What Really is “Fair” in PreNup Negotiations?

I’ve been drafting a fair number of premarital agreements in the past few months, now that same-sex couples can marry in California and, most significantly, now that gay and lesbian married couples receive federal benefits.  Negotiating these agreements is rarely simple, as the discussions raise deep issues about the underlying structure of the relationship – and each party’s notion of what is fair from a financial standpoint.  As is legally required, the discussion always begins with a review of what marital law would impose on the couple in the absence of an agreement, and this is usually rather surprising news to most couples.  For those that have already been together for some time, they discover that assets acquired so far are not merged upon marriage – they remain separate property under California law.   For many couples this information forces them to re-evaluate how they have organized their financial lives so far – and oftentimes one of the partners feels that there should be some retroactive sharing of what has been accumulated so far.  These discussions frequently devolve into painful explorations of who was successful and who wasn’t, and what sort of wise (or unwise) financial decisions have been made.

The next phase of the conversation focuses on what the law would do about post-marital assets – which are generally shared equally regardless of who earns them.  Some couples are quite comfortable with this kind of forced sharing, whereas others don’t feel it’s fair to adopt these rules.  This is especially true where each of them has clearly made choices independent of the relationship – choices about education, career, or ambition – such that sharing the benefits doesn’t feel right.  For other couples there are external factors, such as a prospective inheritance or the need to care for an elderly parent, which they feel should be taken into consideration.  Oftentimes the higher earner feels it should suffice that he or she is supporting his or her partner while they are living together, but that splitting savings is excessive.  Interestingly, the lower earner often is uncomfortable even asking for a sharing of assets, either because he or she has never felt that a partner would be taking care of him or her, or perhaps because he or she fears that asking for this sort of sharing will trigger a hostile reaction from his or her spouse.

As difficult as these issues are to resolve, the hardest nut to crack involves spousal support.  The law in most states says that if one spouse is earning less than the other one at the time of a dissolution, the higher earner can be required to pay spousal support for some period of time, often about half the duration of the marriage.  There are various theories behind this concept: for some it’s a way to help the lower earner “move on” in life, for others it reflects the belief that the higher earner has benefited from the love and support of a spouse during the marriage.  But to many lesbians and gay men, the notion of supporting an ex-lover seems absurd – they should be grateful for the support they received during the marriage!

What’s interesting to me is to see how differently couples handle these challenging topics.  I’ve observed some couples be entirely practical, and reach compromises quickly that address both partner’s concerns and reach a reasonable middle path.  For other couples – even when there’s not a huge amount of money at stake – the feelings are tender and the rifts seem impossible to heal.  One of them might feel offended that the other expects to be supported, while sometimes the lower earner feels unduly blamed for their difficult financial situation.  It’s easier to resolve the issues when one partner is earning less because he or she is taking care of the kids, or if one partner has sufficient income and assets to easily support both partners.  It gets more difficult if the “richer” one doesn’t feel very secure financially, or where the lower earner has made voluntary choices that resulted in the financial difficulties.

The good news is that most of my clients find their way through these thickets, and reach an agreement and go on to celebrate their marriage. Others, however, decide that marriage just isn’t the right legal framework for them, at least not yet, and they are able to stay together as a couple and defer the wedding, perhaps forever.  Unfortunately, there are couples whose relationship doesn’t survive the prenup negotiation process.  For them, asking these hard questions reveals deep differences in feelings and goals, and forces them to reconsider their plans, resulting in a breakup of the relationship.  It’s painful when this happens, though I’m convinced that this was an inevitable outcome, sooner or later.

And what have I learned about how to approach these questions most effectively?  The first place to start is to be honest about one’s own needs and feelings.  Do you regret the choices you have made so far, and do you feel you have the ability to turn your life in a new direction?  Are you disappointed in what you received, either positive or negative, from your parents and your childhood?  What are your long term financial needs, and how do they differ from that of your partner?  The next step is to be truly open to understanding your partner’s attitudes about money and financial security, even where the feelings might be threatening to you.  As seasoned negotiators always remind us, you can’t build a bridge until you know where the other side of the river is located.  And then, in the end, the two of you need to find a way to build an arrangement that is supportive of both partner’s goals and needs, and brings you closer together as you form your legal relationship.  Forging your financial partnership – or agreeing to maintain separate financial identities even while married – is an important dimension to creating intimacy.  Not as much fun as making love, for sure, but in some ways equally important when it comes to nurturing your long term relationship.

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