Protect your Assets: Prenuptial Agreements 101


What is a prenuptial agreement?

A prenuptial or premarital agreement is a negotiated agreement reached between two parties in advance of marriage. The agreement typically deals with the ownership of assets in the event the marriage ends in divorce. Some prenuptial agreements will also cover alimony and child support. There is a great overview from a legal perspective here.

Do I really need a premarital agreement?

About half of marriages end in divorce in the United States so it may be prudent to consider signing one. Following are some considerations to help guide your decision making.

Timing is everything

Many newly engaged couples believe the entire concept of prenuptial agreements is unromantic or even disgusting because the party proposing the agreement may be planning for the marriage to fail. If you plan on asking for a prenuptial agreement in your future marriage we suggest you start the conversation early so expectations are not shattered weeks in advance of the big day.

Many jurisdictions even require a party be given a certain amount of time to review and negotiate the terms of a prenuptial before the marriage date. If the adequate time is not provided the agreement can be rendered unenforceable. In California the party receiving the prenuptial agreement must be given at least seven days to review the agreement before it is signed. If someone is not given the seven days, a court may consider it to be signed under duress and refuse to enforce it’s provisions.

Protect yourself.

Prenuptial agreements should be negotiated with the assistance of licensed and independent legal counsel. Independent is a key word. We have seen many prenuptial agreements drafted for couples by one attorney. Usually the drafting attorney is working for the person with the money. So how could the other party hope to get fair and complete representation from this lawyer if they are already working for their soon to be spouse? Unfortunately they usually do not.

In the State of California the party receiving the prenuptial agreement must be represented by independent legal counsel at the time of signing the agreement or waive their right to do so in writing. If independent counsel is not present the agreement may be rendered unenforceable.

This facet works to the advantage of both parties. For the party receiving the prenuptial agreement they will have access to competent and experienced legal counsel to ensure they understand what they are signing. For the person offering the prenuptial it provides additional assurance the agreement will stand up in court if the day should come. Bottom line don’t use your fiance’s attorney.

Protect your future.

Prenuptial agreements are all about money. One or both parties have it or the expectation of having it and want the money protected in the event of divorce. They are not only for celebrities or the super rich. Say you started a business before you were married and the business is just starting to gain traction. If the business grows to a value of millions of dollars during your marriage, the value may be considered part of your marital estate and you will have to pay your spouse to keep it in a divorce.

You may wish to have the business carved out as your separate property through the use of a prenuptial agreement. If the business does not take off as expected you would still have the peace of mind to know it is yours. If it does take off, you and your new spouse probably enjoyed the fruits of this success during your marriage through the income it was able to pay you.

Be prepared.

Prenuptial agreements require diligence and full disclosure. One of the many problems we see with prenuptial agreements is a complete lack or poor effort at disclosure of financial information. A good prenuptial agreement will include exhibits attached showing the assets, debts, income and expenses of both parties. You may not be able to prove assets not disclosed in the financials of the prenuptial agreement are governed by the provisions.

Take for example a brokerage account. You sign a prenuptial agreement saying all assets owned at the time of marriage are considered the separate property of the owner. What if the brokerage account was with Lehman Brothers who subsequently goes bankrupt and their records are no longer available. Your account balance will not have disappeared with the bankruptcy but your ability to prove it existed at the time of your marriage may have. If you cannot prove it existed at the time of marriage you may not get it awarded as your separate property in divorce. Start with full disclosure, be diligent about keeping records and consider updating or amending your prenuptial agreement as circumstances change and assets move around.


Stay tuned for more on the topic as we dive into Best Practices, explain Common Provisions, uncover Postnuptial and cohabitation agreements, share some horror stories of Prenuptial Failures and maybe even convince you Prenups are Romantic.

Hidden Assets in Divorce Panama Papers

Clients of Wellspring Divorce Advisors regularly express concerns about hidden assets in divorce proceedings. Often trust has been lost thanks to an affair and it is easy to take the next step and believe one lie makes it likely there are others. In most cases a Certified Divorce Financial Analyst at Wellspring can either confirm or deny these client fears through forensic review of financial records but the realizations found in the Panama Papers have proven it may be possible to hide assets. At least for a while.

The Panama Papers, published the International Consortium of Investigative Journalists or ICIJ, reveal

  • Offshore companies used ‘in a game of hide and concealment’ after marriages break down
  • Documents list luxury cars and yachts, lavish homes, and art collections
  • Spouses face a costly battle to prove ownership of offshore assets in protracted divorce proceedings

The ICIJ published a story How the One Percenters Divorce: Offshore Intrigue Plays Hide and Seek with Millions” in early April of 2016. Most of the names revealed in the papers are international but the South American location of the law form involved does not render American citizens immune to the frauds perpetrated.

Concerns for hidden assets in divorce are common and widespread. If you share these concerns you must ask yourself; How much is the peace of mind worth? The peace of mind to know your spouse did not defraud you in the divorce proceedings. The peace of mind to know you got what you were owed in the financial settlement. There are ways to uncover hidden assets in divorce if you have the time and money to pursue it. We suggest you work with your Wellspring Divorce advisor and your attorney to look at the cost versus benefit of doing so and make your decision on how to proceed with the professional advice in mind.

Divorce Costs how much?

It depends on the situation; for example, if you have substantial or complicated assets your divorce cost may be higher. If you own a small business and take liberties with deducting your personal expenses as business expenses on your taxes your divorce cost will be higher. If you or your spouse have significant separate property claims your divorce cost will be higher. If you cannot have productive and respectful discussions with your spouse your divorce cost will be higher. In our experience the most expensive divorces are fought by two parties who HATE each other for one reason or another. Sadly the legal system is structured in a way leaving these two hateful individuals more angry at the end of the process than they were at the outset. It also depends on the attorney’s hourly rate and if he or she is inclined to encourage a settlement. Hiring the most expensive attorney in town known for being a shark will increase you divorce cost.

Wellspring Divorce Advisors coaches clients to think of their potential divorce cost as a continuum from highest to lowest rather than absolute dollar terms. Click here for a brief overview of your main options from proceeding or call us for an overview and consultation to help you choose. Our experience has shown the engagement with Wellspring Divorce Advisors will reduce your overall cost significantly.

Ranked below are your process options ranked highest to lowest in cost. We have seen litigation cases cost millions of dollars in fees and mediation cases with equivalent amounts of assets done for $15,000.

  1. Litigation
  2. Adversarial with Settlement
  3. Collaborative Divorce
  4. Mediation
  5. Pro-Per

Caveat: A failed mediation can easily land you in a litigation model and cost even more. Make sure you understand mediation before opting in. The model is often misunderstood and full of less than reputable professionals.

Temporary orders for money in divorce

Temporary orders are usually issued regarding child custody, child support, spousal support and use or possession of assets. They cover the time period between the time that the divorce petition is filed and the time that the judgement of divorce is issued. Orders of any type are legal matters requiring the attention of legal counsel. Wellspring Divorce Advisors requires all of our clients consult with legal counsel to make sure they understand their legal rights and obligations.

Divorce is not a fast process. It is a legal, emotional and financial process often lasting years from the date a petition for dissolution is filed. Because of the often long periods of time passing between petition and judgment the court is often asked to make temporary orders on certain pieces of the case. Temporary Orders are important from a financial perspective because they are designed to protect the parties from risks that appear during pending dissolution proceedings. Risks might include a full time mother and homemaker being cut off from family bank accounts and by extension unable to pay bills. They may be entered for the sole purpose of providing clarity and guidelines to parents as to their obligations to support minor children. There may also be reasons to make orders for a party to continue supporting the costs of a marital asset in order to protect credit scores. Temporary orders could also be used in situations where extensive financial data gathering is under way and the court simply lacks complete information to make longer term decisions.

Following are some examples of temporary orders related to finances we have seen in our practice. We have provided links to California self help websites where possible.

  1. Order for Temporary Alimony or Spousal Support – A temporary order for alimony is often entered to ensure both parties have the ability, to the extent possible, to maintain the marital standard of living they enjoyed during marriage. At the very least the temporary order is put in place to provide necessary funds to a non-working or lower earning spouse to support themselves during pending litigation or settlement discussions. In California the amount of temporary alimony will usually be calculated by a computer program called Dissomaster based upon historical and current incomes of both parties. Note: Temporary spousal support is almost always higher than long term spousal support in our experience.
  2. Order for Temporary Child Support – A temporary child support order provides necessary funds to a non-working or lower earning spouse to support the expenses necessary to support minor children. The amount of temporary child support will be based upon the incomes of both parties as well as the needs of the children. If, for example, the children have special needs or attend private schools, orders may be entered to cover the associated expenses of specific items.
  3. Order for Sole Use and Possession of the Marital Residence – In more contentious cases parties may argue over who should move out of the marital residence during the pending litigation. It may be necessary in this case to grant one party sole use and possession of a marital home on a temporary basis while litigation or settlement discussions proceed.
  4. Automatic Temporary Restraining Orders – in most jurisdictions the filing of a petition for marital dissolution in accompanied by temporary orders restraining either party from selling, encumbering or otherwise disposing of an asset. The orders may also restrict you from changing beneficiaries on insurance or retirement funds.


What is financial discovery during divorce?

Financial discovery is the fact finding/document gathering part of the divorce process.  Financial discovery can be time consuming and may be the most expensive part of a divorce process for a wealthy family. Financial discovery will most likely happen over time. The amount of time depends on whether or not the parties are being cooperative.  It is a process, not an event, and requires ongoing document requests until all necessary information is gathered.

For the most part, discovery takes place outside the courtroom, with parties exchanging written information and sitting through face-to-face questioning sessions (called “depositions”). However, if the parties can’t agree on what should be handed over in discovery, a judge may have to resolve the dispute.

The kind of information that a party can force someone else to reveal — is generally very broad, though there are some limits. A party may ask for facts about the case, for the identity of others who may know something about the case, for documents relating to the case, and for inspection of physical objects or property connected to the dispute. Discovery can be used to seek information not only from the other party, but also from people and businesses that aren’t involved in the legal proceedings.

There are four types of formal tools that are frequently used in financial discovery during divorce. They are:

  • In a deposition, one party or that party’s lawyer conducts face-to-face questioning of the other party or a witness to the dispute. The person being questioned (the “deponent”) must answer under oath, and the answers are recorded for later use at trial. If the deponent cannot testify at trial, the questions and answers might be read to the jury as evidence. If the deponent does testify and gives different answers at trial from those he gave during the deposition, the questions and answers can be used to show the jury that the witness changed his story.
  • Requests for production of evidence.In a request for production of evidence, one party asks the other for physical evidence related to the dispute. Requests for production are usually used to gather pertinent documents, such as contracts, employment files, billing records, or documents related to real estate. However, these requests can also be used to inspect physical objects or property — for example, in a dispute about whether a contractor properly repaired a homeowner’s roof, the contractor’s lawyer might ask to have a roofing expert inspect the work.
  • Interrogatories are written questions one party sends to the other to be answered under oath. The answers can be used at trial in the same way as deposition answers — to challenge a party who changes her story later.
  • Requests for admission.In a request for admission, one party asks the other party to admit, under oath, that certain facts are true or certain documents are genuine. These requests are generally used to save time and to narrow the issues that have to be proved at trial.

We work with our clients to identify and collect the financial data pertinent to the divorce. From the original data gathering we evaluate any key financial concerns related to divorce – such as income and deductions, living expenses, assets, and liabilities. This process will likely tip us to other information we will need to request.

Wellspring Advisors work with the attorney to compile complete and comprehensive document requests, interrogatories and depositions to insure no stone goes unturned and the right questions are asked to help level the playing field. Good financial discovery will give you the peace of mind that no assets were hidden. Knowledge is power in the financial negotiations of divorce and formal discovery may be the only way to gain the knowledge you need.