Women, listen up.
If you aren’t going to be the high-earning spouse in a marriage, you are going to want to consider prenuptial or postnuptial agreements.
“There is a fallacy that the people who are not the money spouse should not sign a prenup or postnup. That’s wrong. This is your time as the non-moneyed spouse to negotiate your package,” said divorce attorney Lisa Zeiderman, noting that women are usually the ones to spend less time in the workforce because they are home with kids or supporting the family.
Zeiderman, managing partner at Miller Zeiderman LLP in New York, spoke in early May at Financial Advisor magazine’s eighth annual Invest In Women conference in Atlanta, participating in a panel called “Divorce, Second Marriages & Pre-Nuptial Agreements.”
She said her office sees many women who have been in marriages after 10, 15 or 25 years and have essentially given up their earning power. “And they are not going to get enough spousal support and they are not going to get enough equitable distribution to make up for that time,” she said.
If women haven’t negotiated a prenup or postnup at the point they decide to stay home, they might later find themselves spending huge amounts on legal fees to demonstrate what their lifestyle is and why they can’t earn anymore—and how it might be devastating to them that their husbands, who might have gone on to earn millions over the years their spouses stayed home, do not want to give them financial support, Zeiderman said.
As for what should be in a prenup or postnup, Zeiderman said these agreements should also include estate rights in the event a husband dies. She noted that under New York law, for example, the wife is entitled to one-third of the estate if the husband dies without a will or an elector. A wife should also put in for spousal support and the amount of equitable distribution relating to the amount of assets the couple has accumulated. “Equitable” does not necessarily mean 50% in every state.
A conversation about prenups and postnups is difficult to broach with clients, noted Carol Lee Roberts, the president of the Institute for Divorce Financial Analysts and the panel’s moderator. Roberts reminded advisors in the room that these contracts should be treated like anything else that protects their clients.
“You would think nothing of asking your clients if they have disability insurance and telling them they are more likely to get disabled than be dead before age 65. We all make sure our clients have adequate insurance,” Roberts said. “It’s the nature of our work, and this is just one more thing. … A marriage will end either by one of the parties dying or divorce. It’s guaranteed like all the other inevitable things we address with our clients.”
Roberts noted that 41% of first marriages end in divorce, as do 60% of second marriages and 73% of third marriages, which makes it crucial for advisors to talk about it.
“This is not a taboo thing,” added panelist Kimberly Foss, a senior wealth advisor with Mercer Advisors. “Women work, so we want to know that your asset is protected.”
Foss said it’s important that clients understand what it’s like to go through the process of a prenuptial agreement and it may be that advisors have to sit with the clients at the negotiating table with the husband-to-be. The client has to answer some questions: “So, if she lives in a house, where does she get to live? Who is going to be the caregiver and what benefits will she have long term?
“What I do is list those [questions] out for her and then I could be the voice when we go in,” Foss said, adding that this is not about teaming up on the future spouse. She noted that while advisors are not divorce litigators, they still need to be that voice, since the client may not be comfortable speaking up for herself, even in the second marriage.
Zeiderman agreed. “So many times, we see people who are actually signing that prenup, maybe three weeks or four weeks or two months before the marriage,” which is never a good idea. Without an advisor to lead a client through it, the client is likely to fold—and concede to the future spouse’s demands.
Zeiderman said her firm usually offers to vet husbands-to-be when a client is considering a second marriage “because we could often see things that they may not be able to see.” But the clients usually reject the offer.
Advisors will likely have different discussions with clients depending on their ages. Zeiderman said clients in their 40s, 50s and 60s are often “fighting for every cent that they can get for spousal support or fighting not to pay it,” while younger clients are keeping their income and assets separate.
“So they are coming into my office, and they are being very intentional about the fact that [both spouses are] going to stay in the workforce and that they do not end up in a situation where they are supporting the other person,” she said. “So they are waiving their spousal support and they are doing it intentionally.”
Foss, however, cautions that keeping separate assets and income could be problematic unless it’s discussed often. “I will just tell you in my personal life [with] separate accounts and separate assets—I know it’s the wedge that broke my marriage apart. I mean, it was the money,” she said. For that reason, she warns that people in their 30s getting married for the first time should have their separate accounts but also have a shared account as well.