This summer certainly lived up to its perennial reputation as prime time for weddings. At the start of the season, a multibillionaire media mogul walked down the aisle with his bride at a lavish ceremony in Los Angeles. That the groom was marrying for the fifth time and is now 93 carries important lessons for other ultra-high-net-worth individuals (UHNWIs) currently considering matrimony, specifically as relates to prenuptial agreements.
Prenups, which stipulate how assets should be distributed in the event a marriage is dissolved, are not necessarily appropriate for everyone. For older individuals as well as those bringing considerable wealth to the union, however, they can be especially effective in providing both the couple and their families with priceless peace of mind.
Amid the enchantment of wedding season, it’s important for UHNWIs to be fully versed in all the essential legal and financial elements that a marriage involves. Earlier in 2024, the prominent matrimonial attorney Jenifer J. Foley, Co-founder and Partner at Alter Wolff Foley & Stutman LLP, was part of an all-star panel on UHNW divorce convened by Geller’s Chief Client Officer Scott Bush.
Let’s look at what she has to say about three paramount aspects of prenups.
We’ll start with the crucial question of who they may be most useful for:
1) To Prenup or Not to Prenup
As Foley points out, people who might want to consider a prenup include those entering into marriage having already accumulated significant family wealth, business-related assets, or trust funds. In such scenarios, prenups tend to be comparatively easy to draw up and enforce.
Individuals who have been married previously, anyone anticipating a future financial windfall, and couples with existing children who are especially mindful of any inheritance issues could also benefit from the provisions of a prenup.
That said, these documents do have inherent limitations and are far from foolproof. Lawyers can’t predict the future. As a couple’s financial situation evolves and individual wealth disparities widen, complications can ensue. And education is ultimately of paramount importance. State laws vary, so it is always vital to be able to call upon a team of trusted advisors.
Moving on, how couples can resolve conflicts relating to the need for a prenup:
2) When One Partner Wants a Prenup and the Other Doesn’t
Clear, upfront, and honest communication is key in this case. Foley says parties to the marriage should have an open and honest dialog aimed at answering the “Why’s?” and proactively problem solve any concerns that arise.
Couples also have a responsibility to be fully educated about their overall financial profile, and the type of lifestyle they envisage together. This is especially necessary where there is a material monetary gulf between the parties, which often becomes a particularly contentious issue at the point of divorce. Before the wedding date is even set, discussions should be scheduled relating to the role the non-monied spouse intends to play during the marriage, including such aspects as how they plan to build their own financial security.
Foley also emphasizes that prenups needn’t necessarily be zero-sum scenarios that address everything all at once. Frequently, for example, the contracts she draws up will cover specific subjects such as asset distribution, while leaving other items including spousal support open.
Last but not least, why “set it and forget it” never works with prenups:
3) Honoring the Prenup after the “I Do”
Foley stresses this is one document which should never gather dust or be relegated to the bottom of a drawer. It is, she adds, “The contract that you have to remember you signed.”
A main aim of any prenup is to negate the need for a litigious future divorce. As such, couples must strictly adhere to its provisions throughout the course of their marriage. Not doing so can come back to haunt both signatories at a later date.
An experienced family office, fully familiar with the contents, has an indispensable role here in overseeing ongoing administration and ensuring that the agreement is being complied with.
Couples contemplating marriage often perceive prenups as antithetical to romance. And certainly, not everyone needs them. That said, especially for UHNWI’s and their families, a detailed and transparent prenup can be an indispensable way of safeguarding hard-earned assets.
If you have questions about any aspect of this article or how we can support you as you look to plan your nuptials, do not hesitate to contact us. We would be glad to have a discussion.
This presentation is being provided for informational purposes only and does not constitute legal, tax, or investment advice. Recipients should consult their professional advisors prior to acting on any information set forth herein.
