Is a Pre-Nup Right for Me? Wealth Disparity (Part 1 of 3)

Last Spring, we wrote about the rise in demand for prenuptial agreements during the pandemic.

In this three-part series, we will discuss the most common reasons why a prenuptial agreement (a “pre-nup”) might be the right decision for a couple on the verge of marriage.

Part I — Wealth Disparity

The most traditional scenario in which pre-nups might be requested is where there is a vast disparity in wealth between the future spouses. This evokes images of the celebrity marriage that you read about in People Magazine. A financially-dominant spouse marries someone with significantly fewer resources and promises a modest amount of future support if the marriage ultimately proves unsuccessful, all while preserving additional wealth accrued during the marriage.

While the celebrity marriage may be the most common source of wealth disparity in Beverly Hills, here in the Washington, DC region, wealth disparity giving rise to a pre-nup is typically attributed to family wealth. The impetus for the pre-nup often comes from the generation above.

Grandma or Grandpa worked their entire lives to accumulate generational wealth. They invested significant time and energy drafting estate planning documents to ensure that the family nest egg is passed down to future generations and protected. They may even condition an heir’s inheritance on any married heir having a valid pre-nup in place, or promise to foot the bill for the attorneys’ fees incurred by their grandchild’s spouse-to-be.

Alternatively, there may be no such advanced estate planning already in place from the generation above. There may not have been a discussion about how family wealth will be inherited and protected. There may not be any estate planning vehicles in place, such as a trust, to protect inherited wealth in the event of divorce. There may only be a likelihood of future wealth disparity due to an expected inheritance, which can trigger the discussion of a pre-nup.

At Bulman Dunie, we frequently represent parties on both sides of this type of a pre-nup. Whomever we represent, our goal is ensuring adequate “consideration” for the pre-nup on both sides. “Consideration” means a benefit. Each side must receive actual “consideration”—actual benefit—from the pre-nup in order for it to be valid.

For the wealthier spouse to protect significant wealth or potential future wealth, the other spouse should receive something in return for waiving their rights in the event of divorce, such as a promise of modest support in the event the marriage proves unsuccessful. For the less-monied spouse, the wealthier spouse might agree to waive any claim to earnings and savings accrued by the less-monied spouse during marriage.

If you are interested in exploring how a prenuptial agreement could protect your family’s wealth or have been presented with a draft prenuptial agreement by your fiance’s family, we can discuss creative ways to negotiate fair terms. Please contact Bulman Dunie or attorney Meg Rosan at mrosan@bulmandunie.com.

Please be on the lookout for Part 2 next month on the topic: Second Marriages.