Prenups Can Fail in High Net Worth Divorces

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While bringing up the subject of having a prenuptial agreement drafted might not be the most romantic thing to discuss before marriage, this document can prove to be of tremendous help in the unfortunate event of a high net worth divorce.

This is because a prenup significantly reduces complications regarding finances and protects the assets of the wealthier spouse.

Furthermore, a prenup covers:

  • business matters
  • retirement accounts
  • the division of life insurance
  • property management

However, is drafting and signing a prenup enough to foolproof a high net worth marriage in the case of a divorce?

Why Can Prenups Be Ineffective in a High Net Worth Divorce

Before drafting a prenup, it is paramount that you disclose to your future spouse the existence of all your assets, as otherwise, the document can be deemed invalid in a divorce. Moreover, it is also essential to ensure your partner enters it voluntarily while fully understanding the meaning of the prenup and what each condition entails.

Finally, it is crucial that you do not force your future spouse to sign a prenup, as they can use this pertinent argument during the divorce. Nevertheless, there are numerous reasons why a prenup might be considered unenforceable in a high net worth divorce, in addition to those above.

The following are the most prevalent reasons why a prenup might not be deemed valid by the judge in a high net worth divorce:

  • It was signed under duress: While coercion or duress is often difficult to prove in court, as each state has different laws concerning it, the spouse who is not wealthy can bring up this argument. This can happen either because it is true or because they are planning to make the judge award them a larger portion of their ex-partner's assets. Consequently, if the spouse can prove that they lacked mental capacity when they signed it, such as being ill or under the influence of drugs or alcohol, this might be a good enough reason to invalidate it.
  • It was filed improperly: Like any other legal document, a prenup must be written in a specific manner to make it valid, as well as following the laws of your state of residence. Careless errors might render a prenup unenforceable, so it must be thorough and detailed to meet the court's requirements. If your prenup was drafted briskly and unclearly, a portion of it or the whole document could be thrown out in a divorce.
  • It is fraudulent: A fraudulent prenup involves the less wealthy spouse signing it without knowing about all the assets of their future high net worth partner. If the spouse can prove that their partner did not disclose all of their assets or they undervalued their assets, the prenuptial agreement will be deemed invalid by the judge. When drafting a prenup, the wealthy spouse must also disclose the liabilities and debt.
  • It favors one spouse too much than the other: Because prenups have the purpose of protecting both spouses in case of a divorce, they should not heavily favor one partner over the other. The majority of prenups ensure that the assets or debts a spouse brings to the marriage will remain theirs if the marriage ends. The court might invalidate a prenup if it is deemed unreasonable or if it states absurd conditions such as a prohibition on weight gain or limitations on the partner's activities.
  • It was not signed with adequate legal representation: It is essential that both partners have separate legal counsel upon signing a prenup. Since prenups are contracts, people should give themselves a lot of time to consult a lawyer in order to review the agreement before signing. If you or your partner signed the document without a lawyer present, you risk invalidation from the judge in a divorce.

Thereby, there are plenty of reasons why a prenup can fail to protect you in a high net worth divorce. For this reason, you should ensure you take all the necessary precautions when drafting and signing this extremely important document, as it dictates what happens to the wealthy spouse's assets in the event of a divorce or death.

To make sure you have your prenup drafted correctly, you should:

  • sign it at least one month before marriage
  • keep it updated with every change that occurs in your marriage
  • be precise and clear concerning what you wish to happen with your assets
  • make a fair prenup that protects both partners

Where Prenups Fall Short in a High Net Worth Divorce

Courts and legislatures do not allow couples to bargain away their children's rights. A couple is prohibited from including what happens to their children in their prenup because these documents mostly refer to financial assets, whereas children are seen as persons. Nonetheless, it is possible for one spouse to request that their child from a previous relationship inherit some of their property.

Therefore, in the unfortunate event of a divorce, a couple with a wealthy spouse will have to make a decision when it comes to children or has the children choose their custodial parent if they are 14 or older. Lastly, spousal support is another issue that you cannot include in a prenup in some states. Also known as alimony, spousal support is a sum of money the high net worth partner has to pay to their ex-spouse so that they can continue to live comfortably.

The payment can be permanent until one of the ex-spouses passes away or remarries, or temporary. Because the judge decides on the sum of money that should be paid as spousal support only in regular divorces, people in high net worth divorces have to make their own decision, preferably with the help of a specialized high asset divorce lawyer.

If You Are Going Through a High Net Divorce, Sean Cleary Will Offer You Quality Legal Assistance

With over two decades of professional experience, Sean M. Cleary is a lawyer who specializes in offering superior assistance and representation to high net worth individuals who are currently navigating a divorce. He is aware of how challenging going through a divorce involving valuable assets is, which is why he will take it upon himself to provide you with the assistance you need.

Your divorce will end significantly faster with both ex-partners content with the final decisions. Sean and his legal team will carefully listen to you, examine all the documents involved in your high net worth divorce, and eventually develop a strategy that will solve the most acute issues you are facing because of your divorce.

Disclaimer: Please note that the information provided on this site is not formal legal advice, also the site does not allow you to form an attorney-client relationship.