youhaven't stepped in a hole
that's gonna break your ankle.
(13:27):
Mm-hmm . .
Because before things go bad,you can usually fix it. So that
, that , that the shortcut isknow your jurisdiction that you
expect to live in. All of ouragreements allow people to say,
and we're going to say foreverand ever, this agreement is
interpreted under Texas familylaw as it existed, or as it
(13:49):
exists. You pick what it is. Sowe did one that was a European
, uh, people were in Europe onan expat assignment. We did a
Texas Postmarital agreement,but we had, we had property in
Texas. The expat assignment wasfrom Texas. There was an
expectation they were gonnacome back to Texas when this
was all over. But we baked intoit and we got permission , we
(14:11):
got approval by our Europeancounterparts that this was
effective on them. Mm-Hmm .
. So if you knowthat you're gonna be moving to
another state, or say you'vegot a client who has multiple
offices because that's howtheir business rolls, then roll
it by all of the differentjurisdictions that they may
have a home. A lot of ourclients have multiple homes.
(14:34):
You need to make sure that whatyou're drafting is not gonna
get, you know, eviscerated ifthey get divorced in another
jurisdiction. But these areimportant conversations to
have. So let , here's , here'san example of why people don't
like marital agreements. Theythink the very money per person
is gonna roll away with all themoney, and they keep it all,
(14:56):
and the not have person is, isleft destitute. That would be
ill-advised, because if youdon't give the have not spouse
something to want to keep andnot risk losing, if they
challenge the agreement, givethem nothing because then they
(15:17):
have nothing to lose. So ,
Speaker 1 (15:21):
Well , and we've seen some language like that in
some agreements that have beenfought in the court system
where the agreement was like,well, anything and everything
that's acquired post-marriageis, you know, one spouse's. And
I think that, you know, whatyou're talking about is maybe
(15:41):
like when the agreement, you ,you just can't agree to
something that is so far on oneperson's side and expect that
the co court's gonna considerthat there wasn't coercion or
you know , like they have abetter re you know, way to like
encourage that . You know whatI'm saying? Like , or use that
(16:02):
as a reason.
Speaker 2 (16:03):
Yeah. But be careful, Melissa, some of our
jurisdiction, Texas being one ,we will let those one-sided
onerous agreements if all thebells and whistles have been
filled in. You've given ,you've given your waivers,
you've given your disclosures,you've got lawyer and you paper
it up. Some people even videothe signing ceremony so that
there's no crying and nobody'sgot a gun to someone's head.
(16:26):
It's valid. It's valid if it'son, you know, you've already
sent the wedding invitationsout. Texas is pretty pioneer
stock. Everybody's expected toknow other states not so, and
some states look as is thisunconscionable when you signed
it or is it unconscionable atthe time we're interpreting it.
Again, you need to know yourstate. Texas is much more
(16:50):
laissez-faire. Uh, you are incharge of you. And if you sign
something that is not helpfulto you, sorry. But that's how
it's gonna be. I just thinkfrom , uh, an advocate's point
of view, because you deal withthis in mediation. If you see a
marital agreement that is sogross that you're thinking,
God, there's no reason thatthey'll settle, they'll try to
(17:12):
challenge it if for no, noother purpose than to get
nuisance money from the otherside or keep the marriage
alive. So at least there'scurrently some obligation to
take care of my livingexpenses. Gotta just gotta
think. Wouldn't it be better tohave some sort of granting to
the have not some monies, someretirement, or maybe even a
(17:35):
disability policy if, I mean ,what if the have not become,
became horribly disabled duringthe marriage and there's no
obligation to support them.
That just seems cruel. But ifyou don't think about it, it
would be enforce . We had onewhere , um, it was an a mature
(17:55):
couple that I think they wereboth widowed. I think that's
right. But the dad's adultchildren were very worried that
dad was gonna be too generousto his new spouse and they
wanted the marital agreement.
And so the way we solved it,and I'm kind of curious why
they thought they wereinheriting stuff that from
(18:17):
somebody that was alive , butthat was their problem. What we
did to solve the problem is weprovided a life insurance
policy on the dad with the newwife as the beneficiary. So the
community or the joint fundstook care of the policy. It was
a whole life policy. Big chunkof money went in. And so
(18:39):
everybody knew that when hepassed, the kids would not be
harmed in any way and neitherwould she. And so that was a
way to solve it so thatfeelings and expectations were
met. There's all kinds of ways.
And you could do that if you'vegot a business owner who's
like, Hmm , my business, I , Idon't wanna co-own it with
(19:01):
anybody else, and I don't wantmy children to co-own it with
anybody else. Figure out a wayto quantify the benefit the
have not spouse might have andtake care of it. It might be as
simple as making sure that the,especially if it's a closely
held business that the formerspouse, we take care of their
(19:22):
health insurance, we designatethem as a consultant, if it's
all legal with the HR people asa consultant so they can stay
on life insurance. Or maybethey really were a consultant
and we can help contribute totheir 401k because they have
not had all that socialsecurity that went into it.
There . Just, there really areunlimited issues to talk about.
(19:45):
Depends on the facts that showup in your office.
Speaker 1 (19:48):
Well, and obviously because we do business
valuations , you know, I thinkthat we've seen more language ,
um, you know, in some sort oflitigated fashion or mediation.
Um, but I think it , one of thethings that I would in would
(20:09):
ask you maybe is what we'veseen or what we recommend if
there's a business, is that youreally, specifically if you're
planning ahead of time, or thisis a second marriage, that
you're getting evaluation atthe time. Because what we've
seen is, oh, okay , um, we'vesaid that the business is
(20:32):
separate and , um, you know,the, the spouse understood
that, but the spouse didn'tunderstand that the business
was worth $50 million. And youknow, like that's a different
discussion. And I hear that,you know, well, I didn't know
that it was worth so much. Soit's almost like presenting
that as well at the time andsaying, yes, it is a
(20:54):
substantial asset. Like let's,let's be very clear on what
it's worth at that time. Now,in some cases it could preserve
that as a separate value at thedate of marriage. Mm-Hmm .
depending uponthe state. Um, but that is, you
know, just way , one way to putit in writing it , it doesn't
(21:16):
sort of allow you to have any,you know, future number
available at that time. But youcan at least kind of preserve
what was discussed at that. Doyou see some of that language
in the agreements?
Speaker 2 (21:30):
We do , you'll see it because at least in most of
our jurisdictions, you're gonnahave schedules attached to your
agreement. What are husband'sassets including valuations?
Uh, and there's fulldisclosures. So I would see tax
returns from the business and,and be able to share with the
client, he's a 50% owner,here's what the income looks
like. Uh, look at theseliabilities. Look at the
(21:52):
retained earnings becausethey're saving up to buy the
new property. Are they gonnabuy the new property within the
business? Are they gonna starta new business, which would be
community if it started duringmarriage? And is that new
business that's gonna be the,the leaseholder back to the bi
? You know, there's just, ugh ,it's mind numbing. What you
need to think about. Uh, and Idon't know if you remember, oh
(22:14):
gosh, was it back in thenineties where at least in
Texas, we redid our partnershipand our limited partnerships so
that a lot of company, thebusiness people were converting
their corporations to limitedliability partnerships. Well,
if whoever was doing thepaperwork didn't think about,
(22:36):
am I undoing a separateproperty asset distributing it,
that distribution is gonna bemarital, and now I'm putting
that marital into this andeverybody's thinking this new
one is the separate property.
And when you look at thelegalities is not a marital
agreement would've solved allthat. It allows the business
(22:58):
owners to continue to do theirbusiness without worrying about
business smart businessdecisions being completely
torpedoed because of a familylaw expectation. Those, those,
you know, I wanna be able tomanage my business. I wanna be
able to sell my business. Iwanna be able to merge, do all
(23:19):
the kinds of things thatbusinesses do, incur debt. Uh ,
it , it is, it really does makesense for there to be a marital
agreement if there's any assetsor liabilities before a
marriage that you need to makesure is solved better than our
(23:40):
family law systems do. BecauseI, we've got one that just came
in this week, and the bulk ofthe case isn't going to be
attorney's fees. It's gonna bethe valuation experts because
this multi-company, I mean theorganizational chart of this,
this entity between familytrusts and um , uh, what are
(24:07):
those called? The subsidiariesand all the things that feed
into the organization, it was abeautiful piece of art that is
going to give businessevaluators an enormous amount
of work. So if they, if theyhad a premarital agreement, we
could have baked into thepremarital agreement, how are
we gonna value these things?
Speaker 1 (24:27):
Well, and you're also, it's a good point to make
because if you did a premaritalagreement and you eventually do
estate planning, you reallywanna be careful because we had
a recent case and it wasclearly separate money gifted
at a very young age, and it wasinvestments and the investment
brokerage account or brokeragepeople like transferred the
(24:52):
asset reti like the name andeverything. And we thought for
sure, you know, like you canclearly see it . Like even the
investment firm was like, oh,our bad. You know, like, we
didn't mean to do that, blah,blah, blah. We were doing
estate planning, but we kind ofmessed it up. Um, the judge
still split it and said, no, itwas commingled you, you know,
(25:14):
like it was a theory and youknow, like you did this and a
couple other things. And well,we even have , and you know,
Speaker 2 (25:26):
We have our estate planners in town or in town in
the state , uh, pushed ourlegislator to create a
transmutation statute becausethey thought, oh, this is
great. We'll do these separateproperty owners and we will
transmute turn into likelegally turn it into community
property so they get the taxbenefits. And I'm like, make
(25:48):
sure you have a family lawyerthat's advising people. Here's
the consequence of that Greatplan.
Speaker 1 (25:54):
Yeah. Well, and you know, it , you have calculators
in a lot of states also thathave been created that are,
that are mathematicalcalculators for various pieces
of the divorce that are also,we're probably not created with
financial people in mind. Butagain, you know, like these are
(26:15):
the types of things. If, if thedivorce court system is failing
in some of these areas, thewhole purpose is to protect it,
to know how many , because it'snot just putting it in writing.
Like you, you have to, youknow, like we can go into a
decent question that that kindof feeds into this, but, you
(26:37):
know, how do you use theseagreements to protect the
assets? Because it's not justputting it in writing, there's
different levels to protectingthe agreement. You know, even
in the process, it's not abouthaving just a piece of paper to
really have it be defendable incourt. Right,
Speaker 2 (26:58):
Right. Well, it depends , again, going back to
jurisdiction in our agreements,we even provide, if you fail to
do your annual accounting,that's okay. It's not gonna ,
it's not gonna annihilate thevalidity of this. And if you
waive a couple of paragraphsand you do some commingling or
things that you said youwouldn't do, we're not gonna
(27:18):
say the whole thing's invalid.
That'll depend on yourjurisdiction. It is, you know ,
think about it from a businessperson's perspective. You have
buy sell agreements when youhave co-ownership. Think of a
premarital agreement as a buysell agreement. What do I do if
I want out? How do we , how arewe gonna value all this? Or do
(27:40):
we need a , an appraisal? Do welook at book value? Do we, do
you know, how are we gonna doit? And then stick with it.
Because those agreements, justlike a premarital agreement,
can help guide the people infinding a solution that does
not involve the court havingthe court system because the
court will solve it. The court,they are completely capable of
(28:05):
solving it. Usually not in away that people expect or want
either direction. So if , ifthe big company is gonna be
valued at $200 million andother than the company, there's
no real asset to give to thehave not , then we get a
judgment. How do we secure thejudgment for that equalization
payment? It , you know, it ,it, why not have that as part
(28:28):
of what we're gonna do? Mm-Hmm. , it's a never
ending , um, game. Not, and Idon't mean to be flippant about
it, it's a quest. That's it,it's a quest for figuring out
what people have, what theywould like for the solution to
be and can I document it to getto that solution?
Speaker 1 (28:51):
Well, and realistically, if we dial back,
how do you stay out of divorcecourt and how do you go through
mediation if an eventualseparation happens, one of the
ways is to start having thesepremarital agreements in place
so that the parties have atleast a reference point with
(29:15):
which to, you know, start toseparate assets even if they
have a hard time. Maybe , um,you know, understanding it 10,
20 years later. You can alwaysinclude attorneys in mediation.
You can always bring people to,you know, dissect that
agreement. But just like a buy,sell , buy sells are very
(29:40):
specific to the company.
They're very specific to the,the intention of the future.
They're very specific to theparties at play. And they're
not just pulling a template andfilling in the blanks. If you
really want it to be effective,because effective means you can
(30:01):
take it and say, you know what?
This didn't work, but we'veagreed to how we could separate
this out. Let's just get someassistance. Right. You know,
like that's part of it. And itthen you're really looking for
somebody that understands thenuances of these agreements.
Right? It's
Speaker 2 (30:20):
Well in Texas, and I keep saying in Texas, but I'm
sure other jurisdictions allowthis. We put in the agreement ,
the premarital agreements orall of the agreements, if
there's a disagreement, wecan't, if this needs help, we
are going to first go tomediation and if mediation
fails, we will go toarbitration. It will be binding
arbitration. So one way to keepkeep outta court is to bake it
(30:44):
into the agreement. The problemis people need to understand
the consequence of an A bindingarbitration, but they do it in
business transactions all thetime. Not all of our states
will enforce arbitrationagreements in family law cases.
But we are seeing , seeing avery rapid trend of people, of
(31:04):
our legislators across thecountry approving it. Because
adults can sign agreements andthey can be binding, whether it
or not, in each state. It'll bebinding on parent-child cases
and issues involving thechildren is to be seen Texas.
We will start it , uh, we willallow that to happen. If it is
(31:26):
not in the children's bestinterest, the court always,
always retains the right to fixit.
Speaker 1 (31:33):
And I think that that's an important thing
because in some states you'realso not capable or , and you
know, maybe a lot of states orall of them , um, you're not
able to sign away child supporteither. Correct .
Speaker 2 (31:46):
So I , I know jurisdiction you can give away
child support. In fact, Ilearned something from a friend
of mine who spoke on the issue.
'cause I said, you can'tdetrimentally affect the child.
She argued that's goingdownwards. Doesn't mean you
can't negotiate. Our child willgo to x, y , Z private school.
Our child will have a collegefund or what . And I thought
(32:07):
I'd never anticipated that, butit's part of my equation now .
Speaker 1 (32:11):
Well, and I think that that goes towards, you
know, some states won't requirepayment of college by the
parties. And so again, if youplan like a second or third
marriage and there's gonna bechildren to that marriage, you
know, you would want to havesome arrangement in place. Or
(32:33):
if sometimes there'sgrandparents that are paying
for higher education , um, thatcould be determined as well.
But that's difficult to signaway somebody else's
obligation. Um, you know, butthose are the types of things.
Like it's, it's also, you know,you mentioned videotaping, like
(32:54):
some people record people, youknow, understanding what
they're signing and that theywere of clear mind and things
like that. Like there are otherways to support the
documentation of theseagreements
Speaker 2 (33:11):
And, and include in it a question that says, and
you understand that under thelaws of this jurisdiction, this
agreement agreement may besomewhat unfair to you, but
it's clear and getting them toacknowledge I, yeah, it's going
to , because sometimes in aneffort to prove to a spouse
(33:33):
that I am not marrying you foryour money because you are
daddy Warbucks. I will signwhatever you put in front of
me. I would strongly, stronglyadvise against that because
there will be no, 'causethey're thinking, if I prove to
you during my loving treatmentof you, et cetera, et cetera,
you will tear this up. Do notbe delusional. There is no
(33:56):
requirement, no expectation, noentitlement to it being torn
up. What you should do isnegotiate for some con , I
don't wanna say compensation,but some consequence so that
for each year of marriage,daddy war bugs will contribute
$10,000 as my separate propertyor a hundred thousand dollars
or , um, if any money he putsin his 401k, I get an equal
(34:19):
amount to put in my ira IRA orI don't, I don't, but do
something so that you don'tresent. 'cause that's one of
the things that happens whensomeone signs one of these
agreements, they resent it.
Mm-Hmm. , theyresent it. You made me give
away everything that the lawsaid. Everything that the law
(34:39):
said I could have.
Speaker 1 (34:42):
Mm-Hmm .
Speaker 2 (34:42):
. And
you treat me. Yeah. It's, I Why
set your marriage up for thatkind of consequence?
Speaker 1 (34:48):
Well, and I've seen, you know, like I've really had
to shift my view of theseagreements as well, you know,
as the decades go as I gothrough divorces. Um, but, but
even looking at these types ofagreements in, in protecting
somebody and going forward,it's, it, there could be bogies
(35:10):
of, you know, if we make itthrough five years of marriage
or 10 years of marriage or 15or 20, like they've sort of
vested, they've sort ofretained some sort of, you
know, the, the marital pie. AndI think that that's helpful.
You can't really look at itthough, like as a predictor of
divorce. You have to kind oflook at it as like, we're going
(35:31):
into this in the same mindset.
Right? Right.
Speaker 2 (35:36):
We did one where the impetus for the marital
agreement was the , um, thespouse that had the wealth. It
was through family wealth andit was his family that that
required that there be amarital agreement. And the wife
understood completely, she hademployment, but they were
planning on having children.
And they had talked about ifthey had children, it was
(35:58):
expected 'cause of her incomecapacity for her to stay home
at least through I thinkkindergarten or something. So
they, it's , it wasn't a pushpresent, but we could call it a
push present for each child.
She was gonna get like $50,000.
Speaker 1 (36:13):
Okay .
Speaker 2 (36:13):
Because it was , it was an acknowledgement that I'm
going to be staying home, notworking, not contributing. That
needs to happen. And they, andthey even, they created, I
think it was Melissa , I can't,I can't swear it's been so long
ago. I think they had a 20year, maybe it was 25 years
they were still married. Themarital agreement disappeared.
(36:35):
Hmm . Yeah . I , you know, andit's, I can't remember anybody
else ever doing that, but itmade sense because the, the ,
the grandparents were worriedthat, you know, we've got this
family wealth, it's gonna getcomplicated. And a lot of his
income was flowing throughtrust and they wanted to make
sure all that income stayedseparate property, which it
(36:55):
wouldn't under our scheme. Andit made sense that they wanted
to do that. But then it alsomade sense with, but if this is
a marriage that sticks, whywouldn't you want me and your
and your grandchildren tobenefit from that? And
everybody went along with it.
Speaker 1 (37:13):
Yeah. And , and I mean, that's the whole point is
that there is no agreementthat's gonna be perfect for
everybody. Um, but that youhave to kind of go through some
of the pieces. Do you recommendthat everybody kind of does a
premarital agreement or is itjust first marriages, second
marriages, or what do you see?
Speaker 2 (37:35):
Here's my suggestion. Before there are
wedding plans and there's beenan ask and an an affirmation
that yes, there should be adiscussion about expectations
and whether or not there shouldbe a premarital agreement
depending on that conversation,then that's how I would
(37:58):
determine whether or not apremarital agreement is
recommended. Because when ayoung couple has nothing and
their parents have nothing, andthat's just how they show up
when they start, then a maritalagreement may not be necessary
regardless of where peoplelive. But if, you know ,
(38:18):
because so many of our couplesare marrying later in life,
they've created some wealth.
They've created some debt, theymay have some school debts and
all kinds of things that, thatthey're bringing into the
permanency of a relationshipwith a marriage license. Those,
they , they need to talk aboutit. And generally speaking, if
(38:39):
it's nothing more than this iswhat we owned and owe at the
time of marriage, and if Istill own it and owe it at the
time we split, it's mine. Ifthat's all it accomplishes,
that saves you a huge headache.
'cause even if it's a five-yearmarriage, Melissa , these banks
don't keep their records rightonline. You can go back two
(39:01):
years and to get further backif your bank has them, which
they should for seven years,despite the fact that there's
federal laws to that, theywanna charge you an arm and a
leg to go get those records. Soyou can prove what I had in
that bank account when we gotmarried. If you do, and , and
some of those, I don't knowthat I'd recommend the
template, but there aretemplates where it is just a
(39:22):
snapshot. This is what we haveand forever and ever, this is
what I'm gonna own as myseparate property. That's okay.
That's okay .
Speaker 1 (39:32):
Well, and you, you mentioned though, a good point
is to have the actualstatements, so to actually
have, you know, 'cause at thattime you can, you can print it
out, you can put it, you know,or your tax return or some
other validation of that.
Because this gets into kind ofone of , uh, the last questions
(39:53):
that we have. 'cause I think wehave , this is so good. I ,
it's making my head spin. Ithink that everybody should
have a premarital agreement forthe money piece because what
we're fighting about in courtis money. And , but what I get
right now, which maybe you canexplain why I am getting these
(40:13):
calls a lot, is that people arenow wanting to ask about
separation. And they're like,well, we wanna get legally
separated, but we wanna agreeto like what we have and what
I'm , what we might get. Andthen we might work on our
marriage, or we might getdivorced and work on our
(40:35):
marriage and then getremarried. Like they're asking
these questions of kind of likehow to talk about the money and
what it would look like, but tomaybe not break up and it kind
of maybe leads into thesepost-marriage agreements and
such. It does.
Speaker 2 (40:52):
Exactly. Okay . It does. Exactly. And, and
Melissa, there's all kinds ofreasons that people don't want
a legal divorce. Sometimes it'sreligious, sometimes it's
political. Yes . I imagine thatthere's quite a few people that
are running for big officesthat have premarital
agreements, and there'sprobably some postmarital
discussions about if thathappens, then I get this. And I
(41:16):
, that's my expectation. I haveno inside track on that. So
these postmarital agreementshelp a couple do exactly that.
Uh, maybe somebody's gettingready to go into a risky
venture and , uh, or we worryabout taxes. Somebody are gonna
, they're gonna live indifferent jurisdictions. If it
is a valid marital agreement,the IRS will uphold it. They
(41:37):
may, well, right now we havenot enough workers to drill
down on 'em , but that we havean opinion from the , um, uh,
internal revenue Service that avalid premarital agreement if
it adjusts how we're doingincome, that can adjust how
they do taxes. So if I'm inTexas and we have no income
tax, but you're in Illinois andyou've got income tax, that big
(41:58):
income tax generating asset,push it down to, to Texas or
whatever, whatever makes sensewhen you look at it, and you
can do those in a postmaritalagreement. I don't have a lot
of knowledge about what eachjurisdiction has. I've got a
lot of knowledge aboutpremarital agreements across
the country. Um , butCalifornia has separation
(42:18):
agreements. It , it's a termthat we don't use in Texas. We
call them postmaritalagreements.
Speaker 1 (42:24):
Yeah. And I , and I , and I think that
jurisdictionally as well, youknow, that like depending upon
what they , whether you can getseparated, you know, it depends
on your state and things likethat. Um, but I think in, in
some of those agreements, likewe saw one where , um, you
(42:45):
know, it was pretty wealthy ,um, grandparents and families.
And one of the, the spouse thatwas not part of the family
wanted to invest money incannabis operations. And the
family was just like , uh, hellno, we do not wanna be
affiliated with it. But we wereable to set up an agreement
(43:05):
where like the par the personwas able to take their own
separate money and invest inthat, and that it would be a
separate situation throughseparate ownership and all of
that, you know. So in somecases there may be, and that it
would, you know, because thewhole disagreement was like if
it was gonna be amazinglyprofitable that you weren't
(43:28):
gonna be the benefit of iteither. So it was an
interesting play. Um, I think a, an interesting use of it. But
for the most part I'm seeingthat people are saying maybe,
and maybe they're thinking,well, we'll I'll, I'll stay in
the marriage and work on it ifwe agree to that. If I say no
(43:50):
at some point we've said we'regonna split these things we've
said, you know, and those areusually when there's no
agreement. Like are you, likewhen, when you do maybe see a
post uh , marriage agreement,are they usually when there's
no premarital?
Speaker 2 (44:05):
Correct. Okay . Okay . You can modify a premarital
agreement. And the other nicething about postmarital
agreements, you don't have todo the whole divorce picture.
You could partition out. So youcould have, I'll call 'em sub
agreements. So we've got amillion dollar account and he
wants to go invest in cannabisand she wants to go invest in
equine therapy. Um, so they'regonna split it up. I get 500,
(44:27):
you get 500 and we willpartition those dollars as our
separate property. That'slegal. It's complete. And what
I go do and what I earn fromthat, if it stays in that
business is all my separateproperty and vice versa. Uh, or
you can say all income that weget from that is you , you get
to language it. But what we're,where we're seeing the
postmarital agreements say thatsomebody's had a drug or
(44:50):
alcohol problem, and it is, itis ruining the marriage. So
they're not ready to pull thetrigger and get a divorce
because they want to helpenable some recovery, et
cetera, or the kids or thereligion or whatever. And so we
will do what looks like a realdivorce, same disclosures,
(45:10):
same. And we divide theaccounts so that if somebody's
running amuck , they can go runamuck with their money and do
what they want to. But thatlooks like a divorce just
without the divorce decree ontop of it. And that's valid.
And we've had not a lot ofthose, but enough of them. It
(45:31):
is a precursor in mostinstances to the divorce. But
it's also an estate tool.
Speaker 1 (45:39):
Mm-Hmm.
Speaker 2 (45:40):
because it, it , it's an
effective division. Now, ifthey could still do their wills
so that if they pass myseparate property part can
still be inherited by theformer spouse, and that's,
that's not my ditch, but I knowthat is a possible, it's just,
you know, the saying about becareful what you ask for, you
(46:01):
might get it.
Speaker 1 (46:03):
Yeah. And we've seen another area that we've seen
some of these, and, and I don'tknow if they're really post
marriage agreements at thispoint or like divorce decrees
or agreements. Um, but we willsee when maybe the court
wouldn't allow the parties.
Like if you have a familybusiness and it's creating all
(46:25):
the income, it's all thewealth, it's everything. The
insurance, everything. And thecourt, you know, if you're in a
jurisdiction that the courtdoesn't allow people to remain
owners, like just notoriously ,um, you might ha and we'll see
it in mediation where you'llagree to maybe stay co-owners
how that would look, how thebusiness, I mean, that's a big
(46:48):
one that we, we see,
Speaker 2 (46:49):
Oh, I, I could see in your world, you're in the
mediation and this, you got afamily , um, business. Both
parents are still like involvedin , the kids are involved in ,
it's completely enmeshed. Youcould ba put that into a new
entity, have an operatingagreement, you're gonna have to
pull in all your, your businessdrafters, have an operating
(47:09):
agreement, a buy sellagreement, all the kinds of
things as though they werestrangers to each other joined
in this new venture. What arethe rules of the road gonna be?
And then in the divorce decree,you barely have to mention it,
you have your interest in theseshares, in this entity , new
entity. She has these shares inthis new entity. Done, done.
(47:30):
Mm-Hmm. . Andthen it, you do not disturb the
generational wealth. You do notdisturb the income flow, the
insurance, all the benefitsthat this family business
created. I I think it's that I, I have on speed dial. I have
a trust person who can handle,do I need to dissolve a trust?
(47:51):
Do I need to create a trust atreal time in mediation, in
collaborative law, this worldhappens all the time. We
usually bring them to thephysical table to talk to us
all about what this would looklike. We have our business
transaction people looks like amerger and acquisition in the
middle of a divorce. We haveour child custody people
that'll talk about if we needto create a trust for this
(48:13):
special needs child, do we needto do the, the generational
part where you, if there'smoney in it, it goes to the
other children. It , it , thereis no limit to the experts that
you need to bring into thetable at mediation or
collaborative law that willhelp solve these problems that
the courts simply are notequipped to do. They don't have
(48:35):
the authority to do it. Theydon't have the time to do it.
And I can , I can tell you Idon't have the knowledge to do
it. I pull in my experts. So Ican't imagine that our courts
who are so understaffed andprobably underpaid are gonna be
able to make it happen.
Speaker 1 (48:51):
Well, and I think that people understand that for
decades what accountants andlawyers have done for
corporations is created layersto protect people from getting
sued by outsiders. And so youhave layers of LLCs and
corporations and taxconsequences, if anything, I
(49:14):
think. And then you have theestate planning that, that
involves trust. If anything, Ithink that sometimes it's kind
of weird, but like in theprocess of divorce, we do start
to simplify the ownership andthe structures that maybe 20
years ago were very necessary,but that we're starting to see
(49:34):
are maybe just too much or, youknow, not as relevant is , but
you also have real estate, youknow, a lot of LLCs are put in
place to separate real estatefrom businesses. You know, so
it's And who's gonna use it ?
The
Speaker 2 (49:49):
Business ? Yeah .
Yeah. The business uses thisland. It's a separate entity
that owns the land. So howabout if we, we could co-own
the land. Mm-Hmm .
. And for yearslet the non-business owner get
the income, like the rent. And, and , but you have to put in
all the stuff about fair rentalare we doing in a a , what's
(50:12):
that triplet lease? Uh , it'sjust, you need to know what you
need to know. And I don'tpretend to have those answers.
I do know that I lean on thepeople that do
Speaker 1 (50:23):
Well in my, my, you know, like we do some big
divorces that are like famouspeople. And I'm sure you've
been involved in some too. Andin looking at some of these
divorces, you also can see alot of Hollywood doesn't get
married or they stay marriedfor financial reasons. And so I
think that just my generaldesire around this podcast was
(50:49):
to give people an opportunityto see that you can get
divorced and still documentwhat you need to happen. It
doesn't have to be an eitheror. It's that there are options
out there that you don't haveto just stay married because
you can't figure out thefinances. Like there's
agreements, but there's alsolike, maybe there's business
(51:11):
agreements that you could getdivorced and have, 'cause you
have a great suggestion likechange the structure while
you're married so that it's thestructure that you need , uh,
in place if you desire toseparate. Because a lot of
people become friends, youknow, it's not like they hate
each other. It's just change .
Oh ,
Speaker 2 (51:31):
They have special, think about it. Most, they have
specialties within thebusiness. Mom is really, really
good at hr. Dad is horrible atit, but he's the, he's the r
and d kind of person. You , youcould take that company and
split it then I don't know that. But that's when the other
experts will have to comeadvise them. This would be a
(51:51):
great company to split. Let theHR be the hr, we'll put in a
binding contract that you haveto hire this hr, blah, blah,
blah. And you can fix it. That,that gets into some of the most
creative open-minded neverhappens in litigation world.
Mm-Hmm . . Itjust can't because I, in
(52:12):
litigation, I want all thestuff for my client in
mediation, not as much. But incollaborative we can truly
create a different way forthese entities to continue to
benefit the couple and theirfamily. It just, it's , if you
don't know that those optionsare out there, you're failing
(52:34):
your clients is what I wouldtell the lawyers. And for the
business owners that are outthere, or the CEOs or whoever's
listening to your podcast, ifyou are not referring people
who are needing some family lawconversation that have the full
toolbox of options to help themsolve these problems, you're
not helping them out.
Speaker 1 (52:55):
Yeah. And because
Speaker 2 (52:57):
There are solutions,
Speaker 1 (52:58):
And this leads into , because you've talked about
collaborative, which is,there's a concept called
collaborative divorce. You'vetalked about mediation, you
know , um, and I encouragepeople, like if they're really
concerned, you know, like ifthey're getting divorced , a I
would even like them to talk toa divorce coach, right? Like
get away of the land of likehow this is gonna be a , an
(53:22):
interesting experience orunderstand from a mediator how
you can go around the courtsystem. Because the, the only
way that we're seeing likepeople really get stuck in the
court system is if you'regetting divorced from a
narcissist and, and thenarcissist controls all the
money, so then you might begoing to court. But, you know,
(53:46):
tell us about some of howyou're helping people do things
differently. And theseagreements could help people do
things differently. Um, and howyou work to help your clients.
Speaker 2 (53:58):
They , most of our clients come to us in the end
of their relationship. Not atthe beginning, just by
statistics, but we have a fairnumber of premarital
agreements. And what we'reseeing now more Melissa, is the
end of a marriage where thereis a premarital agreement in
effect. Mm-Hmm . And that'swhen I talk to you about making
(54:19):
sure that you read yourpremarital agreement pretty
frequently. Particularly ifyou're going to be buying or
selling something that may beimpacted by your premarital
agreement, just know before youbuy. So those kinds of things
are , uh, we're , we're notused to that. We're not used
to, oh, we are required to goto arbitration. Oh, we are
(54:41):
forbidden from doing X, y, z,which is standard in a
litigation track. If you've gota premarital agreement for
heaven's sake, make sure yourdivorce lawyer knows it before
they get started. Uh, and makesure that your estate planner
knows it before you getstarted. Your business manager
knows it so that everybodyfollows the yellow brick road
to make sure that you don't dosomething that's outside of
(55:03):
that premarital agreement thatwill damage its validity. So
there's that. So we're having alot of that . What I wanna do
is find out when a client comesin, how would you define
success? You know, is successan amicable divorce where our
kids aren't harmed? Is yourdefinition of success. I
protect my business assets,whatever it's valued at, I'm
(55:27):
happy to pay for that and hecan be supported by me. Uh, my
idea of success is annihilationof the other side. And then we
send them to another lawyer ,uh, whatever their definition,
and we go over it with somefrequency because we , we can
change our goals. And as thingsdevelop in a case, you need to
(55:48):
be reminded , um, Mr. Jones,you you want me to go do x, y,
z depositions? Let's go back toyour goals of amicable. Do you
see how that's not gonna work?
And, and challenge them becauseI am not a cheerleader for my
clients. That's not my job.
That's their business coach,their divorce coach, their
friends, whoever. My job is tobe your mirror. If you're doing
(56:11):
or saying something that isgoing to make you look a
certain way in our case,whether however we're doing
this dissolution. That's my jobto tell you that and to advise
you if these are your goals,this behavior is not going to
get you there. And then discusswhether or not we need to stay
on as a , an attorney-clientprivilege or attorney-client
(56:34):
relationship and picking yourlawyer that matches. And I
don't mean as identical 'causeyou need a compliment who will
help you think about the thingsyou didn't think about and get
to the goals that you think areimportant. And we're all
different. We are all so verydifferent. Nobody's better or
(56:55):
worse. We're just, we havedifferent mentalities.
Speaker 1 (56:57):
Yeah. And I, and I think that, you know, choosing
an attorney is very important.
I also think that , um, andthis is just my personal
opinion, maybe 'cause I likemediation a lot, but I think
choosing an attorney that hassome engagement in alternate
ways of getting divorced, be itcollaborative, be it a trained
(57:21):
mediator, it doesn't take a lotto be trained as a mediator,
you know? Um, but that to me,what it tells me is that the
attorney is recognizing thatthere are other ways than
divorce court. Because if theyonly think that divorce court
is the way, then that might bethe way you end up going. Even
(57:41):
if there's other options. Um, I, because I , yeah, they'll ,
they're gonna stick with whatthey know and a litigator is
different, you know, like youwon't know that because it
might be your first divorce.
But I think that working withsomebody that can give you the
options, you know, speakingwith attorneys , um, that could
(58:04):
go the distance if you need,but are willing to, you know,
have you have a , a little bit, uh, easier route. Because an
easier route is lower fees, youknow? Exactly. And not all
attorneys are willing to dothat at this point. You know,
so you will, you won't find atremendous amount of people
with all of these skill sets .
So it's really like if that'simportant to you, then, you
(58:27):
know, if, if you wanna burn itto the ground and and fight as
much as you there , that is,that is your right. Like, that
is, you know, like yourexperience. But what we're
talking about is a little bitdifferent and they can connect
with you on LinkedIn , um,happy to visit. So just
reaching out to you,
Speaker 2 (58:46):
Remember . Yeah. I wanna say one thing. Do you
wanna send my kid to college oryours? That's a question I ask.
Yeah , you , I'm , I'm happy totake your money to go do this
rabbit trail or we can solvethis problem and move on. What
, what we didn't talk about isthe kitchen table. It's
probably not relevant for yourclientele, but there are cases
(59:10):
where you don't really need thelawyer. The two of you could
sit at the kitchen table,divide and conquer, give it to
a lawyer to draft it up andyou're done. So it does, every,
every case is like an iceberg.
It's frozen water, buteverything else is different.
Speaker 1 (59:26):
Well, and, and starting at the kitchen table
is where, you know, as long asthere's not abuse issues and
you feel safe and comfortablein that conversation, that will
allow you to understand howmuch your spouse is willing to
go about this in acollaborative way. Even if, you
(59:46):
know, like you guys can stillget attorneys and still have
representation and advocatesand, and a team, but it's also
looking at, you know, as acouple, are you even capable of
any of these discussions? Welltry to have some of them, you
know, like try to , um, eventalk about it from an estate
(01:00:07):
standpoint. Like where's allour stuff? Like what do we
have? What do we owe? You know,and if those are red flags ,
uh, or they're like, you don'tdeserve to know that
information. Well, you know,you might need to talk to other
types of people that would giveyou resources, but , um, it's
state specific and you're inTexas, so if you need more
(01:00:29):
information, we've given , um,how to reach out to Susan. And
I would say definitely considera premarital agreement, just
because I see how they end incourt, all the time and the
judge is gonna be the personthat decides it. Um, so if you
want some control or privacy, Ithink you have to consider some
(01:00:52):
other ways. So I appreciate theinformation.
Speaker 2 (01:00:55):
It's been a lot of fun. It's nice meeting you.
Speaker 1 (01:00:58):
Thank you.
Hi, welcome to mediator podcast.com, a podcast
and video series aboutmediation, negotiation and
collaboration. My name isMelissa Greg , and I'm
evaluation expert and divorcemediator in St. Louis,
Missouri. Today we're talkingabout premarital agreements and
protecting your assets beforeyour second marriage, or really
(00:20):
any marriage with Susan Meyers.
Susan's been practicing familylaw in the Houston area since
1982, and she formed her ownfirm, Myers and Associates in
2011. Her strength is beingable to see options and
alternate paths to achieve therealistic goals of her clients,
and that is always needed indivorce and family law.
Welcome. How are you, Susan?
Speaker 2 (00:43):
I'm very well, thank you very much for the
invitation.
Speaker 1 (00:46):
Well, this is a topic that is kind of near and
dear to my heart because I seea tremendous amount of divorces
ending , um, or marriagesending in divorce that didn't
have a plan in place for thefinances. And so I think in e
(01:06):
and we are talking aboutpremarital agreements, but
they're also called prenuptialagreements. And that might be
like traditionally what aperson understood as a prenup,
right? Are they really the sametype of agreement or are they
completely different?
Speaker 2 (01:27):
They're they're the same type of agreement. It's an
an agreement that is executedbefore a marriage, but I don't
wanna get that confused with ,you could have a cohabitation
agreement where there's not anintention to marry. So these ,
uh, prenuptial, premarital,pre-marriage, all of that is in
contemplation of a marriage.
(01:48):
And most of them will have aprovision in it that says, if
y'all don't get married, thisis null and void. There's even
a post-marital agreement, butwe'll talk about this some
other time.
Speaker 1 (02:00):
Well, and it , it's interesting because I think
that in general, you know, whenI dissect a divorce, I, I think
that when people get married,they go down, get, you know,
justice of the peace , they getthe merit certificate, and they
just jump into this legal kindof a , you know, arrangement,
but they don't have aconversation about the finances
(02:21):
and maybe they don't even haveany money. So they're like, ah
, you know, we'll figure it outdown the road. Right? So I
think that even taking thetaboo off of these agreements
and starting to just say, youknow, how could these
agreements be used to protectyou, to develop a way to
(02:42):
amicably split? If, if thatcould happen. And a lot of
these we're seen in the secondor third divorces because you
could have , you know, married,young, divorced , young,
widowed and, and other types of, um, situations. So it kind of
gets us to understanding first,like what are some of the legal
(03:03):
issues that you would evenconsider when you're getting
married for the second or thirdtime, and maybe you have some
assets, or maybe you just wantto be more intentional this
next time. Like, what are someof the things that we would
wanna consider initially?
Speaker 2 (03:22):
Okay , there's a, a long list of things that people
should consider. First place,you need to start with this .
Where do we live? Where are wegoing to live? 'cause I can't
predict where people are gonnalive at the end of their
marriage, but we do know wherethey're starting off. I think
you , most couples either theylive together and they've
experienced some of thiscommingling, other assets or
some sort of expectation. But Ithink one of the best benefits
(03:47):
of a marital agreement, whetheryou execute it or not, is that
there is a conversation aboutyour expectations, because
people get a divorce becausetheir expectations are not met.
But if they don't put theirexpectations vocally so that
there's an understandingbetween the two of them ,
they're doomed. They'reabsolutely doomed. Unless by
some magic they were in syncwithout talking about it. You
(04:09):
know, I expected to stay homewhen we had kids. I expected
you to work when you had kids.
I expected that you wouldcontribute financially. I
expected you to take care of mefor the remainder of my life.
All of those expectations, ifnot spoken, are going to cause
problems. So, you know whereyou live, you know what your
expectations are. And then forthe second and third and fourth
(04:30):
and fifth marriages, we worryabout things, elements that
will happen to you. Do we havechildren from our first, second
or thirds? Do we need to worryabout that? Do I have a lot of
debt that I'm bringing into amarriage? Not just the assets
you need to worry about. Do Ihave debt related to it? Do I
have streams of income? Am Igoing to lose an alimony stream
(04:51):
from a prior marriage becauseI'm going to marry second or
third time? There's reallyunlimited things that each
couple need to look at. If theyhad a horrible divorce in
number round number one, let meassure you, you better have a
premarital agreement in roundnumber two to avoid at least
some of the horror. Becausedivorce work is as difficult or
(05:17):
as simple as the clients andtheir counsel want to make it.
Why do people get divorced?
Their expectations weren't met.
Why do they get married?
Because they think that's abetter alternative. And, you
know, we're finding that themarriage rate went down, the
difficulties continue, but thedivorce rate really is about
the same. It looks like it'slower, but it's only because
(05:38):
the marriage rate's lower. Andwhere we're seeing more
divorces are the maturecouples. Those mature couples
may be on their second orthird. I I this afternoon. I've
got an arbitration with amature couple. There's a
premarital agreement. Andthey're both, they both have
kids , uh, both have adultchildren actually, and
grandchildren. So it is, it issomething that is happening.
(05:59):
People need to talk about it.
And I do think that the moreour famous people talk about
their premarital agreements,the more comfortable the rest
of us are talking aboutpremarital agreements. It's,
when you think about it, youhave to get a, you had to be
trained to drive a car, right?
(06:19):
You have to go through lessonsand you have to get a license.
You have to pass a test. Well,there's no test to get married
and look at the consequences ofthe I dos. There are fi
fiduciary duties or financialduties there . You know, there
, there really are a lot ofduties that pop into existence
different from jurisdiction tojurisdiction. So why not know
(06:42):
what those are? And if youdon't like how your
jurisdiction is gonna dissolveyour marriage, whether by death
or divorce, 'cause remember,every single marriage ever will
end, Melissa. There's noexception. You either die and
get out of a marriage or youdivorce and get out of a
marriage. Those maritalagreements address both issues.
(07:05):
So one of the ways that , tothink about it, the very best
one of these agreements isdrafted by somebody who has
family law background andsomebody who has estate
planning background. Becausethen we think about all the
alternatives. You know , youknow, it, we are raised on two
questions. What if and whatabout, and that's what marital
agreements can do for ourcouples. That's just, it just
(07:28):
makes things easier.
Speaker 1 (07:30):
Well, and, and I think that it, in the past,
it's been used in a lot ofdifferent varieties. I think
when you get into secondmarriages, you have some estate
issues. And the estate issuescould be around, you know,
where your money is going toyour children, you know, and,
(07:51):
and they are adult children andthey're concerned about this
second marriage and things likethat. But if I look at a, an
agreement, right? Um, and, andwe just start to break it down
in a couple different,different like buckets of what
you have to consider. One ofthe things that you already
(08:13):
talked about, which is kind ofthe first bucket in my opinion,
is the state issue, right? Andso, and you, and you
beautifully kind of wentthrough it, but divorce in
general is a very statespecific issue. And so when
we're talking about theseagreements, you know, it's not
(08:33):
like going and borrowing somefriend's agreement and writing
up something. It's, it's moreof a conscientious, you know,
like you talked about actuallydiscussing these things. You
know, like if, 'cause if you'renot on the same page about them
before you get married, it'snot gonna get any better after
you get married. But can, canyou talk more about how, why,
(08:56):
why the state structure isimportant and what impact that
just has generally on divorce?
Speaker 2 (09:03):
Sure. Each state will have a law or statutes,
whether or not they approve ofmarital agreements. Every one
of our jurisdiction does. Butfrom there, it stops. So, for
example, in Texas where Ipractice, we have a
presumption, a legalpresumption that marital
agreements are valid, whoever'schallenging, it has the burden
of proof and it's limited. Uh,if it's unfair, we really don't
(09:25):
care. And , and you , my mythinking is once it's west of
the Mississippi, it's a freefor all . We expect adults to
make decisions east of theMississippi. We do find a
little bit more paternalisticrules. For example, I think
it's Connecticut, that theywill not approve a premarital
agreement that does away withalimony or spousal maintenance,
(09:47):
even though everybody's gotemployment and whatever their
circumstances are, it's notapproved. Now, it may still be
the effect at the end of theirmarriage, but that is against
their public policy. In Texas,we don't have any problems with
you waiving spousalmaintenance. We , the only
places that I think all of ourstates agree is we will not let
(10:08):
you impact negatively childrenof the marriage. We may let you
impact children outside of themarriage. Like, sure , and my
money will never go to yourchildren when I pass, or
whatever those rules might be.
Um, so it does matter becausestate that is a state-driven
law. Each state has its ownbackground as to where they,
(10:32):
their basis was. For example,Texas is from the Spanish law.
And the Spanish law was acommunity property state. We've
got 13 states that arecommunity property, California
being one of them . Here's oneof the oddities in our state.
Your passive income on yourpre-marriage , uh, estate. So
you've got a investment accountand that investment has
(10:54):
interest and dividends and itrolls over and you just keep,
you just park it there and yougive some instructions to your
account manager In California,everything that's in that
account will be your separateproperty period. If you add
community to it, that will becommunity. But if you just
leave it there and it justkeeps rolling, whatever, it's,
you're separate. In Texas, wedon't let your passive income
(11:15):
be your separate property. Wesay it's community property. So
that's a perfect example of ifyou know the differences
between your jurisdictions, yousay to your clients in every
state in the country, thiswould be passive income. That
is always gonna be thatperson's separate property. So
giving that up is not a hugecommitment unless the sole
(11:35):
source of all of their incomeis this passive income. So it ,
you have to know, there has tobe full disclosure, what do I
own? What are the, what are thestreams of income? What do I
owe? What are my debts outthere? You know, some of our
high professionals have veryhigh liability issues if they
are surgeons or pilots, and thekinds of things that when they
(11:57):
do things wrong, it is veryexpensive. So we talk about
that. They may have businessesthat have really complicated
investment , um, platforms andobligations and cash calls and
all those things that coulddrain a , a community or a
marital estate. And if youwanna make sure that that
doesn't happen, that's a greatconversation for a business
(12:20):
owner to have with anon-business owner. But it ,
full transparency, this is whyI want to keep this business my
separate, all of the expenseswill be taken care of by my
separate funds, and we will, ifI ever have to borrow against
our community stuff or ourjoint money, my separate has to
pay us back. So you, those arethe kinds of things that are
(12:42):
important to know about. Buthere's, here's our reality,
Melissa, I can't think abouteverything in their future.
I'm, I'm doing a couple rightnow where there is no way, no
way the drafters could haveanticipated the disaster their
language has created. Mm-Hmm.
(13:06):
adults to think about theircontracts when they take future
actions. And sometimes whenyou're married to someone, you
forget. So if you get a maritalagreement, and I know it's not
what we talked about earlier,you need to review it
periodically to make sure youhaven't stepped in a hole
that's gonna break your ankle.
(13:27):
Mm-hmm .
Because before things go bad,you can usually fix it. So that
, that , that the shortcut isknow your jurisdiction that you
expect to live in. All of ouragreements allow people to say,
and we're going to say foreverand ever, this agreement is
interpreted under Texas familylaw as it existed, or as it
(13:49):
exists. You pick what it is. Sowe did one that was a European
, uh, people were in Europe onan expat assignment. We did a
Texas Postmarital agreement,but we had, we had property in
Texas. The expat assignment wasfrom Texas. There was an
expectation they were gonnacome back to Texas when this
was all over. But we baked intoit and we got permission , we
(14:11):
got approval by our Europeancounterparts that this was
effective on them. Mm-Hmm .
another state, or say you'vegot a client who has multiple
offices because that's howtheir business rolls, then roll
it by all of the differentjurisdictions that they may
have a home. A lot of ourclients have multiple homes.
(14:34):
You need to make sure that whatyou're drafting is not gonna
get, you know, eviscerated ifthey get divorced in another
jurisdiction. But these areimportant conversations to
have. So let , here's , here'san example of why people don't
like marital agreements. Theythink the very money per person
is gonna roll away with all themoney, and they keep it all,
(14:56):
and the not have person is, isleft destitute. That would be
ill-advised, because if youdon't give the have not spouse
something to want to keep andnot risk losing, if they
challenge the agreement, givethem nothing because then they
(15:17):
have nothing to lose. So ,
Speaker 1 (15:21):
Well , and we've seen some language like that in
some agreements that have beenfought in the court system
where the agreement was like,well, anything and everything
that's acquired post-marriageis, you know, one spouse's. And
I think that, you know, whatyou're talking about is maybe
(15:41):
like when the agreement, you ,you just can't agree to
something that is so far on oneperson's side and expect that
the co court's gonna considerthat there wasn't coercion or
you know , like they have abetter re you know, way to like
encourage that . You know whatI'm saying? Like , or use that
(16:02):
as a reason.
Speaker 2 (16:03):
Yeah. But be careful, Melissa, some of our
jurisdiction, Texas being one ,we will let those one-sided
onerous agreements if all thebells and whistles have been
filled in. You've given ,you've given your waivers,
you've given your disclosures,you've got lawyer and you paper
it up. Some people even videothe signing ceremony so that
there's no crying and nobody'sgot a gun to someone's head.
(16:26):
It's valid. It's valid if it'son, you know, you've already
sent the wedding invitationsout. Texas is pretty pioneer
stock. Everybody's expected toknow other states not so, and
some states look as is thisunconscionable when you signed
it or is it unconscionable atthe time we're interpreting it.
Again, you need to know yourstate. Texas is much more
(16:50):
laissez-faire. Uh, you are incharge of you. And if you sign
something that is not helpfulto you, sorry. But that's how
it's gonna be. I just thinkfrom , uh, an advocate's point
of view, because you deal withthis in mediation. If you see a
marital agreement that is sogross that you're thinking,
God, there's no reason thatthey'll settle, they'll try to
(17:12):
challenge it if for no, noother purpose than to get
nuisance money from the otherside or keep the marriage
alive. So at least there'scurrently some obligation to
take care of my livingexpenses. Gotta just gotta
think. Wouldn't it be better tohave some sort of granting to
the have not some monies, someretirement, or maybe even a
(17:35):
disability policy if, I mean ,what if the have not become,
became horribly disabled duringthe marriage and there's no
obligation to support them.
That just seems cruel. But ifyou don't think about it, it
would be enforce . We had onewhere , um, it was an a mature
(17:55):
couple that I think they wereboth widowed. I think that's
right. But the dad's adultchildren were very worried that
dad was gonna be too generousto his new spouse and they
wanted the marital agreement.
And so the way we solved it,and I'm kind of curious why
they thought they wereinheriting stuff that from
(18:17):
somebody that was alive , butthat was their problem. What we
did to solve the problem is weprovided a life insurance
policy on the dad with the newwife as the beneficiary. So the
community or the joint fundstook care of the policy. It was
a whole life policy. Big chunkof money went in. And so
(18:39):
everybody knew that when hepassed, the kids would not be
harmed in any way and neitherwould she. And so that was a
way to solve it so thatfeelings and expectations were
met. There's all kinds of ways.
And you could do that if you'vegot a business owner who's
like, Hmm , my business, I , Idon't wanna co-own it with
(19:01):
anybody else, and I don't wantmy children to co-own it with
anybody else. Figure out a wayto quantify the benefit the
have not spouse might have andtake care of it. It might be as
simple as making sure that the,especially if it's a closely
held business that the formerspouse, we take care of their
(19:22):
health insurance, we designatethem as a consultant, if it's
all legal with the HR people asa consultant so they can stay
on life insurance. Or maybethey really were a consultant
and we can help contribute totheir 401k because they have
not had all that socialsecurity that went into it.
There . Just, there really areunlimited issues to talk about.
(19:45):
Depends on the facts that showup in your office.
Speaker 1 (19:48):
Well, and obviously because we do business
valuations , you know, I thinkthat we've seen more language ,
um, you know, in some sort oflitigated fashion or mediation.
Um, but I think it , one of thethings that I would in would
(20:09):
ask you maybe is what we'veseen or what we recommend if
there's a business, is that youreally, specifically if you're
planning ahead of time, or thisis a second marriage, that
you're getting evaluation atthe time. Because what we've
seen is, oh, okay , um, we'vesaid that the business is
(20:32):
separate and , um, you know,the, the spouse understood
that, but the spouse didn'tunderstand that the business
was worth $50 million. And youknow, like that's a different
discussion. And I hear that,you know, well, I didn't know
that it was worth so much. Soit's almost like presenting
that as well at the time andsaying, yes, it is a
(20:54):
substantial asset. Like let's,let's be very clear on what
it's worth at that time. Now,in some cases it could preserve
that as a separate value at thedate of marriage. Mm-Hmm .
know, just way , one way to putit in writing it , it doesn't
(21:16):
sort of allow you to have any,you know, future number
available at that time. But youcan at least kind of preserve
what was discussed at that. Doyou see some of that language
in the agreements?
Speaker 2 (21:30):
We do , you'll see it because at least in most of
our jurisdictions, you're gonnahave schedules attached to your
agreement. What are husband'sassets including valuations?
Uh, and there's fulldisclosures. So I would see tax
returns from the business and,and be able to share with the
client, he's a 50% owner,here's what the income looks
like. Uh, look at theseliabilities. Look at the
(21:52):
retained earnings becausethey're saving up to buy the
new property. Are they gonnabuy the new property within the
business? Are they gonna starta new business, which would be
community if it started duringmarriage? And is that new
business that's gonna be the,the leaseholder back to the bi
? You know, there's just, ugh ,it's mind numbing. What you
need to think about. Uh, and Idon't know if you remember, oh
(22:14):
gosh, was it back in thenineties where at least in
Texas, we redid our partnershipand our limited partnerships so
that a lot of company, thebusiness people were converting
their corporations to limitedliability partnerships. Well,
if whoever was doing thepaperwork didn't think about,
(22:36):
am I undoing a separateproperty asset distributing it,
that distribution is gonna bemarital, and now I'm putting
that marital into this andeverybody's thinking this new
one is the separate property.
And when you look at thelegalities is not a marital
agreement would've solved allthat. It allows the business
(22:58):
owners to continue to do theirbusiness without worrying about
business smart businessdecisions being completely
torpedoed because of a familylaw expectation. Those, those,
you know, I wanna be able tomanage my business. I wanna be
able to sell my business. Iwanna be able to merge, do all
(23:19):
the kinds of things thatbusinesses do, incur debt. Uh ,
it , it is, it really does makesense for there to be a marital
agreement if there's any assetsor liabilities before a
marriage that you need to makesure is solved better than our
(23:40):
family law systems do. BecauseI, we've got one that just came
in this week, and the bulk ofthe case isn't going to be
attorney's fees. It's gonna bethe valuation experts because
this multi-company, I mean theorganizational chart of this,
this entity between familytrusts and um , uh, what are
(24:07):
those called? The subsidiariesand all the things that feed
into the organization, it was abeautiful piece of art that is
going to give businessevaluators an enormous amount
of work. So if they, if theyhad a premarital agreement, we
could have baked into thepremarital agreement, how are
we gonna value these things?
Speaker 1 (24:27):
Well, and you're also, it's a good point to make
because if you did a premaritalagreement and you eventually do
estate planning, you reallywanna be careful because we had
a recent case and it wasclearly separate money gifted
at a very young age, and it wasinvestments and the investment
brokerage account or brokeragepeople like transferred the
(24:52):
asset reti like the name andeverything. And we thought for
sure, you know, like you canclearly see it . Like even the
investment firm was like, oh,our bad. You know, like, we
didn't mean to do that, blah,blah, blah. We were doing
estate planning, but we kind ofmessed it up. Um, the judge
still split it and said, no, itwas commingled you, you know,
(25:14):
like it was a theory and youknow, like you did this and a
couple other things. And well,we even have , and you know,
Speaker 2 (25:26):
We have our estate planners in town or in town in
the state , uh, pushed ourlegislator to create a
transmutation statute becausethey thought, oh, this is
great. We'll do these separateproperty owners and we will
transmute turn into likelegally turn it into community
property so they get the taxbenefits. And I'm like, make
(25:48):
sure you have a family lawyerthat's advising people. Here's
the consequence of that Greatplan.
Speaker 1 (25:54):
Yeah. Well, and you know, it , you have calculators
in a lot of states also thathave been created that are,
that are mathematicalcalculators for various pieces
of the divorce that are also,we're probably not created with
financial people in mind. Butagain, you know, like these are
(26:15):
the types of things. If, if thedivorce court system is failing
in some of these areas, thewhole purpose is to protect it,
to know how many , because it'snot just putting it in writing.
Like you, you have to, youknow, like we can go into a
decent question that that kindof feeds into this, but, you
(26:37):
know, how do you use theseagreements to protect the
assets? Because it's not justputting it in writing, there's
different levels to protectingthe agreement. You know, even
in the process, it's not abouthaving just a piece of paper to
really have it be defendable incourt. Right,
Speaker 2 (26:58):
Right. Well, it depends , again, going back to
jurisdiction in our agreements,we even provide, if you fail to
do your annual accounting,that's okay. It's not gonna ,
it's not gonna annihilate thevalidity of this. And if you
waive a couple of paragraphsand you do some commingling or
things that you said youwouldn't do, we're not gonna
(27:18):
say the whole thing's invalid.
That'll depend on yourjurisdiction. It is, you know ,
think about it from a businessperson's perspective. You have
buy sell agreements when youhave co-ownership. Think of a
premarital agreement as a buysell agreement. What do I do if
I want out? How do we , how arewe gonna value all this? Or do
(27:40):
we need a , an appraisal? Do welook at book value? Do we, do
you know, how are we gonna doit? And then stick with it.
Because those agreements, justlike a premarital agreement,
can help guide the people infinding a solution that does
not involve the court havingthe court system because the
court will solve it. The court,they are completely capable of
(28:05):
solving it. Usually not in away that people expect or want
either direction. So if , ifthe big company is gonna be
valued at $200 million andother than the company, there's
no real asset to give to thehave not , then we get a
judgment. How do we secure thejudgment for that equalization
payment? It , you know, it ,it, why not have that as part
(28:28):
of what we're gonna do? Mm-Hmm.
ending , um, game. Not, and Idon't mean to be flippant about
it, it's a quest. That's it,it's a quest for figuring out
what people have, what theywould like for the solution to
be and can I document it to getto that solution?
Speaker 1 (28:51):
Well, and realistically, if we dial back,
how do you stay out of divorcecourt and how do you go through
mediation if an eventualseparation happens, one of the
ways is to start having thesepremarital agreements in place
so that the parties have atleast a reference point with
(29:15):
which to, you know, start toseparate assets even if they
have a hard time. Maybe , um,you know, understanding it 10,
20 years later. You can alwaysinclude attorneys in mediation.
You can always bring people to,you know, dissect that
agreement. But just like a buy,sell , buy sells are very
(29:40):
specific to the company.
They're very specific to the,the intention of the future.
They're very specific to theparties at play. And they're
not just pulling a template andfilling in the blanks. If you
really want it to be effective,because effective means you can
(30:01):
take it and say, you know what?
This didn't work, but we'veagreed to how we could separate
this out. Let's just get someassistance. Right. You know,
like that's part of it. And itthen you're really looking for
somebody that understands thenuances of these agreements.
Right? It's
Speaker 2 (30:20):
Well in Texas, and I keep saying in Texas, but I'm
sure other jurisdictions allowthis. We put in the agreement ,
the premarital agreements orall of the agreements, if
there's a disagreement, wecan't, if this needs help, we
are going to first go tomediation and if mediation
fails, we will go toarbitration. It will be binding
arbitration. So one way to keepkeep outta court is to bake it
(30:44):
into the agreement. The problemis people need to understand
the consequence of an A bindingarbitration, but they do it in
business transactions all thetime. Not all of our states
will enforce arbitrationagreements in family law cases.
But we are seeing , seeing avery rapid trend of people, of
(31:04):
our legislators across thecountry approving it. Because
adults can sign agreements andthey can be binding, whether it
or not, in each state. It'll bebinding on parent-child cases
and issues involving thechildren is to be seen Texas.
We will start it , uh, we willallow that to happen. If it is
(31:26):
not in the children's bestinterest, the court always,
always retains the right to fixit.
Speaker 1 (31:33):
And I think that that's an important thing
because in some states you'realso not capable or , and you
know, maybe a lot of states orall of them , um, you're not
able to sign away child supporteither. Correct .
Speaker 2 (31:46):
So I , I know jurisdiction you can give away
child support. In fact, Ilearned something from a friend
of mine who spoke on the issue.
'cause I said, you can'tdetrimentally affect the child.
She argued that's goingdownwards. Doesn't mean you
can't negotiate. Our child willgo to x, y , Z private school.
Our child will have a collegefund or what . And I thought
(32:07):
I'd never anticipated that, butit's part of my equation now .
Speaker 1 (32:11):
Well, and I think that that goes towards, you
know, some states won't requirepayment of college by the
parties. And so again, if youplan like a second or third
marriage and there's gonna bechildren to that marriage, you
know, you would want to havesome arrangement in place. Or
(32:33):
if sometimes there'sgrandparents that are paying
for higher education , um, thatcould be determined as well.
But that's difficult to signaway somebody else's
obligation. Um, you know, butthose are the types of things.
Like it's, it's also, you know,you mentioned videotaping, like
(32:54):
some people record people, youknow, understanding what
they're signing and that theywere of clear mind and things
like that. Like there are otherways to support the
documentation of theseagreements
Speaker 2 (33:11):
And, and include in it a question that says, and
you understand that under thelaws of this jurisdiction, this
agreement agreement may besomewhat unfair to you, but
it's clear and getting them toacknowledge I, yeah, it's going
to , because sometimes in aneffort to prove to a spouse
(33:33):
that I am not marrying you foryour money because you are
daddy Warbucks. I will signwhatever you put in front of
me. I would strongly, stronglyadvise against that because
there will be no, 'causethey're thinking, if I prove to
you during my loving treatmentof you, et cetera, et cetera,
you will tear this up. Do notbe delusional. There is no
(33:56):
requirement, no expectation, noentitlement to it being torn
up. What you should do isnegotiate for some con , I
don't wanna say compensation,but some consequence so that
for each year of marriage,daddy war bugs will contribute
$10,000 as my separate propertyor a hundred thousand dollars
or , um, if any money he putsin his 401k, I get an equal
(34:19):
amount to put in my ira IRA orI don't, I don't, but do
something so that you don'tresent. 'cause that's one of
the things that happens whensomeone signs one of these
agreements, they resent it.
Mm-Hmm.
away everything that the lawsaid. Everything that the law
(34:39):
said I could have.
Speaker 1 (34:42):
Mm-Hmm .
Speaker 2 (34:42):
set your marriage up for thatkind of consequence?
Speaker 1 (34:48):
Well, and I've seen, you know, like I've really had
to shift my view of theseagreements as well, you know,
as the decades go as I gothrough divorces. Um, but, but
even looking at these types ofagreements in, in protecting
somebody and going forward,it's, it, there could be bogies
(35:10):
of, you know, if we make itthrough five years of marriage
or 10 years of marriage or 15or 20, like they've sort of
vested, they've sort ofretained some sort of, you
know, the, the marital pie. AndI think that that's helpful.
You can't really look at itthough, like as a predictor of
divorce. You have to kind oflook at it as like, we're going
(35:31):
into this in the same mindset.
Right? Right.
Speaker 2 (35:36):
We did one where the impetus for the marital
agreement was the , um, thespouse that had the wealth. It
was through family wealth andit was his family that that
required that there be amarital agreement. And the wife
understood completely, she hademployment, but they were
planning on having children.
And they had talked about ifthey had children, it was
(35:58):
expected 'cause of her incomecapacity for her to stay home
at least through I thinkkindergarten or something. So
they, it's , it wasn't a pushpresent, but we could call it a
push present for each child.
She was gonna get like $50,000.
Speaker 1 (36:13):
Okay .
Speaker 2 (36:13):
Because it was , it was an acknowledgement that I'm
going to be staying home, notworking, not contributing. That
needs to happen. And they, andthey even, they created, I
think it was Melissa , I can't,I can't swear it's been so long
ago. I think they had a 20year, maybe it was 25 years
they were still married. Themarital agreement disappeared.
(36:35):
Hmm . Yeah . I , you know, andit's, I can't remember anybody
else ever doing that, but itmade sense because the, the ,
the grandparents were worriedthat, you know, we've got this
family wealth, it's gonna getcomplicated. And a lot of his
income was flowing throughtrust and they wanted to make
sure all that income stayedseparate property, which it
(36:55):
wouldn't under our scheme. Andit made sense that they wanted
to do that. But then it alsomade sense with, but if this is
a marriage that sticks, whywouldn't you want me and your
and your grandchildren tobenefit from that? And
everybody went along with it.
Speaker 1 (37:13):
Yeah. And , and I mean, that's the whole point is
that there is no agreementthat's gonna be perfect for
everybody. Um, but that youhave to kind of go through some
of the pieces. Do you recommendthat everybody kind of does a
premarital agreement or is itjust first marriages, second
marriages, or what do you see?
Speaker 2 (37:35):
Here's my suggestion. Before there are
wedding plans and there's beenan ask and an an affirmation
that yes, there should be adiscussion about expectations
and whether or not there shouldbe a premarital agreement
depending on that conversation,then that's how I would
(37:58):
determine whether or not apremarital agreement is
recommended. Because when ayoung couple has nothing and
their parents have nothing, andthat's just how they show up
when they start, then a maritalagreement may not be necessary
regardless of where peoplelive. But if, you know ,
(38:18):
because so many of our couplesare marrying later in life,
they've created some wealth.
They've created some debt, theymay have some school debts and
all kinds of things that, thatthey're bringing into the
permanency of a relationshipwith a marriage license. Those,
they , they need to talk aboutit. And generally speaking, if
(38:39):
it's nothing more than this iswhat we owned and owe at the
time of marriage, and if Istill own it and owe it at the
time we split, it's mine. Ifthat's all it accomplishes,
that saves you a huge headache.
'cause even if it's a five-yearmarriage, Melissa , these banks
don't keep their records rightonline. You can go back two
(39:01):
years and to get further backif your bank has them, which
they should for seven years,despite the fact that there's
federal laws to that, theywanna charge you an arm and a
leg to go get those records. Soyou can prove what I had in
that bank account when we gotmarried. If you do, and , and
some of those, I don't knowthat I'd recommend the
template, but there aretemplates where it is just a
(39:22):
snapshot. This is what we haveand forever and ever, this is
what I'm gonna own as myseparate property. That's okay.
That's okay .
Speaker 1 (39:32):
Well, and you, you mentioned though, a good point
is to have the actualstatements, so to actually
have, you know, 'cause at thattime you can, you can print it
out, you can put it, you know,or your tax return or some
other validation of that.
Because this gets into kind ofone of , uh, the last questions
(39:53):
that we have. 'cause I think wehave , this is so good. I ,
it's making my head spin. Ithink that everybody should
have a premarital agreement forthe money piece because what
we're fighting about in courtis money. And , but what I get
right now, which maybe you canexplain why I am getting these
(40:13):
calls a lot, is that people arenow wanting to ask about
separation. And they're like,well, we wanna get legally
separated, but we wanna agreeto like what we have and what
I'm , what we might get. Andthen we might work on our
marriage, or we might getdivorced and work on our
(40:35):
marriage and then getremarried. Like they're asking
these questions of kind of likehow to talk about the money and
what it would look like, but tomaybe not break up and it kind
of maybe leads into thesepost-marriage agreements and
such. It does.
Speaker 2 (40:52):
Exactly. Okay . It does. Exactly. And, and
Melissa, there's all kinds ofreasons that people don't want
a legal divorce. Sometimes it'sreligious, sometimes it's
political. Yes . I imagine thatthere's quite a few people that
are running for big officesthat have premarital
agreements, and there'sprobably some postmarital
discussions about if thathappens, then I get this. And I
(41:16):
, that's my expectation. I haveno inside track on that. So
these postmarital agreementshelp a couple do exactly that.
Uh, maybe somebody's gettingready to go into a risky
venture and , uh, or we worryabout taxes. Somebody are gonna
, they're gonna live indifferent jurisdictions. If it
is a valid marital agreement,the IRS will uphold it. They
(41:37):
may, well, right now we havenot enough workers to drill
down on 'em , but that we havean opinion from the , um, uh,
internal revenue Service that avalid premarital agreement if
it adjusts how we're doingincome, that can adjust how
they do taxes. So if I'm inTexas and we have no income
tax, but you're in Illinois andyou've got income tax, that big
(41:58):
income tax generating asset,push it down to, to Texas or
whatever, whatever makes sensewhen you look at it, and you
can do those in a postmaritalagreement. I don't have a lot
of knowledge about what eachjurisdiction has. I've got a
lot of knowledge aboutpremarital agreements across
the country. Um , butCalifornia has separation
(42:18):
agreements. It , it's a termthat we don't use in Texas. We
call them postmaritalagreements.
Speaker 1 (42:24):
Yeah. And I , and I , and I think that
jurisdictionally as well, youknow, that like depending upon
what they , whether you can getseparated, you know, it depends
on your state and things likethat. Um, but I think in, in
some of those agreements, likewe saw one where , um, you
(42:45):
know, it was pretty wealthy ,um, grandparents and families.
And one of the, the spouse thatwas not part of the family
wanted to invest money incannabis operations. And the
family was just like , uh, hellno, we do not wanna be
affiliated with it. But we wereable to set up an agreement
(43:05):
where like the par the personwas able to take their own
separate money and invest inthat, and that it would be a
separate situation throughseparate ownership and all of
that, you know. So in somecases there may be, and that it
would, you know, because thewhole disagreement was like if
it was gonna be amazinglyprofitable that you weren't
(43:28):
gonna be the benefit of iteither. So it was an
interesting play. Um, I think a, an interesting use of it. But
for the most part I'm seeingthat people are saying maybe,
and maybe they're thinking,well, we'll I'll, I'll stay in
the marriage and work on it ifwe agree to that. If I say no
(43:50):
at some point we've said we'regonna split these things we've
said, you know, and those areusually when there's no
agreement. Like are you, likewhen, when you do maybe see a
post uh , marriage agreement,are they usually when there's
no premarital?
Speaker 2 (44:05):
Correct. Okay . Okay . You can modify a premarital
agreement. And the other nicething about postmarital
agreements, you don't have todo the whole divorce picture.
You could partition out. So youcould have, I'll call 'em sub
agreements. So we've got amillion dollar account and he
wants to go invest in cannabisand she wants to go invest in
equine therapy. Um, so they'regonna split it up. I get 500,
(44:27):
you get 500 and we willpartition those dollars as our
separate property. That'slegal. It's complete. And what
I go do and what I earn fromthat, if it stays in that
business is all my separateproperty and vice versa. Uh, or
you can say all income that weget from that is you , you get
to language it. But what we're,where we're seeing the
postmarital agreements say thatsomebody's had a drug or
(44:50):
alcohol problem, and it is, itis ruining the marriage. So
they're not ready to pull thetrigger and get a divorce
because they want to helpenable some recovery, et
cetera, or the kids or thereligion or whatever. And so we
will do what looks like a realdivorce, same disclosures,
(45:10):
same. And we divide theaccounts so that if somebody's
running amuck , they can go runamuck with their money and do
what they want to. But thatlooks like a divorce just
without the divorce decree ontop of it. And that's valid.
And we've had not a lot ofthose, but enough of them. It
(45:31):
is a precursor in mostinstances to the divorce. But
it's also an estate tool.
Speaker 1 (45:39):
Mm-Hmm.
Speaker 2 (45:40):
effective division. Now, ifthey could still do their wills
so that if they pass myseparate property part can
still be inherited by theformer spouse, and that's,
that's not my ditch, but I knowthat is a possible, it's just,
you know, the saying about becareful what you ask for, you
(46:01):
might get it.
Speaker 1 (46:03):
Yeah. And we've seen another area that we've seen
some of these, and, and I don'tknow if they're really post
marriage agreements at thispoint or like divorce decrees
or agreements. Um, but we willsee when maybe the court
wouldn't allow the parties.
Like if you have a familybusiness and it's creating all
(46:25):
the income, it's all thewealth, it's everything. The
insurance, everything. And thecourt, you know, if you're in a
jurisdiction that the courtdoesn't allow people to remain
owners, like just notoriously ,um, you might ha and we'll see
it in mediation where you'llagree to maybe stay co-owners
how that would look, how thebusiness, I mean, that's a big
(46:48):
one that we, we see,
Speaker 2 (46:49):
Oh, I, I could see in your world, you're in the
mediation and this, you got afamily , um, business. Both
parents are still like involvedin , the kids are involved in ,
it's completely enmeshed. Youcould ba put that into a new
entity, have an operatingagreement, you're gonna have to
pull in all your, your businessdrafters, have an operating
(47:09):
agreement, a buy sellagreement, all the kinds of
things as though they werestrangers to each other joined
in this new venture. What arethe rules of the road gonna be?
And then in the divorce decree,you barely have to mention it,
you have your interest in theseshares, in this entity , new
entity. She has these shares inthis new entity. Done, done.
(47:30):
Mm-Hmm.
generational wealth. You do notdisturb the income flow, the
insurance, all the benefitsthat this family business
created. I I think it's that I, I have on speed dial. I have
a trust person who can handle,do I need to dissolve a trust?
(47:51):
Do I need to create a trust atreal time in mediation, in
collaborative law, this worldhappens all the time. We
usually bring them to thephysical table to talk to us
all about what this would looklike. We have our business
transaction people looks like amerger and acquisition in the
middle of a divorce. We haveour child custody people
that'll talk about if we needto create a trust for this
(48:13):
special needs child, do we needto do the, the generational
part where you, if there'smoney in it, it goes to the
other children. It , it , thereis no limit to the experts that
you need to bring into thetable at mediation or
collaborative law that willhelp solve these problems that
the courts simply are notequipped to do. They don't have
(48:35):
the authority to do it. Theydon't have the time to do it.
And I can , I can tell you Idon't have the knowledge to do
it. I pull in my experts. So Ican't imagine that our courts
who are so understaffed andprobably underpaid are gonna be
able to make it happen.
Speaker 1 (48:51):
Well, and I think that people understand that for
decades what accountants andlawyers have done for
corporations is created layersto protect people from getting
sued by outsiders. And so youhave layers of LLCs and
corporations and taxconsequences, if anything, I
(49:14):
think. And then you have theestate planning that, that
involves trust. If anything, Ithink that sometimes it's kind
of weird, but like in theprocess of divorce, we do start
to simplify the ownership andthe structures that maybe 20
years ago were very necessary,but that we're starting to see
(49:34):
are maybe just too much or, youknow, not as relevant is , but
you also have real estate, youknow, a lot of LLCs are put in
place to separate real estatefrom businesses. You know, so
it's And who's gonna use it ?
The
Speaker 2 (49:49):
Business ? Yeah .
Yeah. The business uses thisland. It's a separate entity
that owns the land. So howabout if we, we could co-own
the land. Mm-Hmm .
the income, like the rent. And, and , but you have to put in
all the stuff about fair rentalare we doing in a a , what's
(50:12):
that triplet lease? Uh , it'sjust, you need to know what you
need to know. And I don'tpretend to have those answers.
I do know that I lean on thepeople that do
Speaker 1 (50:23):
Well in my, my, you know, like we do some big
divorces that are like famouspeople. And I'm sure you've
been involved in some too. Andin looking at some of these
divorces, you also can see alot of Hollywood doesn't get
married or they stay marriedfor financial reasons. And so I
think that just my generaldesire around this podcast was
(50:49):
to give people an opportunityto see that you can get
divorced and still documentwhat you need to happen. It
doesn't have to be an eitheror. It's that there are options
out there that you don't haveto just stay married because
you can't figure out thefinances. Like there's
agreements, but there's alsolike, maybe there's business
(51:11):
agreements that you could getdivorced and have, 'cause you
have a great suggestion likechange the structure while
you're married so that it's thestructure that you need , uh,
in place if you desire toseparate. Because a lot of
people become friends, youknow, it's not like they hate
each other. It's just change .
Oh ,
Speaker 2 (51:31):
They have special, think about it. Most, they have
specialties within thebusiness. Mom is really, really
good at hr. Dad is horrible atit, but he's the, he's the r
and d kind of person. You , youcould take that company and
split it then I don't know that. But that's when the other
experts will have to comeadvise them. This would be a
(51:51):
great company to split. Let theHR be the hr, we'll put in a
binding contract that you haveto hire this hr, blah, blah,
blah. And you can fix it. That,that gets into some of the most
creative open-minded neverhappens in litigation world.
Mm-Hmm .
(52:12):
litigation, I want all thestuff for my client in
mediation, not as much. But incollaborative we can truly
create a different way forthese entities to continue to
benefit the couple and theirfamily. It just, it's , if you
don't know that those optionsare out there, you're failing
(52:34):
your clients is what I wouldtell the lawyers. And for the
business owners that are outthere, or the CEOs or whoever's
listening to your podcast, ifyou are not referring people
who are needing some family lawconversation that have the full
toolbox of options to help themsolve these problems, you're
not helping them out.
Speaker 1 (52:55):
Yeah. And because
Speaker 2 (52:57):
There are solutions,
Speaker 1 (52:58):
And this leads into , because you've talked about
collaborative, which is,there's a concept called
collaborative divorce. You'vetalked about mediation, you
know , um, and I encouragepeople, like if they're really
concerned, you know, like ifthey're getting divorced , a I
would even like them to talk toa divorce coach, right? Like
get away of the land of likehow this is gonna be a , an
(53:22):
interesting experience orunderstand from a mediator how
you can go around the courtsystem. Because the, the only
way that we're seeing likepeople really get stuck in the
court system is if you'regetting divorced from a
narcissist and, and thenarcissist controls all the
money, so then you might begoing to court. But, you know,
(53:46):
tell us about some of howyou're helping people do things
differently. And theseagreements could help people do
things differently. Um, and howyou work to help your clients.
Speaker 2 (53:58):
They , most of our clients come to us in the end
of their relationship. Not atthe beginning, just by
statistics, but we have a fairnumber of premarital
agreements. And what we'reseeing now more Melissa, is the
end of a marriage where thereis a premarital agreement in
effect. Mm-Hmm . And that'swhen I talk to you about making
(54:19):
sure that you read yourpremarital agreement pretty
frequently. Particularly ifyou're going to be buying or
selling something that may beimpacted by your premarital
agreement, just know before youbuy. So those kinds of things
are , uh, we're , we're notused to that. We're not used
to, oh, we are required to goto arbitration. Oh, we are
(54:41):
forbidden from doing X, y, z,which is standard in a
litigation track. If you've gota premarital agreement for
heaven's sake, make sure yourdivorce lawyer knows it before
they get started. Uh, and makesure that your estate planner
knows it before you getstarted. Your business manager
knows it so that everybodyfollows the yellow brick road
to make sure that you don't dosomething that's outside of
(55:03):
that premarital agreement thatwill damage its validity. So
there's that. So we're having alot of that . What I wanna do
is find out when a client comesin, how would you define
success? You know, is successan amicable divorce where our
kids aren't harmed? Is yourdefinition of success. I
protect my business assets,whatever it's valued at, I'm
(55:27):
happy to pay for that and hecan be supported by me. Uh, my
idea of success is annihilationof the other side. And then we
send them to another lawyer ,uh, whatever their definition,
and we go over it with somefrequency because we , we can
change our goals. And as thingsdevelop in a case, you need to
(55:48):
be reminded , um, Mr. Jones,you you want me to go do x, y,
z depositions? Let's go back toyour goals of amicable. Do you
see how that's not gonna work?
And, and challenge them becauseI am not a cheerleader for my
clients. That's not my job.
That's their business coach,their divorce coach, their
friends, whoever. My job is tobe your mirror. If you're doing
(56:11):
or saying something that isgoing to make you look a
certain way in our case,whether however we're doing
this dissolution. That's my jobto tell you that and to advise
you if these are your goals,this behavior is not going to
get you there. And then discusswhether or not we need to stay
on as a , an attorney-clientprivilege or attorney-client
(56:34):
relationship and picking yourlawyer that matches. And I
don't mean as identical 'causeyou need a compliment who will
help you think about the thingsyou didn't think about and get
to the goals that you think areimportant. And we're all
different. We are all so verydifferent. Nobody's better or
(56:55):
worse. We're just, we havedifferent mentalities.
Speaker 1 (56:57):
Yeah. And I, and I think that, you know, choosing
an attorney is very important.
I also think that , um, andthis is just my personal
opinion, maybe 'cause I likemediation a lot, but I think
choosing an attorney that hassome engagement in alternate
ways of getting divorced, be itcollaborative, be it a trained
(57:21):
mediator, it doesn't take a lotto be trained as a mediator,
you know? Um, but that to me,what it tells me is that the
attorney is recognizing thatthere are other ways than
divorce court. Because if theyonly think that divorce court
is the way, then that might bethe way you end up going. Even
(57:41):
if there's other options. Um, I, because I , yeah, they'll ,
they're gonna stick with whatthey know and a litigator is
different, you know, like youwon't know that because it
might be your first divorce.
But I think that working withsomebody that can give you the
options, you know, speakingwith attorneys , um, that could
(58:04):
go the distance if you need,but are willing to, you know,
have you have a , a little bit, uh, easier route. Because an
easier route is lower fees, youknow? Exactly. And not all
attorneys are willing to dothat at this point. You know,
so you will, you won't find atremendous amount of people
with all of these skill sets .
So it's really like if that'simportant to you, then, you
(58:27):
know, if, if you wanna burn itto the ground and and fight as
much as you there , that is,that is your right. Like, that
is, you know, like yourexperience. But what we're
talking about is a little bitdifferent and they can connect
with you on LinkedIn , um,happy to visit. So just
reaching out to you,
Speaker 2 (58:46):
Remember . Yeah. I wanna say one thing. Do you
wanna send my kid to college oryours? That's a question I ask.
Yeah , you , I'm , I'm happy totake your money to go do this
rabbit trail or we can solvethis problem and move on. What
, what we didn't talk about isthe kitchen table. It's
probably not relevant for yourclientele, but there are cases
(59:10):
where you don't really need thelawyer. The two of you could
sit at the kitchen table,divide and conquer, give it to
a lawyer to draft it up andyou're done. So it does, every,
every case is like an iceberg.
It's frozen water, buteverything else is different.
Speaker 1 (59:26):
Well, and, and starting at the kitchen table
is where, you know, as long asthere's not abuse issues and
you feel safe and comfortablein that conversation, that will
allow you to understand howmuch your spouse is willing to
go about this in acollaborative way. Even if, you
(59:46):
know, like you guys can stillget attorneys and still have
representation and advocatesand, and a team, but it's also
looking at, you know, as acouple, are you even capable of
any of these discussions? Welltry to have some of them, you
know, like try to , um, eventalk about it from an estate
(01:00:07):
standpoint. Like where's allour stuff? Like what do we
have? What do we owe? You know,and if those are red flags ,
uh, or they're like, you don'tdeserve to know that
information. Well, you know,you might need to talk to other
types of people that would giveyou resources, but , um, it's
state specific and you're inTexas, so if you need more
(01:00:29):
information, we've given , um,how to reach out to Susan. And
I would say definitely considera premarital agreement, just
because I see how they end incourt, all the time and the
judge is gonna be the personthat decides it. Um, so if you
want some control or privacy, Ithink you have to consider some
(01:00:52):
other ways. So I appreciate theinformation.
Speaker 2 (01:00:55):
It's been a lot of fun. It's nice meeting you.
Speaker 1 (01:00:58):
Thank you.
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