Judy Barber

I stood with a group of young people at a reception at a family conference where I had facilitated a program on prenuptial agreements. Several had attended the session, and asked me a few questions. But they were primarily talking to each other about the difficulties they faced in dealing with this issue.

One man felt obligated to the family holding company and to his father's desire that assets stay in the family. Another, whose family's business had recently been sold, couldn't imagine asking his wife, a successful businesswoman, to sign such an agreement. A young woman felt at a loss as to how to broach the topic with the man who would soon propose to her.

Here, the focus will be largely on marriages where there is a large financial disparity, more frequent in first marriages. But whether for a first marriage or a return to the altar after the death of a spouse or a divorce, romantic feelings are tested when a pre-nuptial agreement is part of the preparation for marriage. These agreements are the toughest negotiating I do. Each time I consult with a couple as they face each other, their parents, and often a cadre of advisors I wish there were ways to make it easier. I'm not sure there are. But I know that when a couple approaches the agreement with honesty, deep regard and sensitivity to the potential emotional and financial implications, it can help strengthen and sustain the relationship through a difficult time. Without this conscious effort, the union can be shaken to its foundation, creating irreparable misunderstanding and distrust. How can couples stay connected?

KEEP IN MIND that at the time two people are committing themselves to marriage, each wants to feel that he or she is most important in the potential spouse's life. Yet, in reality, they are signing what may become a divorce agreement. This is tough! Idealistic and hopeful, couples harbor a secret belief that the emotional bonds and loyalty between them will protect them from the dangerous shoals. Yet the pre-nuptial agreement symbolizes an allegiance to something other than the relationship; to a family, to assets and/or heirs. This devotion to something other than the relationship may feel so alien that it seems unreal. Lawyers are often maligned in these situations because they take what feels unbelievable and make it real.

RISKING THE CONVERSATION is essential as a couple approaches this process. Most often, both people feel vulnerable. The person initiating the document may do so out of a painful past experience, from anxiety regarding the future of a business or assets if there were to be a divorce, or from family pressure. The person who is asked to sign may have fears about the partner's commitment or his/her own financial security. Both may fear losing the relationship if too much pressure is exerted or if one refuses to sign. When I ask couples what makes it so hard to talk to each other, the response is often, "I'm afraid I'm going to learn something about you I haven't known and may not want to know."

The more monied partner rarely talks about the impact - what it's like to carry the burden of financial responsibility. He/she may wish the other would contribute more, financially, even if the contribution is more symbolic than substantive. Few share with their partner the underlying fear of being taken advantage of. The less-monied partner (who has less sense of financial autonomy) may feel at the mercy of the other who has money. He/she may feel shut out of the process of setting financial priorities.

The person with greater financial resources usually initiates the pre-nup. This built-in financial inequity can contribute to an imbalance of power in the relationship. I recently had a discussion with a woman who initiated a prenuptial agreement and who is in a long and successful marriage. She felt it was her responsibility to have the document but says, "There can be no real agreement. The document is unfair in that it creates an imbalance of power." At the time her spouse signed, he felt he had "no choice" -- that "fighting it would have created a huge crisis that [he] wouldn't win."

"He knew it would have triggered questions in me about my trust in him and his motivation, questions I couldn't have answered at the time." She went on to say that, "The person who has the money also needs to look at the issues provoked by the agreement - lack of trust, power and control."

NEVER PRESENT A PRENUPTIAL AGREEMENT WHERE THERE'S BEEN NO MUTUAL DISCUSSION. Even when it is clear from the beginning of a relationship that certain assets and income will remain separate, presenting the document as a fait accompli feels too inequitable and may result in a refusal to sign.

BOTH PEOPLE NEED TO FEEL THEY ARE GETTING SOMETHING FROM THE AGREEMENT. It is an understanding between two people. The person initiating the document gains protection. The person agreeing gets, at least, clarification. His or her financial situation needs to be discussed: How does he or she gain financial independence and security or create a net worth? Is it through a percentage of income set aside as separate property for the purpose of investments? What happens if both agree that person won't continue to work? Is there to be any transfer of assets or regular income? In many situations, this is truly taboo. The person with less money does not want to appear greedy or assumes that, with time, his or her spouse will offer to help create financial autonomy. For the person with the money, it may bring up distrust and suspicion of the partner's deeper motivation for the marriage.

Yet without looking at the non-monied partner's options and gaining an understanding of those financial needs, the good intentions both people bring to the commitment may well be undermined.

Solutions to this problem are highly individual. These situations can quickly become adversarial. The attorneys are fighting it out over how much income or assets the non-monied partner should receive. As things escalate, the amounts can get outrageous by the standards of everyone involved. I ask the person who requests the income or assets, "How old is your relationship? Based on that, what do you feel is fair?" That often (not always) takes it out of the realm of debate.

In these situations, a variety of advisers are often brought in - accountants, investment managers, trust officers and other trusted family advisers. However, the greatest potential for emotional damage is in the drafting of the document. The role of the attorney is critical to a positive outcome but it is not an easy task.

BRING IN THE ATTORNEY AFTER AN INITIAL DISCUSSION TOGETHER. To the extent possible, know what you want going into the first meeting. The attorney's job is to explain all the ramifications and to be informative regarding state laws. Discussing the desired goals before that first meeting sets the tone for the attorney and enables him/her to create the document, which can meet those objectives.

IN THE INITIAL DISCUSSION WITH THE ATTORNEY, EMPHASIZE THE IMPORTANCE OF THE RELATIONSHIP. Since the lawyer's job is to protect the interests of his or her client, the attorney drafting the document cannot represent both parties. In some situations, a couple can hire an attorney to draft the document and then each seeks separate counsel to make sure their interests are represented. This works well, particularly when there is little or no disagreement.

When each person has his or her own attorney, it needs to be emphasized from the first meeting that there is to be no acrimony. It is key that attorneys are sensitive to this issue because the language in these documents is, by nature, hostile. Sometimes the language in correspondence between attorneys and the couple questions the intention and motivation of the people involved in such an inflammatory way that it fuels distrust and resistance to the goals. At times it is necessary to protect a client but adversarial positions can tear at the fabric of the relationship.

TALK TO EACH OTHER, no through lawyers. Sometimes a couple may feel that it is less difficult to express their needs through counsel. But there is potential for misinterpretation and misunderstanding. Recently I spent a painful hour helping a couple unravel feelings about a transfer of assets. Because they had communicated through lawyers, there was confusion about the initial request and subsequent events. They were each resentful over what they thought the other wanted.

EMPHASIZE EXPEDIENCY TO ALL ADVISERS. Feelings fester. Ask those involved to keep the process moving along. Can their calendars be cleared to complete the work in a timely way? The vulnerability this sensitive subject creates makes it essential to complete the process without unnecessary delays.

GETTING CLOSURE. It's often hard to talk about the agreement once completed. Yet if a couple can discuss their good work together as well as the tough areas, true closure may be achieved. If they can share things they wish they'd done differently, or said more diplomatically, they can apologize, let it go -- then celebrate, strengthened by the experience!

In this issue, you'll find an interview with a couple who discuss how they worked their way through a prenuptial experience. Steve Swartz' example of an antenuptial policy for a family business, enables families to plan ahead so no family members feel they are singled out. Mike Fay defines the benefits and limits of such agreements.

PERSONAL EXPERIENCE

A Couple Who Stayed Connected
by Judy Barber

I met with Lynne and James in a hotel suite of an Eastern City. It was a dark and icy afternoon and they had driven quite a distance for the interview. As we shook hands, I was struck by how fresh and unaffected this thirty-ish couple was. They met on a ski slope five years ago, have been married for two and a half years, and are the proud parents of a six-month-old daughter.

ONE OF THE MANY THINGS this couple has in common is a shared background in family business. James works for the company his grandfather founded, his uncle now owns, which manufactures and distribute trucking equipment. Although he studied production and operations management in college, he had not planned to enter the business. Encouraged by his uncle to enter the business, James sees a good chance that he may eventually own it.

Lynne's Grandfather started a grocery business now run by her brother, as well as other business holdings. The impetus for the prenuptial agreement came from Lynne's side of the family. The agreement was an outgrowth of stockholder discussion regarding the need for a policy that would keep company stock in the family. Lynne and James were the first couple asked to abide by the new policy.

This is the story of how they both accommodated the business needs of Lynne's family while, at the same time, keeping their relationship the top priority. During the interview, I was impressed by how connected they stayed through glances and touching and by James's arm curled behind Lynne -- how supportive they were, even when they didn't agree.

IN EDITING THE INTERVIEW I sought to balance their harmony with the tension that exists between Lynne and James as a result of the premarital agreement. I did not want to smooth out the rough spots that exist between them, as with any couple, in a committed relationship.

JB: You met on a ski slope?

James: Yes...on the last run of my week's vacation. It was St. Patrick's Day, so we had a couple of green beers at the bottom of the hill...visited after that and a year later, she moved out here.

Lynne: Temporarily - just for six months to see what it would be like to be in the same place and not just see each other on weekends...it worked out great!

JB: How did the subject of marriage come up?

Lynne: I don't know - it just came up.

James: She kept threatening to move back to her hometown! ...Seriously though, we both knew halfway through the summer (which was also halfway through the six months) that we were definitely going to get married. She kept thinking that every event that came up throughout the summer was the weekend we'd get engaged.

Lynne: All these friends would come to town and say, "This is the perfect time for him to propose!" The six months was up Labor Day weekend, but it didn't happen until September 20th.

James: I just wanted to keep her guessing.

JB: How did the issue of the prenuptial agreement come up?

James: During the time we were engaged, I attended some planning meetings for [her] family business.

Lynne: My brother wanted a mission statement, polices and stockholder responsibilities in place which we didn't have. My brother invited James in shortly after we were engaged. My brother liked James right off the bat. Also there has always been this secrecy thing in my family that he is trying to break...he wanted to include James in what was going on.

JB: So specifically, how did the issue of a pre-marital agreement come up?

Lynne: Somebody asked, "What would happen if there was a divorce and someone outside the family was a stockholder in the company and suddenly we had this partner we didn't choose?" We were the only ones together. I'm not saying they didn't want to deal with James, but we were the guinea pigs.

JB: James, did you see this coming and what was it like for you?

James: I don't remember that I really anticipated it or not. I don't think I was surprised, although I wasn't really thrilled with the idea either.

JB: Did you talk about it after the topic came up at the meeting?

Lynne: It was a touchy subject.

James: I had some discussion with [Lynne's] financial planner.

Lynne: That was part of the planning. Yet it was hard to discuss. It was like I was saying two things, "I want to marry you and spend the rest of my life with you," and, "Just in case we get a divorce, I want you to sign this paper." They contradict each other. It puts the doubt in there and even when I'm saying, "I'm not planning to get divorced, I'm marrying you for life,"...it's hard; besides, there is a lot of divorce in my family. James saw that, and it made it harder to look at the commitment I'd made.
What made it easier for me was my responsibility as a stockholder in the family business and making sure that stayed intact. The policy wasn't made for James or any one person. It was a policy set for all the stockholders. It made it easier for me to say, "It's for the company, not for me."

James: I think I looked at it as something less than 100% commitment. If you're going to have a prenuptial agreement, no matter what the reasoning, it makes it less than a 100% commitment. That bothered me, even though I understood the reasoning.

JB: James, as a businessperson in a family business, you understood it on a rational level. But how did you make sense of it on a gut level?

James: My thinking from a business standpoint was that this prenuptial agreement was like any negotiation. If I'd wanted to handle it like a business, I could have been really tough. On the other hand, I didn't want to do anything to hurt our relationship, that's for sure. But sometimes in dealing with the family's lawyer, I almost didn't want to back down. I hate to back down in any business negotiation.

JB: But you did.

James: On one side it was a business document. On the other side, it was something that could have stood in the way of Lynne and I. So that's a matter of the heart.

JB: Were there other assets unrelated to the business that were negotiated?

James: It was based on both our assets, Lynne's being the focus. One of the issues was earnings generated from either of our assets during the time of our marriage...those are not considered marital assets...I had a hard time with that. We're living our lives together and I thought she'd be entitled to what I earned during that period and visa versa.

Lynne: If we put those earnings in both our names then they become marital.

JB: So how do you each build your own net worth?

Lynne: I'm not a businessperson and that is being taken care of through the family business.

James: I'm doing it through stock and a building I purchased prior to our marriage. It is a warehouse and the company I work for leases it from me. I think of it as setting it aside for us, not for me. It's perhaps more the enjoyment of seeing that I can grow a net worth than wanting to grow something for myself. I get a kick out of getting a big return on an investment. Sometimes that's more fun than spending it! I don't really see her family business or stock as mine; I didn't earn it.

Lynne: I didn't earn mine either. It was a gift. I feel it's mine, though. I know I didn't earn it but my grandfather set everything up for me and I've known about it since I was younger. I'm very thankful to my grandfather, and I feel guilty. James values a person who is earning a living and I don't earn my living. I don't want him not to respect me for that.

JB: Have you ever asked him about that?

Lynne: No.

James: Yes you have. You asked me what I thought about you giving up your business. You thought that was one of the things that attracted me to you, that you were a businessperson. And I said, that was not at all what attracted me to you.

Lynne: When we met and dated, I was a businesswoman. I'm a gemologist and had a boutique in my hometown. It ran well!

James: I have friends that I can discuss business with. I didn't need to marry someone to discuss business with.

Lynne: That was one thing I worried about - if you date and then, all of a sudden, one of you changes. I changed from working to staying at home. I love what I'm doing - especially with our baby. That's what I want to be doing.

JB: This is complicated and involves personal self worth as well as financial net worth but it sounds like there is more there.

Lynne: It's harder for the woman to have more money than the man. Usually the man does the supporting and, in society, it's okay to live off what the man earns. I feel it's different for a woman. I'd like to say, "It's ours ... everything is ours," but I don't. I try to make him feel it's ours too. I asked him the other night if he felt the money was ours. His response was, "Only the monthly money we combine for our household."

JB: James, your situation is complicated too. You feel comfortable creating your own net worth. Also, being a breadwinner is part of being a man in this culture. How do you feel about taking some of what you accumulate and setting it aside?

James: I don't know that I was really brought up to be a "bread winner." Both of my parents worked hard throughout their lives. They did well for themselves. I wouldn't say my father was looked upon as the breadwinner any more than my mom. I don't think about it as setting it aside for myself, but for us.

Lynne: But your mom was on your grandfather's side. Actually, that's the same situation. They got money from her father's family business. They invested it wisely.

James: The money was given for investments. I mean, Lynne feels connected to what she was given. I would, too, but rather than wealth, I was given good opportunities because of my grandfather's business.

JB: A prenuptial agreement is symbolic of one or both people having an allegiance to something other than the marriage. How do you retain a sense of togetherness, in spite of the financial separation?

Lynne: We're a team. It's not Lynne and it's not James. Anything that happens with the family, we discuss it. It just has to be that way.

James: We do all our living expenses together. We each put something into a checking account and that's how we pay bills. The only things we consider separate are these assets. I just can't get her to get rid of one credit card!

Lynne: I won't let go of my credit card or my checking account! That's part of being a little bit independent. I want to increase the monthly amount I put into the joint account. He's not pleased with that.

JB: You don't want her to do that?

Lynne: He wants us to put in equal amounts.

James: Right. I think it just goes along with maintaining a certain lifestyle. It would be easier to say it takes a lot more money each month but I don't know that's the best thing for us.

JB: It sounds as if there are some differences in how much money you each want to put into your lifestyle. How are you working this out?

James: I think we're both respectful of each other and that's why it's working out pretty well. Sometimes Lynne wants to live a little bit more luxurious lifestyle, but I don't think we can do that one-day and then, later on, say, "Let's start being examples for our children."

Lynne: I agree with him for the most part. We're not that much different. Every once in awhile it's hard. I love my home but I had a bigger place before. Sometimes I wish we still had it. But this is our first home.... My wish would be that James would feel more comfortable using or spending the money I have available. One thing I married him for was so he can ground me a bit. He's very good at that. You'd think with the pre-nuptial agreement that I'd found someone who would want to spend all the money. I found someone who doesn't. That made the prenuptial agreement tougher.

JB: How did you stay connected as you went through this process?

James: The experience of the prenuptial agreement was separate from the issue of our relationship. We hardly discussed it. We worked our way through it and it wasn't pleasant. I don't think it'll bother me again unless one of the other siblings got married without one. That would really bother me.

Lynne: We avoided it as much as possible because it was uncomfortable to talk about. It was easier to say, "Okay, whatever is needed for us to do our part, we'll do it and get it done." The toughest part was knowing we were going to get married yet there was this "BUT" right there.

JB: Did you sign the document together?

Lynne: No, we signed it separately. I was in my hometown and it was a week before the wedding. It was down to the wire...there is so much emotion and the attorneys were faxing papers back and forth. I wish we'd done it sooner.

JB: James, did you seek separate counsel?

James: Yes.

JB: How did you get closure on this after the document was signed?

James: I just decided that in this one situation I'd put my pride aside, business-wise, sign it and forget about it. It is a separate issue from our daily lives. You have to remember why you're doing this in the first place. I loved this person, and I wanted to marry her.

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