Bogleheads® Chapter Series – How to Use Prenup and Postnup Agreements as Financial Planning Tools
00:00:00.000 | Welcome to the Bogleheads Chapter Series.
00:00:04.620 | This episode was jointly hosted by all the Life Stage Chapters and recorded February
00:00:09.480 | 4th, 2025.
00:00:11.360 | It features Adam Cordova, a specialist in collaborative family law, presenting the topic,
00:00:16.980 | how to use prenuptial and postnuptial agreements as financial planning tools.
00:00:22.160 | Bogleheads are investors who follow John Bogle's philosophy for attaining financial independence.
00:00:26.960 | This recording is for informational purposes only and should not be construed as personalized
00:00:31.640 | investment or legal advice.
00:00:34.640 | So hello everyone.
00:00:35.640 | I'm Alan, one of the coordinators for the Retired Life Stage Chapter, but tonight's
00:00:40.480 | topic will be relevant for many Bogleheads, regardless of life stage.
00:00:44.720 | Statistically, over 40% of first marriages and 60% of second marriages end in divorce,
00:00:50.640 | often with significant financial impact to all involved.
00:00:53.520 | Unfortunately, the potential role for pre- and postnuptial agreements as financial planning
00:00:58.080 | tools remains somewhat taboo in everyday conversation, and is only occasionally discussed in the
00:01:03.480 | forum with virtually no mention, actually, in the Bogleheads Wiki.
00:01:07.560 | For that reason, we scheduled this meeting to provide a current overview of the topic.
00:01:11.560 | And we're very fortunate to have our guest presenter this evening, Adam Cordova, who's
00:01:15.760 | a Boglehead and a Florida-based lawyer specializing in collaborative family law and an expert
00:01:21.860 | on the topic.
00:01:24.000 | Rather than me muddling up his bio, I'll let Adam introduce himself and proceed with his
00:01:28.280 | presentation and questions and answers.
00:01:31.520 | Thank you very much, Adam.
00:01:32.520 | I'll turn the mic over to you.
00:01:35.280 | Well, Alan, thank you so much.
00:01:38.400 | Let me share my screen and, okay, so Alan, can you see the screen?
00:01:50.520 | Yes.
00:01:51.520 | Everybody else can see it?
00:01:53.760 | Right.
00:01:54.760 | All right, perfect.
00:01:57.120 | So, we're going to be talking today about how to use prenuptial and postnuptial agreements
00:02:02.120 | as financial planning tools.
00:02:04.280 | But before we do, I'd like to provide just a few disclaimers.
00:02:10.040 | Disclaimer number one, I'm a lawyer.
00:02:12.280 | I like disclaimers.
00:02:13.920 | If you don't like it, well, sue me.
00:02:17.160 | And disclaimer number two, please don't sue me.
00:02:22.500 | You see, Alan, that's what we in the industry call a lawyer joke, okay?
00:02:26.980 | I just want to make sure.
00:02:28.440 | Okay.
00:02:29.440 | Anyways, disclaimer number three, I am a lawyer, but I am not your lawyer.
00:02:36.400 | As Alan mentioned before the recording, this is not legal, financial, or tax advice.
00:02:41.780 | This is for educational purposes only.
00:02:44.960 | And disclaimer number four, I am only licensed in Florida.
00:02:49.320 | So, I hope to make this broad enough to be generally applicable and I think regardless
00:02:53.960 | of where you actually live, you'll find something that could be helpful.
00:02:57.720 | But just please keep in mind, if you don't have pythons swallowing alligators and iguanas
00:03:01.920 | falling out of the sky nearby, I don't know your state's laws.
00:03:06.840 | So, a little bit about me.
00:03:10.640 | My name is Adam Cordova, as Alan mentioned.
00:03:12.720 | I'm the Managing Attorney at Family Diplomacy, a collaborative law firm.
00:03:16.680 | We're a Florida-based law firm with offices in Tampa, St. Petersburg, and Sarasota, and
00:03:22.640 | we represent clients virtually throughout the state of Florida.
00:03:26.280 | Our website is FamilyDiplomacy.com.
00:03:29.400 | Few other things about me, I practice exclusively in out-of-court dispute resolution.
00:03:34.560 | I stopped taking court cases in 2015 because I found that for the most part, we were pitting
00:03:40.500 | husband versus wife and parent versus parent.
00:03:43.900 | That didn't align with my values, so I stopped litigating in 2015.
00:03:48.200 | We've actually grown our practice quite a bit since then.
00:03:50.600 | I'm the co-editor and co-author with an LA attorney known as Forrest "Woody" Mosten,
00:03:57.440 | building a book called Building a Successful Collaborative Family Law Practice, published
00:04:02.120 | by the American Bar Association in 2018.
00:04:04.720 | I'm also the recipient of the Florida Academy of Collaborative Professionals Inaugural Visionary
00:04:09.800 | Award for establishing their Leadership Institute.
00:04:13.400 | But probably more pertinently, I started reading Dave Ramsey books a few years ago, probably
00:04:19.120 | like many of you all, to get rid of my damn student loans.
00:04:22.900 | But that led me down a course of reading JL Collins' Simple Path to Wealth, of listening
00:04:28.960 | to a few podcasts, Choose FI, White Coat Investor, and Sound Investing, and finally to some Boglehead
00:04:35.440 | YouTube videos, where I got a little bit more familiar with Rick Ferry and the conferences.
00:04:39.920 | And that led me to joining the Tampa Bay Bogleheads chapter last year.
00:04:45.240 | That's how I got to know, that's how I met Alan.
00:04:48.960 | So let's start off with a question for you all.
00:04:53.040 | When you hear the term prenup, what is the first thing that comes to mind?
00:04:57.880 | I ask that you please write your answer down in the chat or feel free to feel free to raise
00:05:05.940 | your hand.
00:05:08.560 | So when you hear the term prenup, what is the first thing to that comes to mind?
00:05:24.200 | Protect money, finances, okay, good, yeah.
00:05:27.280 | What else?
00:05:28.280 | My partner loves their money more than they love me for our first marriage.
00:05:31.600 | Sure.
00:05:32.600 | Yeah, I've heard that.
00:05:35.200 | Protect yourself and your children.
00:05:38.200 | Someone is not going to like it.
00:05:39.760 | That can oftentimes be the case.
00:05:41.400 | Yeah.
00:05:42.400 | We'll talk about ways that we can help deal with with that.
00:05:45.120 | Good.
00:05:46.120 | Good.
00:05:47.120 | Agreement before marriage.
00:05:48.880 | Yeah, I'd say that that's a pretty good definition of a prenup.
00:05:53.440 | And I'll give a definition in just a moment and also protect your assets, potentially
00:05:59.720 | an unromantic conversation.
00:06:02.320 | Gosh, I'd love to have a candlelit dinner over prenups and postnup, wouldn't you?
00:06:08.320 | I mean, anyways, well, I'd say that's that's probably fair.
00:06:12.560 | Let me pull my screen back up.
00:06:18.560 | So so let's just talk, run through what we're going to be talking about today, and maybe
00:06:23.240 | we can answer some of those ideas, those those questions that were in the chat.
00:06:28.480 | First off, we're going to be providing some definitions talking about what is a prenup
00:06:33.000 | and a postnup.
00:06:35.640 | How can they say how can they serve as financial planning tools?
00:06:39.840 | Who would most benefit from a prenup or postnup?
00:06:44.220 | Are there ways to make them more binding in case you need to enforce them?
00:06:48.800 | And is there a way to make it a better or more fair experience or maybe as some people
00:06:54.520 | would like to think who wrote in the chat, is there a way we can make the experience
00:06:59.000 | suck a little less?
00:07:01.240 | We'll talk about that.
00:07:04.440 | Here's here's the thing to know, though.
00:07:06.920 | Not everyone needs a prenup.
00:07:09.960 | As the guys on ChooseFI like to say, this is just another tool for your toolbox, another
00:07:15.600 | lever for you to pull.
00:07:18.140 | Some of this stuff you may find really interesting and applicable to you, and if so, you should
00:07:22.860 | explore it more.
00:07:24.140 | And if not, that's OK, too.
00:07:26.420 | Not everybody needs one.
00:07:27.420 | We're going to talk about who it may be best for, but in some circumstances, who may not
00:07:32.180 | need the prenup.
00:07:35.460 | Here's one thing to know, a prenup is not a new idea.
00:07:40.900 | There's the Jewish concept of a ketubah, which is a Jewish marriage contract.
00:07:45.660 | It's a practice that has existed for over two millennia.
00:07:49.700 | And similarly, in the Islamic faith, there's the nikah, which is said to be traceable back
00:07:54.320 | to the Prophet Muhammad.
00:07:56.460 | Both are contracts that address property rights in the event of during a marriage.
00:08:02.380 | And also, both of them address, oftentimes, what happens if a marriage ends.
00:08:07.540 | So this is, again, not a new or novel concept.
00:08:12.900 | I want to briefly, before we go into other topics, just kind of talk about the various
00:08:18.100 | different types of agreements that you may hear.
00:08:21.060 | And first off, there's the prenuptial agreement, and here's how I like to define it.
00:08:26.680 | It's a written and binding plan signed by a couple before a marriage that usually addresses
00:08:34.380 | how they want to manage their finances during and after a marriage.
00:08:39.320 | And we know that marriages tend to end one way or the other, either by divorce or slightly
00:08:46.080 | more hopefully by death.
00:08:48.320 | So just something to keep in mind.
00:08:51.920 | Prenuptial agreement is actually known by a few different things.
00:08:55.600 | Your jurisdiction may call it one of several different things.
00:08:59.880 | It can be known as a prenup, a premarital agreement, an anti-nuptial agreement, and
00:09:08.080 | an anti-marital agreement.
00:09:10.720 | And I just bolded A-N-T-E.
00:09:14.720 | It's not A-N-T-I, which would mean against nuptials or against marital, but A-N-T-E,
00:09:20.760 | which means before the nuptials, before the marriage.
00:09:25.880 | But we do come across some agreements that have those as their titles.
00:09:29.400 | So they're all the same thing, means the same thing.
00:09:33.920 | It's just something to know is that Florida and 27 other states and the District of Columbia
00:09:40.720 | have adopted what's known as the Uniform Premarital Agreement Act, which is just a uniform way
00:09:46.760 | of discussing, accepting, and interpreting agreements.
00:09:50.760 | I'll leave that screen on for just a moment so you can see if your state is on there.
00:09:59.240 | Even if your state is not on there, that does not mean that your state does not allow prenups
00:10:04.040 | or post-nups.
00:10:05.040 | It just hasn't adapted or adopted a form of the UPAA.
00:10:10.720 | I'd say that some of the discussion here is probably going to be most relevant to the
00:10:15.560 | UPAA states, but as I said, even if your state has not adopted this Act, I think you're going
00:10:22.080 | to find some things that will be relevant anyways.
00:10:26.560 | Then there's the idea of a post-nuptial agreement, and the truth is it's pretty much the same
00:10:31.460 | thing as a prenuptial agreement, but it's signed during a marriage, and it also can
00:10:37.480 | be called a post-nup or a post-marital agreement.
00:10:41.080 | We're actually going to be talking a little bit later in this presentation about times
00:10:45.560 | where it actually may make more sense to enter into a post-nuptial agreement and may actually
00:10:52.360 | be more binding to enter into a post-nuptial agreement as opposed to a prenuptial agreement.
00:10:59.080 | There's three other agreements I just want to very briefly mention, although I'm not
00:11:03.840 | going to spend too much time on them.
00:11:06.360 | There's the Cohabitation Agreement, also known in some cases as a domestic partnership agreement.
00:11:13.040 | This is simply an agreement that establishes contractual rights between unmarried people
00:11:19.560 | for quite some time before marriage was legal between people of the same sex.
00:11:24.880 | Instead of having rights that were allowed by statute by their states, instead they created
00:11:30.240 | contractual rights by these types of agreements.
00:11:34.040 | So it hasn't only been used for folks who are in the LGBTQ+ community.
00:11:41.920 | I had a client who was going to marry their fiancee in a religious ceremony, but for whatever
00:11:52.040 | reason, they did not want to actually go through a civil ceremony.
00:11:55.960 | They just didn't want to have anything to do with the state, with registration, anything
00:11:59.800 | like that.
00:12:00.980 | So instead of doing a prenup, we did a domestic partnership agreement, which laid out all
00:12:08.360 | of the rights and even said that in the event that at some point they did get married, this
00:12:12.880 | agreement would convert into a prenuptial agreement.
00:12:17.840 | There's also a Marital Settlement Agreement.
00:12:21.360 | This is an agreement that is entered at the time of divorce.
00:12:25.880 | I'm going to be providing a few different tips throughout this presentation.
00:12:30.480 | So here's tip number one.
00:12:32.660 | It's usually better to address financial issues before you are angry at each other.
00:12:38.380 | So this can be in a prenup or a postnup, but just something to keep in mind.
00:12:45.160 | Finally, there's a topic known as a Collaborative Marriage Planning Agreement.
00:12:49.720 | So this is actually a very, very, not many people know about it, not even many attorneys
00:12:55.400 | know about it.
00:12:56.400 | This is a very novel approach, which I've helped develop.
00:13:00.400 | It's a new type of agreement, some elements of which are binding and some not, and they
00:13:06.120 | help couples create three to five year strategic plans for their marriage.
00:13:11.680 | When I say some parts are binding and some parts are not, some parts of the agreement
00:13:17.400 | can actually serve as a binding prenuptial agreement, but other parts may delve into
00:13:22.240 | areas that can't be enforced by an agreement, like what are your parenting styles?
00:13:29.480 | What are your views on how you want to eventually leave money for children and grandchildren
00:13:37.360 | that may not be there?
00:13:39.840 | So it really takes a holistic view of planning your marriage, and this can be something that
00:13:49.080 | supplements marriage counseling or financial counseling, and just if anybody has interest
00:13:54.960 | in it or they know of an attorney who'd like to learn more, I wrote a chapter about it
00:13:59.560 | or I have a chapter about it in my book, Building a Successful Collaborative Family Law Practice,
00:14:04.760 | published by the American Bar Association.
00:14:06.400 | So enough about that, because this discussion will focus primarily on prenups and postnups.
00:14:15.620 | So this section, we're going to focus on how can prenups and postnups serve as financial
00:14:24.240 | planning tools?
00:14:25.240 | Of course, that's the main topic of our discussion, and we're going to really examine five different
00:14:30.920 | ways.
00:14:31.920 | First off, how they can be used for divorce prevention, for asset protection, for asset
00:14:40.640 | management, debt responsibilities, and for inheritance planning.
00:14:47.640 | Before I continue on, let me just mention that I have provided a copy of these slides
00:14:55.640 | to Alan.
00:14:56.640 | I understand Alan is going, or somebody is going to send them out to everybody who registered.
00:15:02.380 | So these are yours for free, so you don't need to take vigorous notes if you don't want
00:15:07.280 | to.
00:15:08.280 | Okay.
00:15:09.280 | Let me just clarify, what I'll do is have Lady Geek post a link on the forum, and there's
00:15:16.600 | a Boglehead file repository.
00:15:19.780 | We can't email it, or I don't have a list of who registered, but we'll make it available.
00:15:26.800 | Thank you, Alan.
00:15:27.800 | Thank you for that clarification, and actually, before I continue, because we went through
00:15:31.960 | a bunch of definitions, I just wanted to check in to see if there were any questions, and
00:15:38.360 | if there was anything in the chat, or if anybody wanted to have any questions yet.
00:15:47.520 | I don't think so.
00:15:48.520 | I haven't seen anything, but Alan, this is going to be recorded and put out on Boglehead's
00:15:52.440 | YouTube also, correct?
00:15:54.160 | Okay.
00:15:55.160 | All right.
00:15:56.160 | Sounds good.
00:15:57.160 | It'll be on YouTube, Alan, or Adam.
00:16:01.200 | Okay.
00:16:02.200 | I've been called a lot worse things, Miriam, so, all right, Alan and Miriam, sounds good.
00:16:12.040 | Let's talk about divorce prevention.
00:16:17.280 | Here's just a fact.
00:16:19.800 | Divorce is one of the biggest financial challenges that you can face.
00:16:23.560 | In fact, I tell families all the time, even though that's a big part of my practice, collaborative
00:16:29.720 | divorce, even in the best of circumstances, even in collaborative divorce, a process I
00:16:34.000 | very much believe in, divorce is very tough, and if you can avoid it, you should.
00:16:41.360 | If that means by a therapist, by speaking together with a friend, with a minister, please
00:16:49.800 | do so, and really, divorce should be a last result, but prenuptials and post-nuptial agreements
00:16:59.400 | can help.
00:17:00.400 | We'll talk about some ways that they can help, but it's important to know, Alan cited a statistic.
00:17:09.240 | What I know or what I've heard is that nearly 50% of divorces or 50% of marriages end in
00:17:16.680 | divorce, and so here's a question, and again, feel free to put the answer down in the chat
00:17:24.280 | or feel free to raise your hand or just shout out the answer if you know it.
00:17:30.340 | What is one of the biggest causes of divorce?
00:17:38.580 | What is one of the biggest causes?
00:17:40.920 | Yeah, I think Jeannie and JC and Mohammed got it right away, money problems, money issues,
00:17:50.920 | finances, absolutely.
00:17:53.360 | Here's one thing about prenups and Monique as well.
00:17:57.920 | Prenups and post-nups require financial disclosure, so from the very beginning, you get to know
00:18:05.400 | each other's finances, so there's a bit of transparency that is actually a requirement
00:18:12.440 | for an enforceable prenup or post-nup, and both of you get the opportunity to see each
00:18:20.120 | other's finances, so that at least starts the base of an important conversation.
00:18:29.320 | Prenups and post-nups, in my opinion, should provide an opportunity for challenging but
00:18:35.560 | necessary conversations, and here's a few that I suggest, that I suggest that even before
00:18:42.000 | we start drafting anything, that my client engage with their spouse with my help as needed.
00:18:50.020 | What is each of your histories on saving, spending, and investing?
00:18:56.260 | What are your current views on these?
00:19:00.520 | During the marriage, to what extent do you want financial integration or financial independence,
00:19:08.320 | and the truth is that most people are on somewhat of a spectrum.
00:19:13.400 | Yes, there are some people who want total financial integration, and there are others
00:19:18.580 | who want total financial independence, but most people fall somewhere in the middle,
00:19:24.080 | and if you can have these conversations up front, especially before the marriage for
00:19:28.360 | a prenuptial agreement, you'll be setting yourself up for a stronger marriage, in my
00:19:35.420 | opinion, and by the way, if both of you say that really you don't want any financial independence
00:19:45.160 | whatsoever, that both of you are on the end of the spectrum where you both want total
00:19:50.440 | financial integration, you may not need a prenuptial agreement.
00:19:55.180 | There may not be things that you need to separate out, so just something to keep in mind.
00:20:02.080 | What does financial security mean for you?
00:20:06.520 | How can it be achieved?
00:20:11.120 | And one thing, and by the way, financial security means different things for different people.
00:20:19.200 | One of the things that I suggest, because obviously there's a lot of focus on alimony,
00:20:24.940 | how much is it going to be, is it being waived, what types of it, all these sorts of things
00:20:29.800 | that are on people's minds, but I like to generally ask first off, well, why?
00:20:35.680 | Why are you asking that?
00:20:36.800 | Because I'm truly curious, and usually that gets down to what is financial security for
00:20:42.520 | you?
00:20:43.520 | And here's just another tip, a clause that I do tend to put in prenups and postnups during
00:20:48.520 | the times where a client may be totally against any type of alimony.
00:20:56.880 | Something that I may suggest is to fund separate Roth IRAs and HSAs as an alimony alternative.
00:21:04.120 | If there's one spouse who just says, I want a total and absolute waiver.
00:21:07.840 | By the way, we're going to talk later about why that may not be the best idea to have
00:21:11.560 | an enforceable agreement, but if that's the case, here at least is an option that you
00:21:16.360 | all can consider.
00:21:19.880 | I want to talk about another way that a postnuptial agreement especially can serve as a divorce
00:21:27.080 | preventative.
00:21:29.640 | There are times, interestingly enough, I was actually listening earlier to one of the White
00:21:35.560 | Coat Investor podcasts, it happened soon after COVID, I think in May 2020, and they were
00:21:40.760 | talking about financial infidelity and somebody just had a terrible experience and they ended
00:21:48.800 | up getting divorced.
00:21:55.160 | I see cases like this a lot, where there is some sort of financial infidelity.
00:22:00.240 | What I mean by that is either gambling or having an affair and spending finances on
00:22:07.440 | that affair.
00:22:08.440 | It could be not just a financial infidelity, it could be physical, romantic infidelity
00:22:12.760 | as well, where people are just on the brink of getting divorced and they just can't think
00:22:20.160 | of any alternative.
00:22:23.120 | One thing that I suggest to them is that a postnuptial agreement could be an alternative
00:22:29.360 | to divorce.
00:22:30.360 | Here's why I say that.
00:22:33.240 | In many of those cases, especially with financial infidelity, one of the big issues is a total
00:22:41.200 | lack of financial trust.
00:22:43.160 | Again, as part of this, the process requires financial disclosure and it can help bring
00:22:49.520 | about a binding agreement that allows for financial security and it can put that in
00:22:55.440 | place and have it ready in the event that there is a divorce.
00:23:00.360 | I find that a lot of times, once these challenging conversations, and yeah, they are challenging
00:23:06.880 | conversations, once they're over, there can be a bit of relief on the shoulders of both
00:23:13.120 | of their clients and that may just open up the space for then the folks to engage in
00:23:20.320 | therapy or again, go to a rabbi or imam or priest or minister and see if they can repair
00:23:29.040 | their marriage.
00:23:30.040 | So, just an option that is different than divorce.
00:23:34.760 | Again, I do divorce, that's most of my practice actually, but I want to make sure that people
00:23:39.840 | know that post-nups can be an alternative.
00:23:44.400 | Okay, so we talked about divorce prevention.
00:23:49.920 | Let's talk about how the tools can be used for asset protection.
00:23:54.400 | Just a few concepts, this applies in Florida, but it applies, I understand, in most other
00:24:05.600 | jurisdictions as well.
00:24:06.880 | There's usually a division between premarital assets and marital assets and premarital assets
00:24:13.240 | are generally separate things that are purchased or acquired prior to the marriage.
00:24:19.600 | Marital assets, at least in Florida, and again, in many other jurisdictions as well, are assets
00:24:25.840 | that are purchased or acquired during the marriage, regardless of who purchased or acquired
00:24:32.280 | it, regardless of whose name is on titling.
00:24:35.360 | And so, these are the definitions that apply by default without an agreement.
00:24:42.000 | But some people run into issues and don't recognize that there can be a premarital asset
00:24:47.680 | that can be converted or even have a portion become a marital asset.
00:24:55.880 | And so, here's a couple examples, a home.
00:24:58.600 | Let's say somebody purchased a home before the marriage and titled it solely in their
00:25:02.920 | name and the mortgage was also solely in their name.
00:25:07.520 | Well, to the extent that they pay off the mortgage during the marriage, without a post-nuptial
00:25:15.080 | or pre-nuptial agreement, that creates a marital portion of a premarital home.
00:25:21.480 | And again, people are just shocked to hear this.
00:25:25.320 | When they come to me for divorce services, they think just because it was titled separately,
00:25:30.320 | it would be totally their premarital assets.
00:25:33.160 | That's just not the case.
00:25:35.560 | Similarly, without a pre-nuptial or post-nuptial agreement, if you have a brokerage account
00:25:41.040 | or 401(k) or really any account that was acquired and funded prior to the marriage, but you
00:25:50.080 | contribute to it during the marriage, then there will be at least a marital portion of
00:25:57.640 | that separate 401(k) or brokerage account or depending on your state, it could convert
00:26:03.920 | the entire account to a marital brokerage or 401(k) account.
00:26:13.800 | There are some other assets that may be worth protecting.
00:26:17.360 | For example, if you get an inheritance during the marriage, if it's kept separate and it's
00:26:27.440 | left alone, it would be considered separate property in most states.
00:26:33.080 | Similarly, a gift from family that you received during the marriage, if it was kept separate
00:26:39.680 | and not touched.
00:26:40.680 | And when I say kept separate, meaning like if it were funds in a separate account or
00:26:44.480 | separately titled and not touched, then it could be considered completely separate and
00:26:50.560 | you may not need a pre-nup or post-nuptial agreement.
00:26:54.260 | But there are things that can be done which could convert a premarital account or inheritance
00:27:02.240 | or gift to a marital inheritance or gift, so co-mingling.
00:27:09.320 | If you earn funds during the marriage and you place it in an account that includes an
00:27:16.080 | inheritance or includes funds from a family and you don't have a pre-nup or post-nup,
00:27:21.980 | that could convert a portion or the entire account to marital.
00:27:30.480 | Is that?
00:27:31.480 | Is that?
00:27:32.480 | Yeah, Alan.
00:27:33.480 | >> No, I'm curious.
00:27:35.060 | So if you have an account, you receive an inheritance, child receives an inheritance,
00:27:42.620 | they're married, but they have a pre-nup that specifies that that inheritance is left.
00:27:51.360 | It's left or intended for that one individual.
00:27:55.080 | If they subsequently co-mingle monies in that same account, is that still fully protective
00:28:00.320 | of at least the initial balance from that inheritance legally?
00:28:04.400 | >> Yeah, great, great question.
00:28:08.120 | So I was just talking about what happens if there's not a pre-nup or post-nup.
00:28:13.800 | Most pre-nuptial agreements or post-nuptial agreements will address that if funds go into
00:28:19.600 | the account, whether or not it would be those funds that were put into the account, whether
00:28:25.320 | the account itself would be affected.
00:28:28.140 | So that's definitely something to speak with a lawyer about that particular thing.
00:28:34.040 | Some agreements are pretty comprehensive and include not just titling and what goes in
00:28:42.060 | or out of that account, but also address whether income earned during the marriage, if earned
00:28:48.320 | by one person, whether all or a portion of that would be considered marital or non-marital.
00:28:53.360 | By default, without a pre-nuptial or post-nuptial agreement, it all would be considered marital.
00:28:57.360 | But some agreements say, look, if I have an income during the marriage and put it into
00:29:02.520 | an account that is titled separately in my name, that will remain separate.
00:29:08.480 | And something else, in the event that you didn't have a pre-nup or post-nup and you
00:29:19.360 | used separate funds for marital purposes, so let's say your grandma Sadie ended up leaving
00:29:29.840 | you a nice chunk of money during the marriage and you kept it separate, but you ended up
00:29:36.440 | using those funds to pay for your expenses throughout the marriage, that very act, depending
00:29:45.360 | on your state, without a pre-nuptial or post-nuptial agreement can convert a portion or the entire
00:29:51.920 | account into a marital account.
00:29:56.320 | So again, the pre-nup and post-nup can help prevent those types of issues from happening.
00:30:02.200 | So a lot of the folks that we see are folks who have extensive gifts from families or
00:30:07.440 | inheritance, or as we discussed before, pre-marital assets.
00:30:14.360 | A few other things about asset protection that pre-nups and post-nups can help.
00:30:21.480 | Private businesses, most people don't realize that without a pre-nup or a post-nup, a business
00:30:28.400 | that is established during the marriage is actually a marital asset.
00:30:33.360 | And even if you're a one-man shop and don't have an inventory things, maybe you're in
00:30:38.760 | the service industry, you may be wondering, well, how the heck could my business be considered
00:30:43.320 | an asset?
00:30:44.320 | How would it even be valued?
00:30:45.480 | Well, there's an entire industry of folks who value businesses of all kinds.
00:30:50.000 | There's even a designation of it, accreditation and business valuation.
00:30:57.300 | So that's something to keep in mind.
00:31:00.320 | Using a pre-nup or post-nup can prevent a business from being considered marital and
00:31:08.320 | keep it as separate.
00:31:10.200 | Similarly, and we kind of similar to the discussion on the houses or the accounts.
00:31:17.560 | If you have a business that is established before the marriage, but it grows during the
00:31:24.000 | marriage, and again, this depends on your jurisdiction and without a pre-nup or post-nuptial
00:31:29.080 | agreement, that growth can create a marital portion of your pre-marital business.
00:31:37.760 | So that's something to keep in mind, the pre-nup or post-nup can prevent that.
00:31:44.760 | Alan, I see your hands up.
00:31:49.280 | - Yeah, there's JC posted a question in the chat.
00:31:53.800 | If one party has an investment property acquired prior to the marriage and a brokerage account
00:31:59.600 | funded prior to the marriage, and during the marriage pays the mortgage and upkeep of the
00:32:04.760 | investment property only from that previously funded brokerage, does the other party have
00:32:09.720 | any ownership of the investment property?
00:32:12.600 | - Yeah, so that's a great question.
00:32:16.640 | And so I'm gonna give you the ultimate lawyer answer, which is, it depends.
00:32:23.600 | It depends totally on your jurisdiction, 'cause one state may treat that scenario very, very
00:32:30.840 | differently than any other state.
00:32:34.440 | But what I can tell you is in most states, you can have a pre-nuptial or post-nuptial
00:32:38.920 | agreement that addresses that very scenario.
00:32:41.800 | All right.
00:32:44.040 | But good question.
00:32:45.040 | I'm sorry I couldn't be any more specific than that.
00:32:51.800 | For retirement or deferred compensation, again, sometimes people think because they have income
00:33:00.960 | that's not part of their regular income, that that income doesn't necessarily count when,
00:33:10.160 | in the event that they go through divorce and they don't have a pre-nuptial agreement,
00:33:13.760 | and things such as alimony or child support are being calculated, deferred compensation
00:33:19.320 | and sometimes even retirement can count as income for those purposes.
00:33:26.400 | Pre-nup or post-nup can carve those out so that in the event of a divorce, those types
00:33:31.680 | of things may not be included.
00:33:35.200 | So we kind of talked about those situations where you may wanna protect assets as being
00:33:42.320 | separate rather than joint, but I think there are situations that are kind of the opposite
00:33:47.120 | of that, where you may wanna designate some assets where by default under your state,
00:33:52.840 | they would be considered separate.
00:33:54.600 | You both may decide that you want them counted as joint.
00:33:59.040 | And so an example of that might be because of, say, a credit issue or other issues.
00:34:13.620 | A couple before the marriage decides to purchase a house together, but only titles it in one
00:34:20.280 | person's name and the mortgage is only in one person's name, but during the marriage,
00:34:26.040 | they plan on moving together and for all intents and purposes, they just both consider it marital
00:34:31.240 | property even though it's titled in one person's name.
00:34:34.880 | A pre-nuptial or post-nuptial agreement can actually say, you know what, even though that's
00:34:39.860 | titled separately, in the event anything should happen, that should be considered a marital
00:34:45.080 | asset for all intents and purposes.
00:34:51.320 | I did wanna actually go back just for a moment on something that I mentioned in terms of
00:35:02.640 | brokerage accounts and commingling in 401(k)s, and this may be especially relevant to this
00:35:08.480 | group.
00:35:09.480 | You may have heard the concept of tax loss harvesting, and that's just an idea, a way
00:35:17.000 | of saving on taxes if the market goes down and let's say that VTSAX is worth less than
00:35:28.960 | what you initially purchased for.
00:35:30.560 | You may decide to sell VTSAX to get a loss and to be able to save on taxes, possibly
00:35:37.960 | for this year, possibly for future years, and then purchase something else that's kind
00:35:44.260 | of similar but not the same thing, let's say VOO, which is the S&P 500.
00:35:50.120 | So you sold VTSAX, which was the total stock market, and then you purchased VOO, which
00:35:56.520 | is the S&P 500, and a lot of folks know that those kind of go on similar trajectories,
00:36:04.100 | so you're basically having pretty much the same thing, but you're able to get some tax
00:36:08.520 | advantages for doing that.
00:36:10.360 | The thing to know, if you did that in a premarital taxable brokerage account, just that active
00:36:17.660 | trading could convert a portion of that premarital account into a marital account.
00:36:26.380 | So I just wanted to mention that, that just came to mind for those who might be engaging
00:36:31.000 | in tax loss harvesting.
00:36:34.060 | Yeah, Alan.
00:36:36.620 | Yeah, there's another question from Monique asking, "If someone inherits money from a
00:36:42.620 | parent who dies during a marriage, I presume they inherit, like the spouse dies during
00:36:48.020 | the marriage, how does that affect the assets and who do they belong to?"
00:36:53.420 | Yeah, another really great question, and I've got to put my phone down, so I'm going to
00:37:06.500 | put my lawyer hat on again, and say it really depends, it really depends which jurisdiction
00:37:15.860 | that you're in, and what I can tell you is that in my home state of Florida, what happens
00:37:27.100 | is that if it's kept in a separate account, and not touched, not actively traded, not
00:37:33.140 | really used for any purposes, just kind of allowed to sit and grow and kept separate,
00:37:38.980 | then it would remain separate property, you know, even if you don't have a prenup or post
00:37:43.580 | nuptial agreement, but as we discussed, at least in Florida, and I think in a lot of
00:37:48.300 | other jurisdictions as well, if you start doing things by putting it in different names
00:37:53.420 | or using it for different purposes or actively trading it, that could create portions that
00:37:58.340 | may be marital, and again, whether or not it's joint property depends on the state,
00:38:09.260 | in the state of Florida, if somebody receives an inheritance, and it's an inheritance just
00:38:17.580 | to that one particular person, then it's considered that person's separate property, if it's an
00:38:22.980 | inheritance or something to both of you, then it would be considered joint or marital property,
00:38:29.340 | but if somebody did something like put an inheritance into a joint account, or put the
00:38:34.180 | inheritance into an account owned by the other person, or put that inheritance in an account
00:38:39.100 | that is their own separate account, but it's generally used for marital purposes, then
00:38:43.580 | that can change the entire nature of that inheritance from premarital, or sorry, from
00:38:50.420 | non-marital to marital.
00:38:53.100 | So again, it really just depends on your jurisdiction.
00:38:59.580 | And so, this asset purchase together before the marriage, this can also be used in situation
00:39:06.900 | where there's longtime partners, and again, I've mostly seen this in same-sex couples,
00:39:15.900 | I believe it was 2015, where the right to marry was established throughout the United
00:39:22.620 | States, and so there are people who've been together for many, many years, but only married
00:39:31.140 | in 2015, and so without a prenup or postnuptial agreement, the court will only look at what
00:39:37.860 | happened during the marriage, but with that prenup or postnuptial agreement, you can count
00:39:43.780 | all of the time that you were together as marital time and marital property for all
00:39:49.340 | purposes, for calculating alimony in case that's an event, but also for establishing
00:39:54.780 | which property should be considered joint and which property should be considered separate.
00:39:59.580 | Again, depending on which jurisdiction that you're in.
00:40:05.380 | So we talked about divorce prevention, we talked about asset protection, there's also,
00:40:14.220 | briefly I'll touch on asset management.
00:40:17.780 | Without an agreement, your state may limit how you manage your assets.
00:40:24.140 | Maybe that you need to title things a certain way, or that you can only have certain beneficiary
00:40:29.580 | designations on different types of policies or different types of accounts, and many of
00:40:35.620 | these states allow you to change that if you have a prenuptial agreement or a postnuptial
00:40:42.420 | agreement that says so, and I'm going to get a little further into this a little bit more
00:40:47.260 | in depth when we talk about inheritance planning, but I just wanted to mention that these agreements
00:40:55.180 | can help you title things or designate beneficiaries in a way that you would prefer that might
00:41:01.500 | not otherwise be allowed in your particular state.
00:41:06.300 | So now let's talk about debt responsibilities.
00:41:11.820 | So here's something to know, in many states, without an agreement, any debt incurred during
00:41:21.500 | the marriage is the responsibility of both spouses, and this is regardless of who, excuse
00:41:27.780 | me, who incurred the debt, who knew about the debt, whether it was in joint names or
00:41:34.180 | separate names, it doesn't matter if a debt was incurred in many states, then both of
00:41:40.220 | you are responsible for that debt.
00:41:43.880 | So prenups and postnups allow you to address a few different things.
00:41:49.660 | It allows you to address, first off, what happens to debts associated with premarital
00:41:55.180 | property, and a lot of people think that, hey, if it's premarital property and we take
00:42:01.060 | out a debt, so for example, if there's a premarital house and you take out a home equity line
00:42:05.860 | of credit or a second mortgage, that because it is associated with the premarital property,
00:42:12.260 | that it should be considered a premarital or separate debt as well.
00:42:18.300 | And so a prenuptial or postnuptial agreement will allow you to designate that.
00:42:23.660 | Debts associated with private businesses, similarly, if somebody has a business that
00:42:31.460 | they are owning and managing during a marriage, the debt incurred in that, even if it was
00:42:36.740 | a premarital business, the debt could be considered marital.
00:42:41.020 | And so a prenup or postnup allows you to designate that as solely that one spouse's responsibility,
00:42:47.260 | whoever is associated with that business.
00:42:51.860 | Agreements can also include any knowledge or notification requirements, and I see this
00:42:55.900 | quite common, that the only way that a debt could be considered marital or joint during
00:43:02.740 | the marriage is either if both people are knowledgeable about it or both people consent
00:43:08.180 | to it, or there's at least some sort of notification that the debt was being incurred.
00:43:14.740 | Again, without these agreements, it doesn't matter if you knew about it or not, if it
00:43:18.220 | was incurred during the marriage, in a lot of states, it would be considered marital
00:43:22.820 | debt.
00:43:24.420 | And then also debts incurred together prior to the marriage, you know, depending on your
00:43:32.500 | state.
00:43:33.500 | For example, you know, I talked about my, you know, I got into this whole thing in the
00:43:37.620 | first place because of my own student loans, student loans can be a big part of people's
00:43:42.980 | debt base.
00:43:43.980 | And so a prenup or postnup can help specify in your particular state, whether those debts
00:43:51.220 | should be considered marital or premarital, or if one spouse pays the other spouse's debt
00:43:56.660 | off, whether there should be some sort of credit for that or not.
00:44:04.220 | Now let's talk about inheritance planning.
00:44:10.580 | So with an agreement, your state may limit how you distribute your assets when you pass.
00:44:18.540 | So for example, in my home state of Florida, you are required to pass at least a certain
00:44:27.340 | percentage of your estate, and this is calculated in ways that are too complicated to address
00:44:34.700 | right now.
00:44:35.700 | But you're required to provide a certain percentage of your estate to your spouse and provide
00:44:45.100 | certain other rights to your spouse.
00:44:48.740 | Even if you write them out of your will, it doesn't matter that writing out would be considered
00:44:54.740 | null and void and your estate when you did pass would still have to provide certain minimum
00:45:00.900 | things to your spouse.
00:45:01.900 | And you may think to yourself, well, yeah, that makes sense.
00:45:04.660 | You don't want to write your spouse out of your will.
00:45:07.740 | And that offers a lot of protections.
00:45:09.420 | And for the most part, I absolutely agree with you in most situations.
00:45:14.180 | But there are certain situations where that may not make certain sense.
00:45:19.260 | And let me give you an example.
00:45:21.340 | I had a client who was in his late 70s.
00:45:26.940 | He actually had married his spouse 25 years ago.
00:45:33.500 | So it's a long-term marriage, but it was also a second marriage for both of them.
00:45:40.740 | And my client was independently financially secure and his wife was also independently
00:45:47.300 | financially secure.
00:45:49.900 | But you know who was not independently financially secure?
00:45:53.980 | Each of their children, their adult children, were not independently financially secure.
00:46:00.340 | And so what they decided upon is that neither of them really needed those minimum requirements
00:46:06.760 | under Florida law.
00:46:08.820 | And so they both decided that they wanted their inheritances not to go to each other,
00:46:14.100 | but to their respective children.
00:46:17.820 | And with a prenup or postnuptial agreement, you can waive those requirements that are
00:46:22.940 | otherwise binding under Florida law.
00:46:25.340 | And again, you may be able to do this in your jurisdiction as well and provide things the
00:46:32.620 | way that you want for inheritance planning purposes.
00:46:36.140 | Now keep in mind, this agreement is not going to address the specifics about what happens
00:46:41.140 | to your inheritance.
00:46:42.660 | You still need Will's Trust and other documents for that, but at least this can waive the
00:46:48.840 | rights or waive the requirements under your specific jurisdiction's laws.
00:46:54.820 | So with an agreement, you can decide to what extent your state's limitations may make sense
00:47:00.780 | or not, given your particular circumstances, whether and how to protect children from a
00:47:06.500 | prior marriage or relationship.
00:47:08.980 | And also, and this may be a good tip, if you are having a prenup or postnup, whether your
00:47:14.140 | agreement should include a life insurance requirement, and again, it's going to that
00:47:18.100 | interest of financial security, and this may be a way to enhance the financial security
00:47:24.340 | for all involved by including life insurance.
00:47:27.700 | Alan?
00:47:28.700 | >> Yes, regarding the last comment you made about the states, I saw a video once that
00:47:34.860 | was interesting, a comment whereby he said that every marriage has a prenup, either the
00:47:40.900 | one that you craft yourself as a partner or the one that the state crafts for you.
00:47:46.500 | >> Yeah, yeah, no, I think that's very well put.
00:47:51.700 | Thank you so much, Alan, for sharing that, and it's true, whether you like it or not,
00:47:57.620 | there's a default, and in essence, your state's default law can be considered your prenup,
00:48:05.060 | and part of the question may be do you want to be a little more proactive in making your
00:48:08.740 | own prenup rather than the default law, so thank you for sharing.
00:48:15.940 | So let's talk a moment for who would most benefit from a prenup or postnup.
00:48:21.980 | So first off, people who are already established or older couples, again, who are financially
00:48:28.380 | independent and indultant are not necessarily relying on the assets or income from the other
00:48:35.780 | spouse.
00:48:37.060 | People who are in second marriages or blended family, especially those with children or
00:48:41.780 | adult children, I had a case where I represented a client in his collaborative divorce, and
00:48:51.540 | then afterwards, he ended up getting engaged.
00:48:59.980 | There wasn't any affair during the marriage or anything like that, it's just that's kind
00:49:03.380 | of how things progress, but he had an adult son who had severe anxiety disorder, and the
00:49:11.500 | son was really, really worried about what would happen to not just the father, but also
00:49:21.260 | the son himself in the event things kind of went sideways, and so in this situation, I
00:49:29.860 | represented this former collaborative divorce client as a new prenuptial client to help
00:49:35.580 | create a prenuptial agreement to, if nothing else, soothe the anxieties of the son and
00:49:42.260 | to help make my client's life a whole lot easier.
00:49:47.240 | These owners, we discussed the protections that private businesses can have with a prenup
00:49:53.480 | or postnuptial agreement, those with large inheritances, again, there's different unique
00:49:58.480 | reasons why LGBTQ+ families, that's lesbian, gay, bisexual, transgender, or queer and other
00:50:04.280 | families who may need a prenup or postnup, and going to Alan's point, people want to
00:50:11.960 | make their own rules and not just go by the "default" prenup.
00:50:18.280 | There's also, I think more and more these days, a healthy skepticism towards people
00:50:23.880 | in black robes and those otherwise in authority, and so rather than leave it up to them, people
00:50:28.320 | want to make their own rules, and similarly, there are those who want to put a premium
00:50:33.800 | on privacy, and so if you can have some touchy issues addressed ahead of time and make it
00:50:43.900 | less likely to have to have these issues resolved in court in the future, you're going to have
00:50:49.040 | a lot more privacy protections.
00:50:51.920 | Okay, all right, so here, this next topic is on how to make your prenups and postnups
00:51:05.240 | more binding, and just a tip, one thing to know, prenups and postnups are found unenforceable
00:51:13.360 | all of the time when not done properly, and one of the things that I like to tell clients
00:51:21.980 | is don't think of a prenup or postnup as a document, that's how people naturally think
00:51:30.480 | about it, it's agreement, it's just a document.
00:51:33.040 | Don't think about it as a document, because the document may not be worth the paper it's
00:51:37.000 | written on, if not done properly, think of it as a process, make sure that you are meeting
00:51:43.560 | every step of the process, and I'll talk about some particular steps in a moment.
00:51:54.000 | So if you have a prenuptial agreement, I advise clients to begin the process four to six months
00:52:02.560 | prior to the wedding, and the reason that I say this is a lot of prenups or postnups
00:52:08.360 | get thrown out because a court finds that it was negotiated and/or executed way too
00:52:15.480 | close to the wedding, and that leads to the idea that it was signed under duress or without
00:52:24.320 | fully understanding each of your rights, and so if you are at the point where you realize
00:52:31.600 | that you do need a prenup or postnup, but you're getting close to the wedding, one thing
00:52:36.160 | that I tell clients all the time is that a postnuptial agreement may be a much better
00:52:40.840 | idea and may be much more binding than going through with a prenup, because a lot of times
00:52:47.720 | people feel in a rush, they're like, "Oh, I need to get this done before the marriage,"
00:52:53.480 | you don't need to get it done before the marriage, you can wait, and in fact, it may be more
00:52:57.840 | binding if you do it.
00:53:00.200 | So let's talk just for a moment, well, what if you don't wait?
00:53:05.920 | And what if it is too close to the wedding?
00:53:08.260 | Is there something that you do afterwards to then make it binding?
00:53:13.160 | And yeah, there is something that you can do, again, it's jurisdiction dependent, but
00:53:18.440 | I think in many jurisdictions, what you can do is sign something known as a reaffirmation
00:53:25.720 | after the wedding is over, after the honeymoon is over, after you've had a little time to
00:53:29.960 | think, and the reaffirmation generally says something like, "We've now had sufficient
00:53:35.200 | amount of time to think it through, and we reaffirm that we want to be bound by all of
00:53:41.760 | the terms of the prenuptial agreement," and generally that should be done using the same
00:53:49.880 | thing to, the same way to execute that would be the same way that you executed a prenup
00:53:55.080 | or postnup, and we'll talk about how a prenup or postnup should be executed, at least in
00:54:02.480 | many jurisdictions.
00:54:03.480 | So, Alan, I see your hands up.
00:54:05.920 | Yeah, sorry to interrupt again.
00:54:07.960 | If somebody is in fact signing a prenup, yeah, somebody in a couple decides they do want
00:54:13.120 | to proceed with the prenup, but it's close to the time of the wedding, is there any utility
00:54:17.040 | in having it assigned with a video affirmation at that time, showing that they are not, neither
00:54:23.480 | party is acting under duress?
00:54:25.500 | I saw that suggested in an actual Boglehead's thread that's currently active.
00:54:32.480 | So, you are just a few points ahead of me, and so I will, I promise you I will address
00:54:40.880 | that, Alan.
00:54:41.880 | Great, great question.
00:54:44.000 | So just one other thing on, actually there's a few different points here, gives both spouses
00:54:53.520 | a reason to want it to be binding.
00:54:56.040 | Again, if there's a situation where one spouse is insistent on no alimony, is insistent on
00:55:05.400 | separate all, and especially if they're the higher earning spouse, of wanting everything
00:55:11.440 | that is earned during the marriage to be their separate property, to have essentially almost
00:55:17.220 | all the assets be their own separate assets, then that causes a few different problems.
00:55:23.920 | Number one, a court may find that it is unenforceable, especially if it goes against the public policy
00:55:31.680 | of your particular state, and let me give you an example in the state of Florida, it
00:55:36.040 | would be against the public policy if due to a prenuptial agreement, one spouse were
00:55:41.320 | to end up with all of the assets and with all of the income, and the other spouse were
00:55:46.200 | to end up on government assistance or welfare.
00:55:50.320 | The courts would essentially throw out the prenuptial agreement, and they would say,
00:55:57.240 | all right, it's better that you pay rather than the state pay and order alimony even
00:56:02.240 | though it was waived.
00:56:03.240 | So that's one thing, but another thing as well, a practical point is you want to give
00:56:11.120 | your spouse a reason not to fight it in the event that it needs to be enforced in the
00:56:16.920 | future.
00:56:17.920 | And so a tip for how to make that happen is to provide for some amount of immediate payout
00:56:25.880 | of lump sum alimony, or for some immediate division of property that goes to them.
00:56:33.920 | And once that is done, in many states, that will basically be seen as an acceptance of
00:56:41.600 | the terms of the agreement, another reaffirmation of the terms of the agreement, and prevent
00:56:46.720 | them from later on trying to get it thrown out.
00:56:50.000 | So you want to give your fiance or spouse a reason for it to be binding.
00:56:57.560 | Don't let it be a totally one-sided agreement.
00:57:00.440 | I also think that's just a terrible way to start a marriage if it's completely one-sided.
00:57:04.960 | Similarly, don't expect a take it or leave it agreement.
00:57:11.960 | In fact, when I'm reviewing agreements for a client that their spouse's attorney has
00:57:18.520 | received, has provided them agreement, or their fiance's attorney has provided with
00:57:22.960 | them agreement, the first thing I tell them is these agreements are rarely, if ever, take
00:57:28.400 | it or leave it, and your attorney probably told your fiance to expect some suggested
00:57:34.400 | changes.
00:57:36.840 | And I don't want you to be afraid if you receive a prenuptial agreement to say, to think to
00:57:42.480 | yourself, "Well, it's in writing, so I have to sign it."
00:57:44.800 | You don't have to sign it as is.
00:57:47.000 | It can be negotiated.
00:57:48.720 | In fact, it should be negotiated.
00:57:50.120 | In fact, the spouse who wants it done in the first place should want it to be negotiated
00:57:55.760 | because if it's negotiated, it shows that it was less likely to have been done by duress.
00:58:02.120 | And so it makes it less likely to be thrown out.
00:58:08.880 | Another way to make it binding is to hire a separate lawyer for each fiance or each
00:58:14.520 | spouse.
00:58:16.720 | I know there are jurisdictions that may allow one attorney to write a prenuptial or post-nuptial
00:58:24.800 | agreement for both spouses.
00:58:25.800 | I just don't think that's a great idea.
00:58:28.360 | In fact, there are states, including my own state of Florida, which say that that is strictly
00:58:34.120 | prohibited for one attorney to do that.
00:58:38.080 | And the reasoning behind that is because they want to make sure that each spouse gets independent
00:58:44.280 | legal advice and make sure that each spouse or fiance's interests are being independently
00:58:52.480 | looked after and represented.
00:58:55.880 | And you just can't do that with one single lawyer.
00:59:01.080 | But here's also one thing as well.
00:59:02.980 | You may have a lawyer who is used to doing wills, trusts, and other estate planning,
00:59:09.480 | and you may be used to doing documents with them together.
00:59:14.360 | And so there are many estate planning lawyers who will do wills for both spouses or do a
00:59:18.080 | trust for both spouses.
00:59:20.240 | And that's great, and that works for those types of documents.
00:59:24.080 | But then sometimes the client will ask that same lawyer to then do a prenup or post-nup,
00:59:31.120 | which as we've seen, does have some touches on estate planning, on inheritance planning.
00:59:38.300 | But especially if it's an attorney who doesn't know what they're doing and says yes, if it's
00:59:46.820 | one attorney who's doing that for both spouses, depending on your jurisdiction, it just may
00:59:51.320 | de facto be thrown out without question if one attorney tried to do it for both.
00:59:58.740 | So it's just something to keep in mind.
01:00:05.640 | So you must have full financial disclosure in most jurisdictions for it to be binding.
01:00:11.340 | So that generally means you must totally disclose your income, your expenses, your assets, and
01:00:18.220 | your debts.
01:00:19.360 | And you also generally must disclose, again, depending on your jurisdiction, major financial
01:00:25.820 | documents like tax returns, pay stubs, statements for brokerage accounts, 401(k)s, HSAs, IRAs.
01:00:35.280 | Pretty much all of it.
01:00:37.260 | And so it is a total pain in the ass to go through all of that financial disclosure.
01:00:41.860 | I will admit that up front, but again, what I generally suggest is that it can be used
01:00:47.460 | as an opportunity to open up the conversation, to get to know each other's finances and to
01:00:52.300 | talk about how you want to plan for each other.
01:00:55.780 | And something else as well, this may not apply to Bobo Heads as much, but if you are dependent
01:01:02.540 | on a financial advisor, for example, then one good thing about having a financial advisor
01:01:08.420 | is that they may be able to disclose or provide a lot of those documents so that you don't
01:01:12.900 | have to.
01:01:13.900 | Separately, some people are more dependent on a CPA, especially if you've got a private
01:01:17.700 | business.
01:01:18.800 | So your attorney may be able to communicate with that CPA and just get a bunch of the
01:01:23.180 | documents from them to lessen the stress on you as you're trying to put all of this together.
01:01:30.860 | There's something else, again, I very much believe in a collaborative process and specifically
01:01:41.420 | an interdisciplinary collaborative process.
01:01:43.860 | And that means using experts, not just from the legal field, but also from other fields
01:01:50.060 | that may be helpful.
01:01:51.380 | And when doing a prenup or postnup, it actually is helpful to have somebody who has a financial
01:01:55.820 | background or a mental health background.
01:01:58.780 | So in this interdisciplinary collaborative team approach to prenups and postnups, each
01:02:04.860 | spouse has their own separate collaborative lawyer who can't be hired to litigate in the
01:02:10.900 | future in case something happens to each other.
01:02:13.180 | So they don't have an incentive to put all these things in play in the hopes that in
01:02:18.260 | the future, they're going to create a lot of issues, a lot of problems for the clients
01:02:22.140 | then be able to make a lot of money in trial work later on.
01:02:27.860 | So there's that, there's oftentimes the use of a financial neutral for financial education
01:02:35.020 | and to ensure and document financial disclosure.
01:02:38.980 | Financial neutral is usually a collaboratively trained CPA or sometimes a financial advisor.
01:02:49.380 | And again, their purpose is to help level the playing field in many relationships, both
01:02:56.980 | before marriage and during a marriage.
01:02:59.060 | There's oftentimes a big gap between the understanding of finances from one spouse to the other.
01:03:06.180 | So this person can help level the playing field and also help to make your agreement
01:03:12.220 | more enforceable because they can document all of the financial disclosure and they can
01:03:17.420 | document all of the financial education and show that both were actively participating
01:03:22.380 | in the prenuptial or post-nuptial drafting process.
01:03:27.340 | And finally, like this, the use of a neutral facilitator.
01:03:33.620 | And in your jurisdiction, it's called different things.
01:03:36.300 | It's sometimes called the collaborative coach or neutral mental health professional.
01:03:41.140 | It's somebody who is a licensed mental health professional, although they're not actually
01:03:45.020 | doing therapy as part of the process.
01:03:47.900 | They're there to help ensure that both fiancees or spouses voices are heard during the prenuptial
01:03:53.980 | and post-nuptial process.
01:03:56.060 | And from an enforcement perspective, they can help document that there was no duress
01:04:02.300 | as part of it and both people were actively participating.
01:04:05.740 | I do see JC has a question in the chat.
01:04:15.100 | How much do these sorts of collaborative processes cost?
01:04:18.020 | All right.
01:04:19.020 | Again, everybody can now repeat it with me.
01:04:21.620 | Use the lawyer answer.
01:04:23.300 | It depends.
01:04:24.300 | Yep.
01:04:25.300 | That's right.
01:04:26.300 | It depends.
01:04:27.300 | It depends very widely where you are.
01:04:30.860 | It's going to be a lot more expensive to do this in a higher cost of living area than
01:04:38.420 | a lower cost of living area because lawyers tend to charge a lot more in those higher
01:04:46.060 | costs and opposite on those lower costs.
01:04:50.260 | So it really just depends.
01:04:53.740 | I can say that it probably will cost you a bit more than having the lawyers do it up
01:04:59.700 | front and just having lawyers do it because you are paying not just for the lawyers, but
01:05:06.020 | for the financial neutrals involvement and the neutral facilitators involvement as well.
01:05:13.420 | So it could cost more up front, but it could save you a whole lot of money down the line
01:05:19.900 | and it could save your marriage as well.
01:05:22.240 | So just something to keep in mind.
01:05:25.700 | Allen.
01:05:26.700 | Yes.
01:05:27.700 | Are you inferring that most collaborative lawyers doing prenups will advocate for the
01:05:35.980 | use of a financial neutral and a facilitator versus just a couple of lawyers basically
01:05:43.700 | representing each of the potential clients or spouses?
01:05:48.700 | Yeah.
01:05:50.020 | Great question.
01:05:51.260 | So typically they will maybe not advocate, but provide the option or maybe depending
01:05:56.780 | on the circumstances, they may advocate strongly, especially if there are a lot of assets and
01:06:06.380 | there's a very clear gap in knowledge or some other issues as well.
01:06:13.940 | Or it may be that it's done not in an interdisciplinary collaborative team, but just through the
01:06:19.140 | collaborative lawyer.
01:06:20.140 | So that's an option as well.
01:06:21.700 | I do it both ways, but I do make sure to provide those options and some take me up on it.
01:06:31.060 | Some don't, but especially when it's a lot of money that we're dealing with.
01:06:41.820 | And so a lot of protections and also big gaps in education, I then really highly recommend
01:06:50.260 | it.
01:06:51.260 | Especially it's up to the clients.
01:06:52.260 | Yeah.
01:06:53.260 | I would think in some cases the collaborative approach might be cheaper because it's not
01:06:58.100 | basically confrontational that you might have more of a straightforward give and take, whereas
01:07:05.140 | if you have two typical lawyers who are very confrontational in their style, they could
01:07:10.020 | drive the cost up in the time spent negotiating back and forth ad nauseum.
01:07:17.540 | You are absolutely correct.
01:07:19.060 | And actually I'm going to touch on that a little bit more in just a moment, talking
01:07:24.180 | about the process.
01:07:26.060 | But that's absolutely correct.
01:07:27.900 | And I'll do a little bit of a comparison in a collaborative approach as compared to maybe
01:07:34.860 | the traditional approach to pre-nuptial and post-nuptial agreements.
01:07:40.260 | And then actually, Alan, to something that you said earlier, one of the things that we
01:07:45.860 | strongly recommend to help it be more likely to be binding is to have a signing meeting
01:07:52.620 | in person or possibly via video conferencing.
01:07:56.700 | It really depends on your state.
01:07:57.940 | Some states allow it to be done by video conferencing.
01:08:02.660 | Some states would require a wet signature or physical signature with ink.
01:08:08.700 | But either way, I would suggest that it be recorded.
01:08:13.260 | Some lawyers go far as saying it should not only be recorded, but it also should be transcribed
01:08:18.420 | by a court reporter.
01:08:22.740 | I think that may be a little bit overkill, so long as it's being recorded by video.
01:08:31.100 | And during this, it's not just a recording of the signing.
01:08:35.700 | There's usually some things that happen beforehand.
01:08:41.560 | So typically, we'll have a notary or somebody else who is able to put the clients under
01:08:48.100 | oath, put them under oath.
01:08:50.220 | And a lot of times, it'll sound just like you hear on Judge Judy or the People's Court.
01:08:55.300 | You swear to tell the truth, the whole truth, and nothing but the truth.
01:08:58.140 | And depending on your jurisdiction, so help you God.
01:09:05.580 | And then there will oftentimes be some questions asked of the clients.
01:09:11.760 | And if you've got a good lawyer, they'll prepare you ahead of time for all these questions.
01:09:17.040 | But there'll be things like, first off, have you read the agreement?
01:09:22.440 | Okay, good.
01:09:24.400 | Do you understand the agreement?
01:09:26.820 | Have you had the opportunity to review the agreement with your lawyer?
01:09:30.680 | Have all of your questions been answered on the agreement?
01:09:34.680 | And oh, by the way, did you have anything to drink this morning?
01:09:38.840 | Did you have anything or do anything which would impair your judgment or impair your
01:09:43.360 | ability to enter into a legally enforceable agreement?
01:09:48.600 | And so all of that goes towards in the future.
01:09:52.240 | If there are any of these questions, are you entering, are you signing this agreement freely
01:09:55.800 | and voluntarily with the intent to be bound by it?
01:09:58.880 | All of these questions go towards the binding nature.
01:10:02.360 | So going back, Alan, to the question that you asked earlier, what if it's like really
01:10:09.200 | close to the wedding and you didn't start the four to six months, but you had it, you
01:10:16.640 | know, recorded it and you had all these questions answered?
01:10:20.520 | I would still, even if you did that, I would still recommend to my clients to get a reaffirmation
01:10:30.600 | afterwards after the wedding, after, you know, after time has gone by and after they've had
01:10:36.880 | time to reflect on it, after the craziness of the wedding is over with, to just reaffirm
01:10:43.760 | that they still want to be bound by that prenuptial agreement, just to be safe.
01:10:50.920 | It may be binding, but if people are going through the trouble of getting it done and
01:10:55.320 | through the expense of getting it done, you really want to make sure it's binding.
01:10:58.440 | A few, a few other suggestions, place the fully executed agreement, financial disclosure
01:11:12.080 | and the recording of the signing meeting in a safety deposit box or other safe place.
01:11:20.600 | Just in case you need it in the future, you know, a lot of people don't do this and then
01:11:27.520 | they hope that their attorney keeps a copy and most attorneys will keep a copy, but things
01:11:33.960 | happened.
01:11:34.960 | You know, before this recording, we were talking about hurricanes, you know, there are some
01:11:40.760 | people who are affected by the wildfires out in California.
01:11:46.200 | There may be old agreements that got destroyed because of natural disasters or, you know,
01:11:54.240 | even if they're done electronically, glitches happen to systems.
01:11:59.120 | So I would make sure to keep a printed copy, digital copy, all of your financial disclosure,
01:12:05.760 | all of your recordings and put it in a safety deposit box or something someplace else that's
01:12:10.920 | really safe and someplace where you can access it in case you ever needed it.
01:12:19.400 | Something else I like to do in pre-nups and post-nups is include a clause for periodically
01:12:25.840 | reviewing it, periodically revisiting the agreement to see if changes are needed.
01:12:35.020 | Circumstances change and it may be that what you thought was important before the marriage
01:12:41.920 | turns out 10 years later is not so important, or maybe that you've got a different view
01:12:46.840 | on how you want to do things.
01:12:48.680 | So I'll oftentimes put a clause that if one of the spouses wants, you know, and sometimes
01:12:53.880 | it's, there's a time, you know, every five years or every 10 years, sometimes it's, you
01:12:59.680 | know, some sort of incident that happens.
01:13:04.560 | So, you know, once a child is born or once a wedding happens or, you know, any different
01:13:10.800 | things you may want to revisit it and see if your priorities are the same as when the
01:13:15.800 | agreement was initially signed.
01:13:20.200 | In addition, if you move to a different jurisdiction, if you're in one of those jurisdictions that
01:13:31.840 | we discussed before have signed a version of the UPAA, the Uniform Premarital Agreement
01:13:37.840 | Act, then in all likelihood that agreement will be honored.
01:13:43.600 | If you're not in one of those jurisdictions, it may or may not be honored.
01:13:49.740 | But either way, regardless of your, regardless if you move to another UPAA jurisdiction,
01:13:58.600 | I would still have it reviewed by a local lawyer because even if it's honored, it may
01:14:03.120 | be interpreted very differently than you both had intended and very differently than how
01:14:09.100 | the lawyers explained under the law of the state where you initially signed it and had
01:14:16.920 | it developed.
01:14:17.920 | Now, in my agreements, I typically put in there that the agreement was signed in Florida,
01:14:26.620 | that in the event of any issue in the future, that it will be legally binding and it will
01:14:32.100 | be interpreted regardless of where the clients live by the laws and by the interpretation
01:14:38.620 | of the state of Florida.
01:14:41.060 | The only challenge with something like that is that if you go to some place and ultimately
01:14:45.180 | you need it, you need to enforce it in a different state, they may not know what that means or
01:14:50.740 | they may not know how to interpret it.
01:14:53.060 | So one of a few things will happen, either they totally ignore it and they just interpret
01:14:57.180 | it by whatever the state that you're in, which may or may not be appealable error in your
01:15:06.220 | jurisdiction, or they, you know, alternatively, you can bring in an expert, somebody from
01:15:16.380 | Florida who knows how it would be interpreted in Florida, but that could create an additional
01:15:20.620 | expense later down the line.
01:15:22.580 | So you may decide that you want to just review it with a local lawyer and see if there are
01:15:27.300 | any changes that need to be made for that new jurisdiction.
01:15:32.340 | Okay, so now we go to the next, and this is heading towards the final agenda item of the
01:15:44.460 | process.
01:15:45.460 | Can the prenup or post-snuff process suck a little less?
01:15:50.340 | And I hope to tell you, yes, it can.
01:15:52.900 | Again, there are going to be challenging conversations.
01:15:56.500 | So I don't want to make, even if I use terms like collaborative, collaborative doesn't
01:16:01.900 | mean easy.
01:16:03.580 | Collaborative doesn't mean wonderful.
01:16:05.240 | It just is a different method of going about things where your professionals especially
01:16:13.140 | have a very different attitude than what traditional family law professionals may have in different
01:16:19.260 | training as well.
01:16:21.080 | So kind of going to what Alan was saying, here's one suggestion.
01:16:29.940 | Don't hire divorce trial lawyers to draft your prenuptial agreement.
01:16:35.860 | Hire collaborative family lawyers, and this is for a very simple, practical reason.
01:16:42.580 | Trial lawyers are used to working within an adversarial system, and again, as we were
01:16:48.460 | discussing before, it is a system that by its very nature, by its very design pits parent
01:16:56.260 | versus parent, spouse versus spouse.
01:16:59.420 | This is what the trial lawyers are used to working in, and by the way, it's well-intended.
01:17:04.900 | It's not like these are bad books.
01:17:08.540 | There's actually a reason why it's an adversarial system, and it goes way back into ancient
01:17:13.980 | history.
01:17:14.980 | The idea that in order to find the truth of something, you needed to hear all different
01:17:20.420 | perspectives, and so you'd hear, if you hear the husband's perspective, then you hear the
01:17:26.780 | wife's perspective, well, then you'll come to the ultimate truth, and the idea behind
01:17:31.060 | that is the judge will come to the ultimate truth.
01:17:33.900 | But how it's done in practice is oftentimes it's, all right, let me tell you why I'm right.
01:17:40.140 | For example, let me tell you why I'm the most wonderful father in the world, and why there
01:17:45.420 | should be no alimony, and let me also tell you why they're the worst possible parent
01:17:50.980 | in the world, and why even if they had alimony, they would frivolously spend it because that's
01:17:56.900 | the type of person they are.
01:17:58.500 | So that's kind of the adversarial nature of trial work and of the type of system within
01:18:07.700 | which trial lawyers are used to working.
01:18:11.380 | In contrast, collaborative family lawyers are used to helping people reach agreements
01:18:15.800 | without the threat of trial.
01:18:19.220 | In fact, once what's known as a collaborative participation agreement is signed, those collaborative
01:18:25.500 | family lawyers are prohibited, depending on your state, either by law or by contract,
01:18:31.820 | from ever engaging again in any type of trial work involving the client.
01:18:37.880 | So their incentive is to help the clients reach an agreement, because in the divorce
01:18:43.700 | process, if they don't reach an agreement, and one of the spouses decide to then go to
01:18:49.580 | trial, then both of the collaborative lawyers are fired.
01:18:53.380 | And yeah, we may be lawyers, but we're also people, and we don't like to be fired.
01:18:57.260 | So we're used to helping people reach agreements without the threat of trial.
01:19:01.660 | So I used to be a member of the board of the International Academy of Collaborative Professionals.
01:19:12.100 | There's pretty much, there are collaborative lawyers in pretty much all jurisdictions.
01:19:15.980 | You can find a collaborative lawyer near you by going to collaborativepractice.com, which
01:19:22.100 | is the website of the International Academy of Collaborative Professionals.
01:19:26.220 | And similarly, within the collaborative method, this will oftentimes work with an interdisciplinary
01:19:33.300 | team.
01:19:34.300 | And let me tell you, when you bring on a mental health professional to deal with these tough
01:19:40.300 | conversations, this is true in divorce, but this is also very true when dealing with those
01:19:45.020 | challenging financial conversations with prenups or post-nups.
01:19:49.300 | It makes the process so much more palatable, I would even say so much easier to go through
01:19:58.300 | from the client perspective, I have to say from the lawyer perspective as well.
01:20:04.860 | And as Alan was alluding to, it also makes it a lot less likely that there's going to
01:20:11.940 | be so much back and forth and so much fighting, and that can actually save you some money
01:20:17.980 | and also save you some frustration.
01:20:20.500 | But these agreements, rather than being done the traditional way, which is one person writes
01:20:25.020 | up a prenuptial agreement oftentimes that is so one-sided and then sends it to the other
01:20:30.140 | person, their attorney, and their attorney then creates a whole bunch of red lines, which
01:20:34.020 | then may be one-sided to the other spouse, and they keep on going back and forth, and
01:20:38.380 | that can be quite an expense.
01:20:41.300 | This process oftentimes, it's done through a series of meetings so the clients can have
01:20:46.460 | open discussions about what exactly it is they're looking to do, and both of their voices
01:20:50.740 | can be heard.
01:20:54.060 | And so, again, I just personally think it's a better process.
01:21:02.300 | Just a few other items.
01:21:04.860 | Focus on interests rather than positions.
01:21:09.180 | Listen to your fiance's spouse's concerns.
01:21:10.580 | And by the way, this is coming right out of the Harvard Negotiation Playbook.
01:21:15.340 | You may have heard of Getting to Yes, and the difference between interests and positions.
01:21:23.820 | Very briefly, positions are what you're looking for.
01:21:28.500 | Positions are why you're looking for those things.
01:21:33.140 | So if you have a fiance that says, "Look, if something happens, I just want $10,000
01:21:40.860 | a month in alimony," that's a position.
01:21:45.300 | And if I have a client who's saying that, and the other client is saying, "Well, I don't
01:21:51.700 | want to have to pay any alimony whatsoever," well, it's very possible that you're going
01:21:58.440 | to reach an impasse and this is going to blow up your marriage.
01:22:04.040 | And so rather than focus on those positions, we highly suggest that you focus on interests.
01:22:10.940 | And so how we do that is ask the question with curiosity, "Why?"
01:22:16.700 | So if I have a client who says, "Well, I need $10,000 in alimony per month," then the question
01:22:23.900 | may be, "Why?" and the answer may be, "Well, because that's what I spent," and then the
01:22:33.940 | question may be, "Why on that?"
01:22:36.820 | And just kind of digging further and further, what you may soon realize is it's not that
01:22:41.740 | particular amount that they're looking for, but it's some financial security that they're
01:22:47.720 | afraid that if something should happen, they're not going to be able to pay their bills.
01:22:52.540 | So once you know that, then you open up the possibility of options that you can then explore
01:22:57.960 | that go beyond just no alimony or the $10,000 a month in alimony.
01:23:03.060 | As I said before, I gave an example of what might be an option in that scenario, which
01:23:08.360 | may be, well, as financial security, it may be that you have a life insurance policy,
01:23:14.540 | or it may be that you have a disability policy, or it may be that you have the other person
01:23:22.560 | pay for a separate brokerage account or HSA or Roth IRA or other type of account for you,
01:23:29.840 | or maybe a certain alimony combined with one of these ideas.
01:23:33.580 | So it just opens up some options.
01:23:38.760 | And again, rather than thinking of it as a terrible process, I hope that I've kind of
01:23:46.240 | shown that it can be used as an opportunity to have those challenging but necessary conversations
01:23:54.640 | to head off future problems, to learn about each other's views on spending, saving, and
01:24:01.620 | investing, and to create a better future for your family.
01:24:08.000 | So let me just open up the floor and see if there are any questions.
01:24:15.440 | Thank you, Adam, for covering such a broad and difficult subject and really giving us
01:24:24.840 | a lot of insight into the positive aspects of approaching this difficult subject.
01:24:30.560 | It was fascinating.
01:24:34.280 | If people want to raise their hand, use the raised hand icon to ask a question on camera
01:24:40.340 | or submit a question via the chat.
01:24:44.840 | We'll take them in chronologic order.
01:24:53.080 | I have one to start, Adam.
01:24:54.840 | I'm curious, if you recommend, should parents, especially for those of us who are older,
01:25:01.800 | maybe in the pre or early retired life stage, the retired life stage with children getting
01:25:06.320 | married, is it appropriate for us to bring up the topic of a possible prenup to our adult
01:25:12.480 | children when they get engaged?
01:25:15.680 | Yeah, great question.
01:25:18.840 | So whether or not it is appropriate, it happens.
01:25:24.200 | It happens quite a bit.
01:25:28.720 | And so I think a lot of folks do come to us because a parent says something.
01:25:35.980 | And so it's not really for me to judge whether or not it is appropriate because everybody
01:25:41.080 | has different family dynamics.
01:25:44.400 | And so there may be a problem in a particular family where it's totally natural.
01:25:52.440 | Or look, and there are parents out there who just have a true concern about their child
01:26:02.840 | and want to bring it up.
01:26:04.680 | Or there may be a family business or something where it makes sense to bring it up.
01:26:09.600 | So whether or not it's appropriate, Alan, it happens.
01:26:15.920 | And so sometimes it's a good thing.
01:26:20.120 | And in fact, there are times where I will have a parent with an adult child who's coming
01:26:26.520 | to me in the first place just because the parent wants to know kind of what's going
01:26:29.880 | to happen and how it's going to work.
01:26:33.120 | And if the adult child is okay with that, then I'm okay with that.
01:26:40.000 | Just so that all questions can be answered.
01:26:42.240 | And quite frankly, a lot of the times, especially if we're talking about younger adult children,
01:26:46.800 | they just don't know what questions to ask.
01:26:49.400 | And they may find comfort in their parent being there who's had a little bit more life
01:26:53.420 | experience to be able to ask, especially those questions which the child may feel challenging
01:26:59.260 | even to articulate.
01:27:00.260 | Sarah, I do see that your hand is up and then we'll go back, Alan, to some additional questions.
01:27:09.000 | So Sarah, if you want to unmute yourself, I'd love to hear your question.
01:27:15.320 | Sarah, you're still muted?
01:27:20.160 | Sorry about that.
01:27:21.160 | It's only been five years since the pandemic, I'm still getting used to the computer.
01:27:26.120 | So I wondered, first of all, thanks so much, it was a terrific, terrific presentation and
01:27:32.160 | grateful to you, Alan, too, for hosting this.
01:27:37.480 | My question is, in your experience, Adam, are there different sets of advice that you
01:27:41.960 | give for widows and widowers in this process here?
01:27:47.960 | And I say that just because I'm not looking to get married anytime soon, but I have experienced
01:27:55.640 | just that vulnerability and I've had kind of a predatory situation that fortunately
01:28:03.160 | worked out OK, but there's a vulnerability that I think widows and widowers have that
01:28:08.680 | maybe GenPOP doesn't.
01:28:10.060 | And I wonder if you calibrate your advice differently.
01:28:13.400 | So I think that's a great question, and thank you, by the way, for being so open to sharing.
01:28:21.120 | I mean, that's because hopefully other folks can learn a little bit from that.
01:28:27.680 | And what I would say is that in some ways, I'll give the attorney answer, it depends.
01:28:35.080 | But some of the different factors that I would look at is, was there a significant inheritance
01:28:43.880 | that was received?
01:28:45.640 | And is there a desire to keep that inheritance separate not only for the widow or widower
01:28:52.440 | themselves, but also for any children that might be there if children were in there.
01:28:59.920 | So in that case, I might suggest that they have a prenup or postnup, if nothing else,
01:29:09.760 | make sure that that is protected.
01:29:12.300 | But also what I might suggest in any situation, especially if there has been a history or
01:29:20.220 | just out of curiosity, it's worth going and paying for a consultation with an attorney
01:29:25.440 | just to know about the laws in your particular state, to learn a bit about, you know, I was
01:29:32.920 | talking about really from my experience, though it might be broadly applicable, you know,
01:29:38.760 | I really only know Florida's laws, and I can, you know, I discuss with clients and answer
01:29:45.040 | particular questions for them, if they, you know, if they come and we have a consultation
01:29:52.060 | and answer their questions, and they may ultimately decide, and in fact, I may even tell them,
01:29:57.360 | hey, you really don't need a prenup given those circumstances, or postnup given those
01:30:01.160 | circumstances, but still, hopefully, it was helpful that you at least learned, you know,
01:30:05.960 | depending on what happens, what the law says.
01:30:09.200 | >> Gotcha.
01:30:10.200 | Great.
01:30:11.200 | Thank you so much.
01:30:12.200 | >> You bet.
01:30:13.200 | You bet.
01:30:14.200 | Thank you.
01:30:15.200 | >> Thank you.
01:30:16.200 | Great question.
01:30:17.200 | >> Thanks.
01:30:18.200 | >> Allen?
01:30:19.200 | >> Oh, actually, let me ask a question that had been submitted, pre-submitted from the
01:30:22.360 | Google form.
01:30:24.600 | Are there differences in how pre- and postnup arrangements should be approached between couples
01:30:29.820 | of similar versus disparate net worths?
01:30:34.040 | Is the approach different in that situation?
01:30:38.360 | >> Sure.
01:30:40.000 | So good question.
01:30:43.840 | I think it is, so there's a lot of different scenarios.
01:30:49.800 | I think the outcome may be different depending on the disparity, depending on who's asking
01:30:57.000 | for the prenup and why they're asking for a prenup.
01:31:00.480 | I'd say, you know, a lot of the times, it's because there is, because there's a private
01:31:09.240 | business, for example, and just if there's an issue, people want to make sure that the
01:31:18.000 | business isn't affected should something happen to the relationship, which could have a very
01:31:23.400 | big effect on personal finances or if there is a large inheritance.
01:31:29.880 | If, on the other hand, there's a situation where both people are pretty financially secure,
01:31:36.800 | but they're looking to do it, for example, in the situation where I had a couple, a client
01:31:42.360 | in their 70s, and they were financially secure, and the other spouse was also financially
01:31:48.280 | secure, that prenup or postnup is going to look very different than when, you know, only
01:31:53.400 | one spouse really is looking to protect inheritance or protecting a gift.
01:31:57.100 | So I think the approach, the outcome may be a bit different, but at the end of the day,
01:32:02.080 | you know, it all comes down to the question of why.
01:32:04.320 | Why are you looking to do this?
01:32:06.160 | What are you looking to protect?
01:32:08.160 | What are you hoping to happen as a result?
01:32:10.880 | And then develop something that meets their particular goals.
01:32:15.600 | All right.
01:32:19.080 | We have more questions, either via the raised hand or chat.
01:32:24.240 | Yes, JC.
01:32:27.440 | So my question is that I understand that question about, like, commingling, where if
01:32:39.000 | you have a separate account, but then you put in money that you earned during the marriage,
01:32:47.040 | like, into that account, like, if you continue to invest in your retirement account or your
01:32:51.000 | brokerage account with marital assets, your income during the marriage, it at least, unfortunately,
01:32:57.600 | becomes commingled.
01:32:59.000 | What about for debt?
01:33:00.360 | Like, if one partner has debt that was acquired prior to the marriage, if the other partner
01:33:08.200 | is using marital assets to help pay that down, does the rest of the debt become their responsibility
01:33:17.280 | as well?
01:33:18.280 | Yeah.
01:33:19.280 | So, great, great question.
01:33:21.800 | It probably would really depend on your state and the laws in your particular state.
01:33:28.880 | And in some states, it would be considered basically a gift to that person or a gift
01:33:36.160 | to the marriage.
01:33:37.160 | And just, you know, if debt gets paid down, well, in the event of divorce, then that debt
01:33:42.080 | is no longer there, nobody gets any credit, and it's just dealt with.
01:33:47.700 | There's nothing to do.
01:33:49.860 | In other states, it may be that if you paid off the other spouse's premarital debt, that
01:33:56.840 | at the end of the day, you get some sort of credit for that or some sort of reimbursement
01:34:02.880 | when otherwise dividing up assets and debts or some sort of special consideration.
01:34:06.480 | So, it really just depends on the specific laws of your state.
01:34:10.440 | The only way to really know that for sure, well, I guess two ways would be to speak with
01:34:17.940 | a lawyer in your jurisdiction.
01:34:19.220 | But if you want to have control over the outcome, would be to get an agreement that addresses
01:34:26.700 | those particular circumstances.
01:34:29.300 | Miriam, did I see your hand up before?
01:34:33.020 | Yes.
01:34:34.020 | I have a question on retirement assets.
01:34:38.260 | Since they are individually owned, they are individual assets, and there are beneficiaries
01:34:45.000 | for when the person passes away, but in a divorce, even before the retiree can access
01:34:59.140 | his own retirement accounts, because there would be a penalty to access it before that,
01:35:04.360 | how would you put that into a divorce or into a prenuptial ahead of time passing of retirement
01:35:13.640 | assets?
01:35:14.640 | Your 401(k) is yours, paid for out of your employment assets.
01:35:22.620 | Your traditional IRA is yours also, funded by your employment, you have to have employment.
01:35:34.000 | The actual money can come from somewhere else, but you have to have the employment that justifies
01:35:37.920 | it.
01:35:38.920 | With the Roth, you never have to take money out of it, ever.
01:35:42.880 | How does this, it like forces you to do things, is that what it is?
01:35:48.380 | So great question, and very insightful that, for example, that alimony alternative where
01:35:57.080 | you might be paying a Roth IRA, of course, that's dependent on the other spouse actually
01:36:03.200 | getting, receiving income and being eligible for a Roth IRA on the one hand.
01:36:09.420 | So I think that's a fair point, and I think it may be that part of that, and oftentimes
01:36:15.600 | arrangements like that, there is a private business or something like that, which may
01:36:22.740 | be required as well to provide some sort of income to that spouse so that they can then
01:36:28.160 | go and have an IRA.
01:36:29.440 | So it's really, it's just a situation dependent, but I know that your question was also more
01:36:34.440 | broad than that about what happens in the event of a divorce to IRAs, to 401ks, there
01:36:42.760 | are other things that kind of go in that category as well, military pensions, for example, or
01:36:48.080 | other things, which if you withdrew from it early, that you may be subject to a penalty.
01:36:56.060 | So I know based on Florida law, and I think pretty much all other states do it this way
01:37:05.140 | as well, but you need to speak with a lawyer in your particular jurisdiction, that there's
01:37:14.180 | an exception for tax penalties for most assets when you are dividing it pursuant to a divorce.
01:37:22.680 | So for example, with an IRA or a Roth IRA, that that can be divided, put from money from
01:37:31.660 | one person, one person's IRA into an, it can be rolled over into another person's IRA,
01:37:40.260 | or on the Roth side, a Roth IRA rolled over into the other person's Roth IRA pursuant
01:37:46.300 | to a divorce without getting penalized for it.
01:37:51.260 | Now, there are certain retirement accounts where it's a little bit more complicated than
01:37:56.580 | that.
01:37:57.580 | So for example, when we're talking about most employment based retirement accounts, a 401k,
01:38:03.540 | I think it's applicable to a 403b, a 457, and it's also similarly applicable to military
01:38:13.140 | pensions and other types of pensions.
01:38:16.020 | There's a special type of order when you get divorced that you need to make sure is
01:38:23.460 | drafted so that these accounts can be split.
01:38:28.140 | In general, it's known as a qualified domestic relations order.
01:38:34.420 | Q, it's acronym is QDRO, it's known as QUADRO by those in the divorce profession and it
01:38:48.540 | basically says that those qualified plans can be divided without penalty if you go through
01:38:57.780 | a process and that process usually includes, first off, making sure that the plan is a
01:39:03.900 | qualified plan and there's a whole definition of what that means in the IRS code and then
01:39:11.940 | sending a proposed order splitting that to a plan administrator just to make sure that
01:39:16.820 | it can be split and then having a judge sign it off.
01:39:20.700 | And so this is actually a very challenging, somewhat tedious process and you have to be
01:39:27.020 | very specific because the last thing you want to do is screw up the split of a 401k or other
01:39:31.780 | big thing, especially if you saved a lot of money in it.
01:39:34.460 | And so even though I do a lot of divorce work, I actually don't draft QUADROs.
01:39:41.700 | There are specific attorneys day in and day out who all they do is QUADROs.
01:39:48.500 | Now that sounds like the most boring job in the world for me, but they, I guess, make
01:39:52.340 | some good money doing it or I guess they get some kick out of it.
01:39:57.500 | So that's what they do.
01:39:59.500 | And then there are orders that aren't exactly QUADROs but are basically the same concept
01:40:05.740 | for some other assets like military pensions.
01:40:10.940 | It's usually called a military retirement order or something similar to that.
01:40:16.380 | There are certain other pensions, again, it just depends on your jurisdiction, but I know
01:40:20.940 | here in Florida, like there's certain municipal pensions that regardless of what you agreed
01:40:25.940 | upon, it just can't be divided.
01:40:28.180 | And so rather than do that, oftentimes there may be some sort of buyout or some other way,
01:40:34.600 | some thing where, well, once the spouse receives the pension, then they're responsible for
01:40:40.720 | providing a portion of it to the other spouse.
01:40:44.420 | So again, attorney answer, it depends, but great question.
01:40:48.260 | Thank you.
01:40:49.260 | Thank you.
01:40:50.260 | Nice answer.
01:40:51.260 | Thank you.
01:40:52.260 | So is that sort of thing, the QUADRO and similar type division of retirement assets or other
01:40:58.600 | assets would not necessarily be addressed in a prenup, perhaps in a post-nup, but is
01:41:04.940 | that the sort of thing you would actually anticipate and build into a prenup or post-nup
01:41:09.860 | or would that be something that basically is dealt with during an actual divorce?
01:41:14.020 | Yeah.
01:41:15.020 | You know, I'd say the majority of the time it's usually dealt with at the time of an
01:41:20.780 | actual divorce in an agreement, reaffirming the prenup or post-nup, but there've been
01:41:26.900 | times where I've added it in because you just want to make sure that there are discussions
01:41:33.520 | not only about, you know, that both, even if they're at the point of divorce, even if
01:41:39.180 | they're angry at each other, make it binding that they're going to cooperate for all of
01:41:43.740 | the steps that are needed to complete that process.
01:41:46.300 | And sometimes you also want to address how that QUADRO or other order will be paid for.
01:41:51.620 | So that, that can also be addressed in a prenup or post-nup.
01:41:53.820 | Any other questions?
01:41:54.820 | It would seem to me in the prenup, it might be there, I don't want to say accidentally,
01:42:03.180 | but it might be that all funds, all of our accounts, all of our retirement accounts might
01:42:08.300 | be put in as a general expression by an attorney, and then they didn't realize that they were
01:42:13.300 | including retirement assets.
01:42:16.300 | Yeah, absolutely.
01:42:19.300 | And you want to make sure that it's done clearly and so sometimes it's helpful to address those
01:42:26.100 | items from the top, from the front end.
01:42:31.300 | Yeah, especially since some retirement assets, I'm sorry, some retirement assets could be
01:42:36.220 | put if the, if the person had, had, you know, megabath, you know, different, a certain kind
01:42:46.420 | of job where they could put a lot of money into the retirement accounts.
01:42:49.860 | Yeah, yeah, I think it sounded like you were referencing if you have the option of a megabath
01:42:56.660 | door Roth IRA, which may, you know, for some of those, you may know that may be a way to
01:43:03.340 | have more than the typical limits.
01:43:05.140 | I think right now the, I think this year the limits for your regular 401k is $23,500 and
01:43:15.880 | there are certain retirement plans that allow for a larger amount.
01:43:20.740 | I think maybe what $69,000 or $72,000 total, something like that.
01:43:27.500 | So yeah, that it may especially be a concern in those situations, but there is so much
01:43:31.580 | money that's saved up in a 401k.
01:43:35.120 | Thank you.
01:43:36.120 | Yeah.
01:43:37.120 | Allen.
01:43:38.120 | Yes.
01:43:39.120 | I was going to say one thing I want to emphasize a couple of points is that I think in the
01:43:44.100 | past, I think most people viewed the concept of conversation of prenup kind of in a negative
01:43:50.020 | manner that somebody is trying to control the future of the marriage.
01:43:53.340 | But I think it's important that by opening the conversation amongst the betrothed couple,
01:43:59.060 | that it actually is setting them up on a better foundation with having their transparent finances
01:44:05.060 | in a shared vision for their future.
01:44:06.980 | And I wish and hope that over time that society will view it more in a collaborative fashion
01:44:12.620 | and building for the future and minimizing the risk of divorce certainly and getting
01:44:18.020 | them off on a stronger foundation.
01:44:21.580 | As somebody who is in a blended family in a second marriage myself, I found that to
01:44:25.980 | be the case.
01:44:26.980 | And actually I did, we did get a prenup, not the first time around, but the second time
01:44:31.860 | around.
01:44:32.860 | And that opened up a lot of difficult conversations, but allowed us to share our perspectives,
01:44:38.020 | especially with a blended family with each of our own children.
01:44:41.260 | And the process generally was helpful and positive.
01:44:45.700 | And I've been married happily for 25 years, I might add.
01:44:49.060 | Another thing I might add peripherally as having a daughter who's now engaged.
01:44:54.900 | One of the things I didn't want to bring up, I asked that question earlier about possibly
01:44:58.340 | bringing up the topic of a prenup to an engaged couple.
01:45:01.900 | But one thing I did is tell my daughter and her fiance that I would gladly pay for them
01:45:07.260 | to meet with an independent financial advisor, fee only, to get themselves off on a solid
01:45:13.380 | financial planning life together and to build some of that transparency and understanding
01:45:19.420 | in before they get married.
01:45:21.220 | And they took me up on the offer.
01:45:22.340 | I was happy to pay for it and they found it very helpful.
01:45:25.200 | And that's something that I think is another avenue with certainly with considering marriage
01:45:30.380 | yourself to approach your fiance, your future partner, about the sharing that process.
01:45:36.860 | Or as a parent of adult children that are getting married, to suggest that.
01:45:40.660 | Not to force them, nor coerce them, but it's just something else to consider in having
01:45:47.060 | that transparency and planning together.
01:45:50.060 | Yeah, that's great, Alan, thank you so much for sharing that.
01:45:55.780 | And I think I'm glad to hear that it was a more positive experience.
01:46:01.660 | And again, I think it's got a very negative connotation again.
01:46:08.660 | I think probably deservedly so, because I think people have seen kind of the worst of
01:46:15.580 | how it can be done.
01:46:17.620 | And so I hope to show that there are alternative ways in how it can be done, but also how it
01:46:23.940 | can be thought of in the first place.
01:46:26.340 | So just opening up the conversations.
01:46:29.820 | I also like to tell clients, I hope that this is helpful enough that this becomes the most
01:46:37.780 | useless document that you're ever going to sign.
01:46:41.740 | And that you all have a lovely and wonderful future together with each other.
01:46:51.500 | And hopefully having these challenging conversations up front will allow you to do that.
01:46:59.060 | All righty.
01:47:00.700 | Any final questions, folks?
01:47:06.380 | If not, let me thank you, Adam, for a wonderful presentation.
01:47:09.100 | Really opened up our eyes to all the aspects of this for consideration, and certainly familiarizing
01:47:15.580 | us all with the collaborative process, which many of us were not previously familiar with.
01:47:19.900 | Thank you, Miriam, for helping out as a moderator, and for everybody for participating.
01:47:24.940 | In a moment, I'm going to end the recording, but after I end the recording, I want to do
01:47:30.580 | an exit poll just to get feedback from everybody.
01:47:33.500 | And I also want to encourage everybody to check with your local Boglehead chapters,
01:47:38.020 | as well as checking with the online in the blog on the Boglehead's website is the calendar
01:47:44.620 | of events for both other live stage and local chapter meetings that are upcoming.
01:47:50.620 | And if you don't have a local Boglehead's chapter in your area, consider starting one.
01:47:56.280 | So thank you again, Adam.
01:47:57.280 | That was fantastic.
01:47:58.280 | And we'll make arrangements to share his slide deck in one fashion or another.
01:48:25.960 | [ Applause ]. [ Music ].
01:48:52.280 | [ Applause ]. [ Music ].
01:49:20.920 | [ Applause ]. [ Music ].
01:49:49.560 | [ Applause ]. [ Music ].
01:50:19.160 | [ Applause ].