Improving on a “Bad” Pre-nuptial Agreement
Basic Facts
Dennis was a wealthy CEO. Nora was a part time self-employed entrepreneur. Each was approaching retirement. Nora never thought the marriage would end in divorce when she signed a pre-nuptial agreement at Dennis’ request months before the wedding.
Challenges
Nora was financially unprepared for post-divorce life and the pre-nuptial agreement would not have allowed her to meet her current needs or retire in the foreseeable future. Although the marriage was ending, Nora valued her friendship with Dennis and was certain that a legal challenge to the pre-nuptial agreement would end their friendship, be expensive and probably not even be successful.
Solution/Value Added
Meeting with Dennis and his lawyer during the collaborative process, Nora and I learned that the pre-nuptial agreement would have resulted in numerous unintended financial consequences for Dennis. Nora, Dennis and both lawyers worked as a team with other professionals, including a mortgage lender and Dennis’ accountant. As a result, Nora qualified for preferential financing for the purchase and renovation of her dream home and was able to create a plan to jump start her business. Nora was able to focus on the renovation project and long term income production due to the short term alimony component of the settlement. The arrangement saved Dennis tens of thousands of dollars of income tax liability which he would have incurred under the pre-nuptial agreement and allowed him to keep business and personal finances private. To the satisfaction of both Nora and Dennis, they remain friends.