Issues in the Family Enterprise / Latest Thinking in the Field / Law / Wealth Management / Women in Family Business

Prenuptial Agreements – Uncomfortable and Necessary

You can find issues more uncomfortable than prenuptial agreements. But not many.

For starters, people view prenups from amazingly different points of view. One of my granddaughter’s professors told her that asking anyone for a prenup was demeaning and exploitive and showed such a lack of trust that even asking would be grounds for breaking an engagement.

On the other side, a friend of mine has the attitude that “anyone who won’t sign a prenup is after your money.” She told her son that if someone were unwilling to sign a prenup, that would be disqualifying. “Why should anyone be paid for marrying you?”

My own view is somewhere in the middle, but I do believe that for members of a family business, marriage isn’t just about two individuals. A divorce could impact the family, the employees, the lenders, the customers, and the community. It can damage or destroy an on-going business. Collateral damage from a bankruptcy, a hostile takeover, or brand damage can be disastrous for countless innocent bystanders. A prenup is an insurance policy taken out on behalf of this larger constituency.

The Heart of the Topic

Assuming you have come down on the side of having a prenup (and I hope you have), how do you deal with the fact that marriage is more than an intimate partnership, it’s also a financial partnership? How do you help your clients make something so inherently problematic less painful?

The good news is that the relatively new legal field of collaborative law can help. A collaborative approach always involves not just lawyers representing each side, but also a mental health professional, and often a neutral financial expert. Instead of being adversarial, the collaborative team’s focus is on getting to an agreement that both parties feel good about.

To get to the “feel good” part of the agreement, the team consciously addresses underlying emotional issues since arguments about money are never really about the money.

For instance, suppose one party’s childhood included weekend visitations with a divorced parent who at times provided lavish and expensive gifts – gifts that over time became equated with love. Suppose, next, that the other party grew up in strained financial times and had parents who strove for financial security but instilled in their child a permanent sense of financial insecurity. Their mantra was, “You’ve got to save for the future! You could lose everything!”

Initially, this couple is likely to have problems with the prenup, probably trading claims about who is “cheap and unloving” and who is “greedy and materialistic.” The underlying problem, however, is that they come from families that never talked about money and don’t know how to frame the questions, let alone understand the other person’s point of view.

Collaborative professionals know that there is a whole host of problems hiding under the rubric of money. Money might represent a means of control; a tool for expressing rebelliousness against a parent; protection against insecurity; status and social position; integrity involving promises made to prior children; or a litmus test for a person’s real motives for the relationship.

There are enormous advantages to understanding what money symbolizes. When a collaborative team gets involved, it works on getting to solutions that aren’t zero-sum, but rather ones that involve understanding and sympathy — solutions that both parties can endorse. Getting the true interests on the table is likely to result in a more amicable agreement.

But there’s more to it than even that – it’s a way to discover how the two “ intendeds” handle important disagreements. A prenup isn’t the last thing this couple will disagree about. On the contrary, the prenup is a kind of X-ray into how well a couple will handle future disagreements. (Thanks to Roxane Polak and David Hoffman for their insights into this part of the article.)

Back to the Beginning

But… back to the beginning! How to go about bringing up this fiendishly ticklish subject in the first place? Basically there are two choices — work it through, or pretend it isn’t there and live with the consequences. This conversation is going to raise fears and make the couple recheck what the relationship is about. But they still need to plunge in and have the conversation.

Bringing up the subject of a prenuptial agreement a minimum of three months before the wedding is minimal if a collaborative law team is to be assembled. Six months is better, and the best time is when the couple is first seriously discussing marriage. It’s easier when there are no looming deadlines. Waiting until the last minute may have a “take it or leave it” feel to it.

In many cases, the party who’s presented with a last minute prenup will probably take it, given the embarrassment of canceling the wedding. This creates an additional problem in that a last minute prenup may not be legally enforceable.

According to Charles McEvily, “If the prenup is ever challenged, a spouse could claim that not signing didn’t feel like an option because the wedding invitations had already been sent.” And…“There’s a cost to starting out the marriage this way. Over time it’s apt to grate and turn into a major impediment to a healthy marriage.” In his experience, in as many as 10% of the cases where this happens, it means the end of the marriage.

Prenups are a scary and difficult topic. They’re not just about money. They’re about deeply felt emotions. And in the case of a family business, they’re about all the other stakeholders who could be harmed by a difficult divorce. Fortunately the recent practice of collaborative law can make it less scary and less difficult.

About the contributor

Mitzi Perdue is a speaker, author, and businesswoman. She is the widow of Frank Perdue and daughter of Ernest Henderson, co-founder of the Sheraton Hotel Chain. She can be contacted at mitzi@MitziPerdue.com.

Her collaborators on this article are David A. Hoffman, DHoffman@blc.law, Charles McEvily, Cmcevily@aol.com, and Roxane Polak, RoxanePolak@gmail.com.

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