Mediator Podcast .com - Mediation, Negotiation & Collaboration
Mediator Podcast .com - Mediation, Negotiation & Collaboration
Premarital Agreements: Protecting Assets Before Your Second Marriage
Hi, welcome to MediatorPodcast.com, a podcast and video series about mediation, negotiation and collaboration. My name is Melissa Gragg, and I'm a valuation expert and divorce mediator in St. Louis, Missouri – specializing in divorce and partner disputes.
Today we are talking about premarital agreements and protecting assets before your second marriage or really any marriage with Susan Myres. Susan has been practicing family law in the Houston area since 1982 and she formed her own firm, Myres & Associates, in 2011. Her strength is being able to see options and alternate paths to achieve the realistic goals of her clients.
Melissa Gragg
CVA, MAFF
Expert testimony for financial and valuation issues
Bridge Valuation Partners, LLC
melissa@bridgevaluation.com
http://www.BridgeValuation.com
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Susan Myres
Managing Partner
https://www.thehoustondivorcefirm.com/our-team/susan-myres/
https://www.linkedin.com/in/susan-myres/
https://www.facebook.com/myresfamilylaw
https://www.linkedin.com/company/myres-&-associates-pllc/
Hi, welcome to mediator podcast.com, a podcast and video series about mediation, negotiation and collaboration. My name is Melissa Greg , and I'm evaluation expert and divorce mediator in St. Louis, Missouri. Today we're talking about premarital agreements and protecting your assets before your second marriage, or really any marriage with Susan Meyers. Susan's been practicing family law in the Houston area since 1982, and she formed her own firm, Myers and Associates in 2011. Her strength is being able to see options and alternate paths to achieve the realistic goals of her clients, and that is always needed in divorce and family law. Welcome. How are you, Susan?
Speaker 2:I'm very well, thank you very much for the invitation.
Speaker 1:Well, this is a topic that is kind of near and dear to my heart because I see a tremendous amount of divorces ending , um, or marriages ending in divorce that didn't have a plan in place for the finances. And so I think in e and we are talking about premarital agreements, but they're also called prenuptial agreements. And that might be like traditionally what a person understood as a prenup, right? Are they really the same type of agreement or are they completely different?
Speaker 2:They're they're the same type of agreement. It's an an agreement that is executed before a marriage, but I don't wanna get that confused with , you could have a cohabitation agreement where there's not an intention to marry. So these , uh, prenuptial, premarital, pre-marriage, all of that is in contemplation of a marriage. And most of them will have a provision in it that says, if y'all don't get married, this is null and void. There's even a post-marital agreement, but we'll talk about this some other time.
Speaker 1:Well, and it , it's interesting because I think that in general, you know, when I dissect a divorce, I, I think that when people get married, they go down, get, you know, justice of the peace , they get the merit certificate, and they just jump into this legal kind of a , you know, arrangement, but they don't have a conversation about the finances and maybe they don't even have any money. So they're like, ah , you know, we'll figure it out down the road. Right? So I think that even taking the taboo off of these agreements and starting to just say, you know, how could these agreements be used to protect you, to develop a way to amicably split? If, if that could happen. And a lot of these we're seen in the second or third divorces because you could have , you know, married, young, divorced , young, widowed and, and other types of , um, situations. So it kind of gets us to understanding first, like what are some of the legal issues that you would even consider when you're getting married for the second or third time, and maybe you have some assets, or maybe you just want to be more intentional this next time. Like, what are some of the things that we would wanna consider initially?
Speaker 2:Okay , there's a, a long list of things that people should consider. First place, you need to start with this . Where do we live? Where are we going to live? 'cause I can't predict where people are gonna live at the end of their marriage, but we do know where they're starting off. I think you , most couples either they live together and they've experienced some of this commingling, other assets or some sort of expectation. But I think one of the best benefits of a marital agreement, whether you execute it or not, is that there is a conversation about your expectations, because people get a divorce because their expectations are not met. But if they don't put their expectations vocally so that there's an understanding between the two of them , they're doomed. They're absolutely doomed. Unless by some magic they were in sync without talking about it. You know, I expected to stay home when we had kids. I expected you to work when you had kids. I expected that you would contribute financially. I expected you to take care of me for the remainder of my life. All of those expectations, if not spoken, are going to cause problems. So, you know where you live, you know what your expectations are. And then for the second and third and fourth and fifth marriages, we worry about things, elements that will happen to you. Do we have children from our first, second or thirds? Do we need to worry about that? Do I have a lot of debt that I'm bringing into a marriage? Not just the assets you need to worry about. Do I have debt related to it? Do I have streams of income? Am I going to lose an alimony stream from a prior marriage because I'm going to marry second or third time? There's really unlimited things that each couple need to look at. If they had a horrible divorce in number round number one, let me assure you, you better have a premarital agreement in round number two to avoid at least some of the horror. Because divorce work is as difficult or as simple as the clients and their counsel want to make it. Why do people get divorced? Their expectations weren't met. Why do they get married? Because they think that's a better alternative. And, you know, we're finding that the marriage rate went down, the difficulties continue, but the divorce rate really is about the same. It looks like it's lower, but it's only because the marriage rate's lower. And where we're seeing more divorces are the mature couples. Those mature couples may be on their second or third. I I this afternoon. I've got an arbitration with a mature couple. There's a premarital agreement. And they're both, they both have kids , uh, both have adult children actually, and grandchildren. So it is, it is something that is happening. People need to talk about it. And I do think that the more our famous people talk about their premarital agreements, the more comfortable the rest of us are talking about premarital agreements. It's, when you think about it, you have to get a, you had to be trained to drive a car, right? You have to go through lessons and you have to get a license. You have to pass a test. Well, there's no test to get married and look at the consequences of the I dos. There are fi fiduciary duties or financial duties there . You know, there , there really are a lot of duties that pop into existence different from jurisdiction to jurisdiction. So why not know what those are? And if you don't like how your jurisdiction is gonna dissolve your marriage, whether by death or divorce, 'cause remember, every single marriage ever will end, Melissa. There's no exception. You either die and get out of a marriage or you divorce and get out of a marriage. Those marital agreements address both issues. So one of the ways that , to think about it, the very best one of these agreements is drafted by somebody who has family law background and somebody who has estate planning background. Because then we think about all the alternatives. You know , you know, it, we are raised on two questions. What if and what about, and that's what marital agreements can do for our couples. That's just, it just makes things easier.
Speaker 1:Well, and, and I think that it, in the past, it's been used in a lot of different varieties. I think when you get into second marriages, you have some estate issues. And the estate issues could be around, you know, where your money is going to your children, you know, and, and they are adult children and they're concerned about this second marriage and things like that. But if I look at a, an agreement, right? Um, and, and we just start to break it down in a couple different, different like buckets of what you have to consider. One of the things that you already talked about, which is kind of the first bucket in my opinion, is the state issue, right? And so, and you, and you beautifully kind of went through it, but divorce in general is a very state specific issue. And so when we're talking about these agreements, you know, it's not like going and borrowing some friend's agreement and writing up something. It's, it's more of a conscientious, you know, like you talked about actually discussing these things. You know, like if, 'cause if you're not on the same page about them before you get married, it's not gonna get any better after you get married. But can, can you talk more about how, why, why the state structure is important and what impact that just has generally on divorce?
Speaker 2:Sure. Each state will have a law or statutes, whether or not they approve of marital agreements. Every one of our jurisdiction does. But from there, it stops. So, for example, in Texas where I practice, we have a presumption, a legal presumption that marital agreements are valid, whoever's challenging, it has the burden of proof and it's limited. Uh, if it's unfair, we really don't care. And , and you , my my thinking is once it's west of the Mississippi, it's a free for all . We expect adults to make decisions east of the Mississippi. We do find a little bit more paternalistic rules. For example, I think it's Connecticut, that they will not approve a premarital agreement that does away with alimony or spousal maintenance, even though everybody's got employment and whatever their circumstances are, it's not approved. Now, it may still be the effect at the end of their marriage, but that is against their public policy. In Texas, we don't have any problems with you waiving spousal maintenance. We , the only places that I think all of our states agree is we will not let you impact negatively children of the marriage. We may let you impact children outside of the marriage. Like, sure , and my money will never go to your children when I pass, or whatever those rules might be. Um, so it does matter because state that is a state-driven law. Each state has its own background as to where they, their basis was. For example, Texas is from the Spanish law. And the Spanish law was a community property state. We've got 13 states that are community property, California being one of them . Here's one of the oddities in our state. Your passive income on your pre-marriage , uh, estate. So you've got a investment account and that investment has interest and dividends and it rolls over and you just keep, you just park it there and you give some instructions to your account manager In California, everything that's in that account will be your separate property period. If you add community to it, that will be community. But if you just leave it there and it just keeps rolling, whatever, it's, you're separate. In Texas, we don't let your passive income be your separate property. We say it's community property. So that's a perfect example of if you know the differences between your jurisdictions, you say to your clients in every state in the country, this would be passive income. That is always gonna be that person's separate property. So giving that up is not a huge commitment unless the sole source of all of their income is this passive income. So it , you have to know, there has to be full disclosure, what do I own? What are the, what are the streams of income? What do I owe? What are my debts out there? You know, some of our high professionals have very high liability issues if they are surgeons or pilots, and the kinds of things that when they do things wrong, it is very expensive. So we talk about that. They may have businesses that have really complicated investment , um, platforms and obligations and cash calls and all those things that could drain a , a community or a marital estate. And if you wanna make sure that that doesn't happen, that's a great conversation for a business owner to have with a non-business owner. But it , full transparency, this is why I want to keep this business my separate, all of the expenses will be taken care of by my separate funds, and we will, if I ever have to borrow against our community stuff or our joint money, my separate has to pay us back. So you, those are the kinds of things that are important to know about. But here's, here's our reality, Melissa, I can't think about everything in their future. I'm, I'm doing a couple right now where there is no way, no way the drafters could have anticipated the disaster their language has created. Mm-Hmm. <affirmative> . But that's, it's a contract. And we expect adults to think about their contracts when they take future actions. And sometimes when you're married to someone, you forget. So if you get a marital agreement, and I know it's not what we talked about earlier, you need to review it periodically to make sure you haven't stepped in a hole that's gonna break your ankle. Mm-hmm . <affirmative> . Because before things go bad, you can usually fix it. So that , that , that the shortcut is know your jurisdiction that you expect to live in. All of our agreements allow people to say, and we're going to say forever and ever, this agreement is interpreted under Texas family law as it existed, or as it exists. You pick what it is. So we did one that was a European , uh, people were in Europe on an expat assignment. We did a Texas Postmarital agreement, but we had, we had property in Texas. The expat assignment was from Texas. There was an expectation they were gonna come back to Texas when this was all over. But we baked into it and we got permission , we got approval by our European counterparts that this was effective on them. Mm-Hmm . <affirmative> . So if you know that you're gonna be moving to another state, or say you've got a client who has multiple offices because that's how their business rolls, then roll it by all of the different jurisdictions that they may have a home. A lot of our clients have multiple homes. You need to make sure that what you're drafting is not gonna get, you know, eviscerated if they get divorced in another jurisdiction. But these are important conversations to have. So let , here's , here's an example of why people don't like marital agreements. They think the very money per person is gonna roll away with all the money, and they keep it all, and the not have person is, is left destitute. That would be ill-advised, because if you don't give the have not spouse something to want to keep and not risk losing, if they challenge the agreement, give them nothing because then they have nothing to lose. So ,
Speaker 1:Well , and we've seen some language like that in some agreements that have been fought in the court system where the agreement was like, well, anything and everything that's acquired post-marriage is, you know, one spouse's. And I think that, you know, what you're talking about is maybe like when the agreement, you , you just can't agree to something that is so far on one person's side and expect that the co court's gonna consider that there wasn't coercion or you know , like they have a better re you know, way to like encourage that . You know what I'm saying? Like , or use that as a reason.
Speaker 2:Yeah. But be careful, Melissa, some of our jurisdiction, Texas being one , we will let those one-sided onerous agreements if all the bells and whistles have been filled in. You've given , you've given your waivers, you've given your disclosures, you've got lawyer and you paper it up. Some people even video the signing ceremony so that there's no crying and nobody's got a gun to someone's head. It's valid. It's valid if it's on, you know, you've already sent the wedding invitations out. Texas is pretty pioneer stock. Everybody's expected to know other states not so, and some states look as is this unconscionable when you signed it or is it unconscionable at the time we're interpreting it. Again, you need to know your state. Texas is much more laissez-faire. Uh, you are in charge of you. And if you sign something that is not helpful to you, sorry. But that's how it's gonna be. I just think from , uh, an advocate's point of view, because you deal with this in mediation. If you see a marital agreement that is so gross that you're thinking, God, there's no reason that they'll settle, they'll try to challenge it if for no, no other purpose than to get nuisance money from the other side or keep the marriage alive. So at least there's currently some obligation to take care of my living expenses. Gotta just gotta think. Wouldn't it be better to have some sort of granting to the have not some monies, some retirement, or maybe even a disability policy if, I mean , what if the have not become, became horribly disabled during the marriage and there's no obligation to support them. That just seems cruel. But if you don't think about it, it would be enforce . We had one where , um, it was an a mature couple that I think they were both widowed. I think that's right. But the dad's adult children were very worried that dad was gonna be too generous to his new spouse and they wanted the marital agreement. And so the way we solved it, and I'm kind of curious why they thought they were inheriting stuff that from somebody that was alive , but that was their problem. What we did to solve the problem is we provided a life insurance policy on the dad with the new wife as the beneficiary. So the community or the joint funds took care of the policy. It was a whole life policy. Big chunk of money went in. And so everybody knew that when he passed, the kids would not be harmed in any way and neither would she. And so that was a way to solve it so that feelings and expectations were met. There's all kinds of ways. And you could do that if you've got a business owner who's like, Hmm , my business, I , I don't wanna co-own it with anybody else, and I don't want my children to co-own it with anybody else. Figure out a way to quantify the benefit the have not spouse might have and take care of it. It might be as simple as making sure that the, especially if it's a closely held business that the former spouse, we take care of their health insurance, we designate them as a consultant, if it's all legal with the HR people as a consultant so they can stay on life insurance. Or maybe they really were a consultant and we can help contribute to their 401k because they have not had all that social security that went into it. There . Just, there really are unlimited issues to talk about. Depends on the facts that show up in your office.
Speaker 1:Well, and obviously because we do business valuations , you know, I think that we've seen more language , um, you know, in some sort of litigated fashion or mediation. Um, but I think it , one of the things that I would in would ask you maybe is what we've seen or what we recommend if there's a business, is that you really, specifically if you're planning ahead of time, or this is a second marriage, that you're getting evaluation at the time. Because what we've seen is, oh, okay , um, we've said that the business is separate and , um, you know, the, the spouse understood that, but the spouse didn't understand that the business was worth $50 million. And you know, like that's a different discussion. And I hear that, you know, well, I didn't know that it was worth so much. So it's almost like presenting that as well at the time and saying, yes, it is a substantial asset. Like let's, let's be very clear on what it's worth at that time. Now, in some cases it could preserve that as a separate value at the date of marriage. Mm-Hmm . <affirmative> depending upon the state. Um, but that is, you know, just way , one way to put it in writing it , it doesn't sort of allow you to have any, you know, future number available at that time. But you can at least kind of preserve what was discussed at that. Do you see some of that language in the agreements?
Speaker 2:We do , you'll see it because at least in most of our jurisdictions, you're gonna have schedules attached to your agreement. What are husband's assets including valuations? Uh, and there's full disclosures. So I would see tax returns from the business and, and be able to share with the client, he's a 50% owner, here's what the income looks like. Uh, look at these liabilities. Look at the retained earnings because they're saving up to buy the new property. Are they gonna buy the new property within the business? Are they gonna start a new business, which would be community if it started during marriage? And is that new business that's gonna be the, the leaseholder back to the bi ? You know, there's just, ugh , it's mind numbing. What you need to think about. Uh, and I don't know if you remember, oh gosh, was it back in the nineties where at least in Texas, we redid our partnership and our limited partnerships so that a lot of company, the business people were converting their corporations to limited liability partnerships. Well, if whoever was doing the paperwork didn't think about, am I undoing a separate property asset distributing it, that distribution is gonna be marital, and now I'm putting that marital into this and everybody's thinking this new one is the separate property. And when you look at the legalities is not a marital agreement would've solved all that. It allows the business owners to continue to do their business without worrying about business smart business decisions being completely torpedoed because of a family law expectation. Those, those, you know, I wanna be able to manage my business. I wanna be able to sell my business. I wanna be able to merge, do all the kinds of things that businesses do, incur debt. Uh , it , it is, it really does make sense for there to be a marital agreement if there's any assets or liabilities before a marriage that you need to make sure is solved better than our family law systems do. Because I, we've got one that just came in this week, and the bulk of the case isn't going to be attorney's fees. It's gonna be the valuation experts because this multi-company, I mean the organizational chart of this, this entity between family trusts and um , uh, what are those called? The subsidiaries and all the things that feed into the organization, it was a beautiful piece of art that is going to give business evaluators an enormous amount of work. So if they, if they had a premarital agreement, we could have baked into the premarital agreement, how are we gonna value these things?
Speaker 1:Well, and you're also, it's a good point to make because if you did a premarital agreement and you eventually do estate planning, you really wanna be careful because we had a recent case and it was clearly separate money gifted at a very young age, and it was investments and the investment brokerage account or brokerage people like transferred the asset reti like the name and everything. And we thought for sure, you know, like you can clearly see it . Like even the investment firm was like, oh, our bad. You know, like, we didn't mean to do that, blah, blah, blah. We were doing estate planning, but we kind of messed it up. Um, the judge still split it and said, no, it was commingled you, you know, like it was a theory and you know, like you did this and a couple other things. And well, we even have , and you know,
Speaker 2:We have our estate planners in town or in town in the state , uh, pushed our legislator to create a transmutation statute because they thought, oh, this is great. We'll do these separate property owners and we will transmute turn into like legally turn it into community property so they get the tax benefits. And I'm like, make sure you have a family lawyer that's advising people. Here's the consequence of that Great plan.
Speaker 1:Yeah. Well, and you know, it , you have calculators in a lot of states also that have been created that are, that are mathematical calculators for various pieces of the divorce that are also, we're probably not created with financial people in mind. But again, you know, like these are the types of things. If, if the divorce court system is failing in some of these areas, the whole purpose is to protect it, to know how many , because it's not just putting it in writing. Like you, you have to, you know, like we can go into a decent question that that kind of feeds into this, but, you know, how do you use these agreements to protect the assets? Because it's not just putting it in writing, there's different levels to protecting the agreement. You know, even in the process, it's not about having just a piece of paper to really have it be defendable in court. Right,
Speaker 2:Right. Well, it depends , again, going back to jurisdiction in our agreements, we even provide, if you fail to do your annual accounting, that's okay. It's not gonna , it's not gonna annihilate the validity of this. And if you waive a couple of paragraphs and you do some commingling or things that you said you wouldn't do, we're not gonna say the whole thing's invalid. That'll depend on your jurisdiction. It is, you know , think about it from a business person's perspective. You have buy sell agreements when you have co-ownership. Think of a premarital agreement as a buy sell agreement. What do I do if I want out? How do we , how are we gonna value all this? Or do we need a , an appraisal? Do we look at book value? Do we, do you know, how are we gonna do it? And then stick with it. Because those agreements, just like a premarital agreement, can help guide the people in finding a solution that does not involve the court having the court system because the court will solve it. The court, they are completely capable of solving it. Usually not in a way that people expect or want either direction. So if , if the big company is gonna be valued at $200 million and other than the company, there's no real asset to give to the have not , then we get a judgment. How do we secure the judgment for that equalization payment? It , you know, it , it, why not have that as part of what we're gonna do? Mm-Hmm . <affirmative> , it's a never ending , um, game. Not, and I don't mean to be flippant about it, it's a quest. That's it, it's a quest for figuring out what people have, what they would like for the solution to be and can I document it to get to that solution?
Speaker 1:Well, and realistically, if we dial back, how do you stay out of divorce court and how do you go through mediation if an eventual separation happens, one of the ways is to start having these premarital agreements in place so that the parties have at least a reference point with which to, you know, start to separate assets even if they have a hard time. Maybe , um, you know, understanding it 10, 20 years later. You can always include attorneys in mediation. You can always bring people to, you know, dissect that agreement. But just like a buy, sell , buy sells are very specific to the company. They're very specific to the, the intention of the future. They're very specific to the parties at play. And they're not just pulling a template and filling in the blanks. If you really want it to be effective, because effective means you can take it and say, you know what? This didn't work, but we've agreed to how we could separate this out. Let's just get some assistance. Right. You know, like that's part of it. And it then you're really looking for somebody that understands the nuances of these agreements. Right? It's
Speaker 2:Well in Texas, and I keep saying in Texas, but I'm sure other jurisdictions allow this. We put in the agreement , the premarital agreements or all of the agreements, if there's a disagreement, we can't, if this needs help, we are going to first go to mediation and if mediation fails, we will go to arbitration. It will be binding arbitration. So one way to keep keep outta court is to bake it into the agreement. The problem is people need to understand the consequence of an A binding arbitration, but they do it in business transactions all the time. Not all of our states will enforce arbitration agreements in family law cases. But we are seeing , seeing a very rapid trend of people, of our legislators across the country approving it. Because adults can sign agreements and they can be binding, whether it or not, in each state. It'll be binding on parent-child cases and issues involving the children is to be seen Texas. We will start it , uh, we will allow that to happen. If it is not in the children's best interest, the court always, always retains the right to fix it.
Speaker 1:And I think that that's an important thing because in some states you're also not capable or , and you know, maybe a lot of states or all of them , um, you're not able to sign away child support either. Correct .
Speaker 2:So I , I know jurisdiction you can give away child support. In fact, I learned something from a friend of mine who spoke on the issue. 'cause I said, you can't detrimentally affect the child. She argued that's going downwards. Doesn't mean you can't negotiate. Our child will go to x, y , Z private school. Our child will have a college fund or what . And I thought I'd never anticipated that, but it's part of my equation now .
Speaker 1:Well, and I think that that goes towards, you know, some states won't require payment of college by the parties. And so again, if you plan like a second or third marriage and there's gonna be children to that marriage, you know, you would want to have some arrangement in place. Or if sometimes there's grandparents that are paying for higher education , um, that could be determined as well. But that's difficult to sign away somebody else's obligation. Um, you know, but those are the types of things. Like it's, it's also, you know, you mentioned videotaping, like some people record people, you know, understanding what they're signing and that they were of clear mind and things like that. Like there are other ways to support the documentation of these agreements
Speaker 2:And, and include in it a question that says, and you understand that under the laws of this jurisdiction, this agreement agreement may be somewhat unfair to you, but it's clear and getting them to acknowledge I, yeah, it's going to , because sometimes in an effort to prove to a spouse that I am not marrying you for your money because you are daddy Warbucks. I will sign whatever you put in front of me. I would strongly, strongly advise against that because there will be no, 'cause they're thinking, if I prove to you during my loving treatment of you, et cetera, et cetera, you will tear this up. Do not be delusional. There is no requirement, no expectation, no entitlement to it being torn up. What you should do is negotiate for some con , I don't wanna say compensation, but some consequence so that for each year of marriage, daddy war bugs will contribute $10,000 as my separate property or a hundred thousand dollars or , um, if any money he puts in his 401k, I get an equal amount to put in my ira IRA or I don't, I don't, but do something so that you don't resent. 'cause that's one of the things that happens when someone signs one of these agreements, they resent it. Mm-Hmm. <affirmative> , they resent it. You made me give away everything that the law said. Everything that the law said I could have.
Speaker 1:Mm-Hmm .
Speaker 2:<affirmative> . And you treat me. Yeah. It's, I Why set your marriage up for that kind of consequence?
Speaker 1:Well, and I've seen, you know, like I've really had to shift my view of these agreements as well, you know, as the decades go as I go through divorces. Um, but, but even looking at these types of agreements in, in protecting somebody and going forward, it's, it, there could be bogies of, you know, if we make it through five years of marriage or 10 years of marriage or 15 or 20, like they've sort of vested, they've sort of retained some sort of, you know, the, the marital pie. And I think that that's helpful. You can't really look at it though, like as a predictor of divorce. You have to kind of look at it as like, we're going into this in the same mindset. Right? Right.
Speaker 2:We did one where the impetus for the marital agreement was the , um, the spouse that had the wealth. It was through family wealth and it was his family that that required that there be a marital agreement. And the wife understood completely, she had employment, but they were planning on having children. And they had talked about if they had children, it was expected 'cause of her income capacity for her to stay home at least through I think kindergarten or something. So they, it's , it wasn't a push present, but we could call it a push present for each child. She was gonna get like $50,000.
Speaker 1:Okay .
Speaker 2:Because it was , it was an acknowledgement that I'm going to be staying home, not working, not contributing. That needs to happen. And they, and they even, they created, I think it was Melissa , I can't, I can't swear it's been so long ago. I think they had a 20 year, maybe it was 25 years they were still married. The marital agreement disappeared. Hmm . Yeah . I , you know, and it's, I can't remember anybody else ever doing that, but it made sense because the, the , the grandparents were worried that, you know, we've got this family wealth, it's gonna get complicated. And a lot of his income was flowing through trust and they wanted to make sure all that income stayed separate property, which it wouldn't under our scheme. And it made sense that they wanted to do that. But then it also made sense with, but if this is a marriage that sticks, why wouldn't you want me and your and your grandchildren to benefit from that? And everybody went along with it.
Speaker 1:Yeah. And , and I mean, that's the whole point is that there is no agreement that's gonna be perfect for everybody. Um, but that you have to kind of go through some of the pieces. Do you recommend that everybody kind of does a premarital agreement or is it just first marriages, second marriages, or what do you see?
Speaker 2:Here's my suggestion. Before there are wedding plans and there's been an ask and an an affirmation that yes, there should be a discussion about expectations and whether or not there should be a premarital agreement depending on that conversation, then that's how I would determine whether or not a premarital agreement is recommended. Because when a young couple has nothing and their parents have nothing, and that's just how they show up when they start, then a marital agreement may not be necessary regardless of where people live. But if, you know , because so many of our couples are marrying later in life, they've created some wealth. They've created some debt, they may have some school debts and all kinds of things that, that they're bringing into the permanency of a relationship with a marriage license. Those, they , they need to talk about it. And generally speaking, if it's nothing more than this is what we owned and owe at the time of marriage, and if I still own it and owe it at the time we split, it's mine. If that's all it accomplishes, that saves you a huge headache. 'cause even if it's a five-year marriage, Melissa , these banks don't keep their records right online. You can go back two years and to get further back if your bank has them, which they should for seven years, despite the fact that there's federal laws to that, they wanna charge you an arm and a leg to go get those records. So you can prove what I had in that bank account when we got married. If you do, and , and some of those, I don't know that I'd recommend the template, but there are templates where it is just a snapshot. This is what we have and forever and ever, this is what I'm gonna own as my separate property. That's okay. That's okay .
Speaker 1:Well, and you, you mentioned though, a good point is to have the actual statements, so to actually have, you know, 'cause at that time you can, you can print it out, you can put it, you know, or your tax return or some other validation of that. Because this gets into kind of one of , uh, the last questions that we have. 'cause I think we have , this is so good. I , it's making my head spin. I think that everybody should have a premarital agreement for the money piece because what we're fighting about in court is money. And , but what I get right now, which maybe you can explain why I am getting these calls a lot, is that people are now wanting to ask about separation. And they're like, well, we wanna get legally separated, but we wanna agree to like what we have and what I'm , what we might get. And then we might work on our marriage, or we might get divorced and work on our marriage and then get remarried. Like they're asking these questions of kind of like how to talk about the money and what it would look like, but to maybe not break up and it kind of maybe leads into these post-marriage agreements and such. It does.
Speaker 2:Exactly. Okay . It does. Exactly. And, and Melissa, there's all kinds of reasons that people don't want a legal divorce. Sometimes it's religious, sometimes it's political. Yes . I imagine that there's quite a few people that are running for big offices that have premarital agreements, and there's probably some postmarital discussions about if that happens, then I get this. And I , that's my expectation. I have no inside track on that. So these postmarital agreements help a couple do exactly that. Uh, maybe somebody's getting ready to go into a risky venture and , uh, or we worry about taxes. Somebody are gonna , they're gonna live in different jurisdictions. If it is a valid marital agreement, the IRS will uphold it. They may, well, right now we have not enough workers to drill down on 'em , but that we have an opinion from the , um, uh, internal revenue Service that a valid premarital agreement if it adjusts how we're doing income, that can adjust how they do taxes. So if I'm in Texas and we have no income tax, but you're in Illinois and you've got income tax, that big income tax generating asset, push it down to, to Texas or whatever, whatever makes sense when you look at it, and you can do those in a postmarital agreement. I don't have a lot of knowledge about what each jurisdiction has. I've got a lot of knowledge about premarital agreements across the country. Um , but California has separation agreements. It , it's a term that we don't use in Texas. We call them postmarital agreements.
Speaker 1:Yeah. And I , and I , and I think that jurisdictionally as well, you know, that like depending upon what they , whether you can get separated, you know, it depends on your state and things like that. Um, but I think in, in some of those agreements, like we saw one where , um, you know, it was pretty wealthy , um, grandparents and families. And one of the, the spouse that was not part of the family wanted to invest money in cannabis operations. And the family was just like , uh, hell no, we do not wanna be affiliated with it. But we were able to set up an agreement where like the par the person was able to take their own separate money and invest in that, and that it would be a separate situation through separate ownership and all of that, you know. So in some cases there may be, and that it would, you know, because the whole disagreement was like if it was gonna be amazingly profitable that you weren't gonna be the benefit of it either. So it was an interesting play. Um, I think a , an interesting use of it. But for the most part I'm seeing that people are saying maybe, and maybe they're thinking, well, we'll I'll, I'll stay in the marriage and work on it if we agree to that. If I say no at some point we've said we're gonna split these things we've said, you know, and those are usually when there's no agreement. Like are you, like when, when you do maybe see a post uh , marriage agreement, are they usually when there's no premarital?
Speaker 2:Correct. Okay . Okay . You can modify a premarital agreement. And the other nice thing about postmarital agreements, you don't have to do the whole divorce picture. You could partition out. So you could have, I'll call 'em sub agreements. So we've got a million dollar account and he wants to go invest in cannabis and she wants to go invest in equine therapy. Um, so they're gonna split it up. I get 500, you get 500 and we will partition those dollars as our separate property. That's legal. It's complete. And what I go do and what I earn from that, if it stays in that business is all my separate property and vice versa. Uh, or you can say all income that we get from that is you , you get to language it. But what we're, where we're seeing the postmarital agreements say that somebody's had a drug or alcohol problem, and it is, it is ruining the marriage. So they're not ready to pull the trigger and get a divorce because they want to help enable some recovery, et cetera, or the kids or the religion or whatever. And so we will do what looks like a real divorce, same disclosures, same. And we divide the accounts so that if somebody's running amuck , they can go run amuck with their money and do what they want to. But that looks like a divorce just without the divorce decree on top of it. And that's valid. And we've had not a lot of those, but enough of them. It is a precursor in most instances to the divorce. But it's also an estate tool.
Speaker 1:Mm-Hmm.
Speaker 2:<affirmative> because it, it , it's an effective division. Now, if they could still do their wills so that if they pass my separate property part can still be inherited by the former spouse, and that's, that's not my ditch, but I know that is a possible, it's just, you know, the saying about be careful what you ask for, you might get it.
Speaker 1:Yeah. And we've seen another area that we've seen some of these, and, and I don't know if they're really post marriage agreements at this point or like divorce decrees or agreements. Um, but we will see when maybe the court wouldn't allow the parties. Like if you have a family business and it's creating all the income, it's all the wealth, it's everything. The insurance, everything. And the court, you know, if you're in a jurisdiction that the court doesn't allow people to remain owners, like just notoriously , um, you might ha and we'll see it in mediation where you'll agree to maybe stay co-owners how that would look, how the business, I mean, that's a big one that we, we see,
Speaker 2:Oh, I, I could see in your world, you're in the mediation and this, you got a family , um, business. Both parents are still like involved in , the kids are involved in , it's completely enmeshed. You could ba put that into a new entity, have an operating agreement, you're gonna have to pull in all your, your business drafters, have an operating agreement, a buy sell agreement, all the kinds of things as though they were strangers to each other joined in this new venture. What are the rules of the road gonna be? And then in the divorce decree, you barely have to mention it, you have your interest in these shares, in this entity , new entity. She has these shares in this new entity. Done, done. Mm-Hmm. <affirmative> . And then it, you do not disturb the generational wealth. You do not disturb the income flow, the insurance, all the benefits that this family business created. I I think it's that I , I have on speed dial. I have a trust person who can handle, do I need to dissolve a trust? Do I need to create a trust at real time in mediation, in collaborative law, this world happens all the time. We usually bring them to the physical table to talk to us all about what this would look like. We have our business transaction people looks like a merger and acquisition in the middle of a divorce. We have our child custody people that'll talk about if we need to create a trust for this special needs child, do we need to do the, the generational part where you, if there's money in it, it goes to the other children. It , it , there is no limit to the experts that you need to bring into the table at mediation or collaborative law that will help solve these problems that the courts simply are not equipped to do. They don't have the authority to do it. They don't have the time to do it. And I can , I can tell you I don't have the knowledge to do it. I pull in my experts. So I can't imagine that our courts who are so understaffed and probably underpaid are gonna be able to make it happen.
Speaker 1:Well, and I think that people understand that for decades what accountants and lawyers have done for corporations is created layers to protect people from getting sued by outsiders. And so you have layers of LLCs and corporations and tax consequences, if anything, I think. And then you have the estate planning that, that involves trust. If anything, I think that sometimes it's kind of weird, but like in the process of divorce, we do start to simplify the ownership and the structures that maybe 20 years ago were very necessary, but that we're starting to see are maybe just too much or, you know, not as relevant is , but you also have real estate, you know, a lot of LLCs are put in place to separate real estate from businesses. You know, so it's And who's gonna use it ? The
Speaker 2:Business ? Yeah . Yeah. The business uses this land. It's a separate entity that owns the land. So how about if we, we could co-own the land. Mm-Hmm . <affirmative> . And for years let the non-business owner get the income, like the rent. And , and , but you have to put in all the stuff about fair rental are we doing in a a , what's that triplet lease? Uh , it's just, you need to know what you need to know. And I don't pretend to have those answers. I do know that I lean on the people that do
Speaker 1:Well in my, my, you know, like we do some big divorces that are like famous people. And I'm sure you've been involved in some too. And in looking at some of these divorces, you also can see a lot of Hollywood doesn't get married or they stay married for financial reasons. And so I think that just my general desire around this podcast was to give people an opportunity to see that you can get divorced and still document what you need to happen. It doesn't have to be an either or. It's that there are options out there that you don't have to just stay married because you can't figure out the finances. Like there's agreements, but there's also like, maybe there's business agreements that you could get divorced and have, 'cause you have a great suggestion like change the structure while you're married so that it's the structure that you need , uh, in place if you desire to separate. Because a lot of people become friends, you know, it's not like they hate each other. It's just change . Oh ,
Speaker 2:They have special, think about it. Most, they have specialties within the business. Mom is really, really good at hr. Dad is horrible at it, but he's the, he's the r and d kind of person. You , you could take that company and split it then I don't know that . But that's when the other experts will have to come advise them. This would be a great company to split. Let the HR be the hr, we'll put in a binding contract that you have to hire this hr, blah, blah, blah. And you can fix it. That, that gets into some of the most creative open-minded never happens in litigation world. Mm-Hmm . <affirmative> . It just can't because I, in litigation, I want all the stuff for my client in mediation, not as much. But in collaborative we can truly create a different way for these entities to continue to benefit the couple and their family. It just, it's , if you don't know that those options are out there, you're failing your clients is what I would tell the lawyers. And for the business owners that are out there, or the CEOs or whoever's listening to your podcast, if you are not referring people who are needing some family law conversation that have the full toolbox of options to help them solve these problems, you're not helping them out.
Speaker 1:Yeah. And because
Speaker 2:There are solutions,
Speaker 1:And this leads into , because you've talked about collaborative, which is, there's a concept called collaborative divorce. You've talked about mediation, you know , um, and I encourage people, like if they're really concerned, you know, like if they're getting divorced , a I would even like them to talk to a divorce coach, right? Like get away of the land of like how this is gonna be a , an interesting experience or understand from a mediator how you can go around the court system. Because the, the only way that we're seeing like people really get stuck in the court system is if you're getting divorced from a narcissist and, and the narcissist controls all the money, so then you might be going to court. But, you know, tell us about some of how you're helping people do things differently. And these agreements could help people do things differently. Um, and how you work to help your clients.
Speaker 2:They , most of our clients come to us in the end of their relationship. Not at the beginning, just by statistics, but we have a fair number of premarital agreements. And what we're seeing now more Melissa, is the end of a marriage where there is a premarital agreement in effect. Mm-Hmm . And that's when I talk to you about making sure that you read your premarital agreement pretty frequently. Particularly if you're going to be buying or selling something that may be impacted by your premarital agreement, just know before you buy. So those kinds of things are , uh, we're , we're not used to that. We're not used to, oh, we are required to go to arbitration. Oh, we are forbidden from doing X, y, z, which is standard in a litigation track. If you've got a premarital agreement for heaven's sake, make sure your divorce lawyer knows it before they get started. Uh, and make sure that your estate planner knows it before you get started. Your business manager knows it so that everybody follows the yellow brick road to make sure that you don't do something that's outside of that premarital agreement that will damage its validity. So there's that. So we're having a lot of that . What I wanna do is find out when a client comes in, how would you define success? You know, is success an amicable divorce where our kids aren't harmed? Is your definition of success. I protect my business assets, whatever it's valued at, I'm happy to pay for that and he can be supported by me. Uh, my idea of success is annihilation of the other side. And then we send them to another lawyer , uh, whatever their definition, and we go over it with some frequency because we , we can change our goals. And as things develop in a case, you need to be reminded , um, Mr. Jones, you you want me to go do x, y, z depositions? Let's go back to your goals of amicable. Do you see how that's not gonna work? And, and challenge them because I am not a cheerleader for my clients. That's not my job. That's their business coach, their divorce coach, their friends, whoever. My job is to be your mirror. If you're doing or saying something that is going to make you look a certain way in our case, whether however we're doing this dissolution. That's my job to tell you that and to advise you if these are your goals, this behavior is not going to get you there. And then discuss whether or not we need to stay on as a , an attorney-client privilege or attorney-client relationship and picking your lawyer that matches. And I don't mean as identical 'cause you need a compliment who will help you think about the things you didn't think about and get to the goals that you think are important. And we're all different. We are all so very different. Nobody's better or worse. We're just, we have different mentalities.
Speaker 1:Yeah. And I, and I think that, you know, choosing an attorney is very important. I also think that , um, and this is just my personal opinion, maybe 'cause I like mediation a lot, but I think choosing an attorney that has some engagement in alternate ways of getting divorced, be it collaborative, be it a trained mediator, it doesn't take a lot to be trained as a mediator, you know? Um, but that to me, what it tells me is that the attorney is recognizing that there are other ways than divorce court. Because if they only think that divorce court is the way, then that might be the way you end up going. Even if there's other options. Um, I , because I , yeah, they'll , they're gonna stick with what they know and a litigator is different, you know, like you won't know that because it might be your first divorce. But I think that working with somebody that can give you the options, you know, speaking with attorneys , um, that could go the distance if you need, but are willing to, you know, have you have a , a little bit , uh, easier route. Because an easier route is lower fees, you know? Exactly. And not all attorneys are willing to do that at this point. You know, so you will, you won't find a tremendous amount of people with all of these skill sets . So it's really like if that's important to you, then, you know, if, if you wanna burn it to the ground and and fight as much as you there , that is, that is your right. Like, that is, you know, like your experience. But what we're talking about is a little bit different and they can connect with you on LinkedIn , um, happy to visit. So just reaching out to you,
Speaker 2:Remember . Yeah. I wanna say one thing. Do you wanna send my kid to college or yours? That's a question I ask. Yeah , you , I'm , I'm happy to take your money to go do this rabbit trail or we can solve this problem and move on. What , what we didn't talk about is the kitchen table. It's probably not relevant for your clientele, but there are cases where you don't really need the lawyer. The two of you could sit at the kitchen table, divide and conquer, give it to a lawyer to draft it up and you're done. So it does, every, every case is like an iceberg. It's frozen water, but everything else is different.
Speaker 1:Well, and, and starting at the kitchen table is where, you know, as long as there's not abuse issues and you feel safe and comfortable in that conversation, that will allow you to understand how much your spouse is willing to go about this in a collaborative way. Even if, you know, like you guys can still get attorneys and still have representation and advocates and, and a team, but it's also looking at, you know, as a couple, are you even capable of any of these discussions? Well try to have some of them, you know, like try to , um, even talk about it from an estate standpoint. Like where's all our stuff? Like what do we have? What do we owe? You know, and if those are red flags , uh, or they're like, you don't deserve to know that information. Well, you know, you might need to talk to other types of people that would give you resources, but , um, it's state specific and you're in Texas, so if you need more information, we've given , um, how to reach out to Susan. And I would say definitely consider a premarital agreement, just because I see how they end in court, all the time and the judge is gonna be the person that decides it. Um, so if you want some control or privacy, I think you have to consider some other ways. So I appreciate the information.
Speaker 2:It's been a lot of fun. It's nice meeting you.
Speaker 1:Thank you.