WEBVTT - Even Millennials With No Assets Want Prenups

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<v Speaker 1>Welcome to the Bloomberg Law Podcast. I'm June Grosso. Every

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<v Speaker 1>day we bring you inside an analysis into the most

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<v Speaker 1>important legal news of the day. You can find more

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<v Speaker 1>episodes of the Bloomberg Law Podcast on Apple podcast, SoundCloud

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<v Speaker 1>and on Bloomberg dot com slash podcasts. Film The War

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<v Speaker 1>of the Roses paints a really bleak picture of divorce.

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<v Speaker 1>In the dark comedy, a wealthy couple's marriage falls apart,

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<v Speaker 1>and their fight over their opulent home and everything in

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<v Speaker 1>it becomes bitter and violent. I fum the one who

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<v Speaker 1>found in this house. I fought with my money. It's

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<v Speaker 1>a lot easier to spend, but it's a vaking honey bottom.

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<v Speaker 1>You might not have made it not for me, So

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<v Speaker 1>we takes. When a couple of starts keep his score,

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<v Speaker 1>there is no winnings, its only degrees of losing. The

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<v Speaker 1>yellow areas are mine, the red areas for hers. This

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<v Speaker 1>seems rational, t boats I got more square footage now.

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<v Speaker 1>With a well written pre nuptial agreement, the Roses would

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<v Speaker 1>have avoided this havoc. A prenuptial agreement is a safeguard

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<v Speaker 1>against a messy divorce, and it's becoming the answer for

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<v Speaker 1>more couples, including millennials. In a survey by the American

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<v Speaker 1>Academy of Matrimonial Lawyers, three and five divorce attorneys said

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<v Speaker 1>more clients were seeking pre nups in the past three years.

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<v Speaker 1>About half said they'd seen a spike in the number

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<v Speaker 1>of millennials requesting the agreements. And in Silicon Valley, where

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<v Speaker 1>entrepreneurs believe their ideas are worth billions, even those who

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<v Speaker 1>are not wealthy want to protect the money they may

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<v Speaker 1>have in the future. Joining me is divorce attorney Monica

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<v Speaker 1>Mase of sidmon Bancroft. So Monica, tell us about the

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<v Speaker 1>experience you had with the founder of a startup years ago.

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<v Speaker 1>So about seven years ago, I had a client come

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<v Speaker 1>to me. She was young, in her early thirties, getting

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<v Speaker 1>married for the first time. She didn't have any assets,

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<v Speaker 1>that she had an idea for a company that she

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<v Speaker 1>had already kind of started the wheels in motion, and

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<v Speaker 1>she was admit that she needed a prenup to protect

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<v Speaker 1>her her business idea, this business that she was going

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<v Speaker 1>to build that she hadn't yet built. So we prepared

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<v Speaker 1>the prenup. Prenup st that this business idea and this

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<v Speaker 1>business would be her separate property. We find it. And

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<v Speaker 1>then about three years ago I was in the airport

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<v Speaker 1>and I saw her on the cover of Forbes, and

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<v Speaker 1>now her business is worth a billion dollars. You know,

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<v Speaker 1>at the time myself, she told me the idea of

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<v Speaker 1>her business, and I thought it was a clever idea

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<v Speaker 1>that I didn't necessarily think it was going to be

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<v Speaker 1>kind of the next unicorn. And sure enough she was right,

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<v Speaker 1>and that business now is her separate property. And so

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<v Speaker 1>he was really smart and savvy um and knew what

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<v Speaker 1>she wanted and communicated that to her fiancee, who was

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<v Speaker 1>completely on board with this concept and idea, and she

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<v Speaker 1>really ended up protecting herself pretty well. So and they're

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<v Speaker 1>still married, by the way. That was my next question.

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<v Speaker 1>Does it cause problems though in some marriages because you

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<v Speaker 1>have an idea, but also you may put money into

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<v Speaker 1>that idea from you know, your joint funds. You put

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<v Speaker 1>energy and time into it. Both partners may do that.

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<v Speaker 1>The beauty about a prenup is it forces people to

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<v Speaker 1>talk about all of that. We address all of that

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<v Speaker 1>in the prenups, so they actually have to have a

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<v Speaker 1>discussion about all of those concepts and ideas. You know

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<v Speaker 1>before entering into the agreement. But I think it's more

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<v Speaker 1>problematic for couples that don't have a premarital agreement and

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<v Speaker 1>find themselves in that situation during the marriage and resentful

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<v Speaker 1>or unhappy. But in a prenup, we we spell all

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<v Speaker 1>of that out. For example, in that client's prenup, we

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<v Speaker 1>had a provision that if community funds were contributed to

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<v Speaker 1>her business and there was a divorce, the community would

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<v Speaker 1>be reimbursed. So we address all of that in the

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<v Speaker 1>premarital agreements so that people don't find themselves in that situation.

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<v Speaker 1>It used to be that you thought of pre nups

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<v Speaker 1>for people who were established and had a lot of assets,

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<v Speaker 1>or people who are going to inherit. Do you see

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<v Speaker 1>a change. Do you see more millennials with nothing wanting

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<v Speaker 1>a prenup? I do, And I think that might be

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<v Speaker 1>a virtue of where I practice. You know, I practice

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<v Speaker 1>in the Bay Area many of my clients or San Francisco,

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<v Speaker 1>Silicon Valley. And I noticed two things. One the millennials,

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<v Speaker 1>the prenups seems, you know, not taboo to them. They

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<v Speaker 1>don't seem to have a problem bringing it up to

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<v Speaker 1>their fiance or discussing it. Maybe that's become prenups have

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<v Speaker 1>become more talked about in the media and celebrity prenups,

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<v Speaker 1>and but it's not a foreign concept to them and

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<v Speaker 1>they don't seem offended by it. They're more open to

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<v Speaker 1>this idea that we're going to have a contract that

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<v Speaker 1>we get to choose the terms of that dictate um,

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<v Speaker 1>what's going to happen during our marriage and our divorce.

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<v Speaker 1>There doesn't seem to be much stigma to it as

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<v Speaker 1>there was fifteen years ago. And secondly, they just seem

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<v Speaker 1>to be more savvy about protecting their assets and it's

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<v Speaker 1>more financially savvy, and that just could be a result

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<v Speaker 1>of that type of information being more readily available to

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<v Speaker 1>people online. You know, it could be because a lot

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<v Speaker 1>of these millennials are coming out of divorced families and

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<v Speaker 1>they want to make sure that they don't go through

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<v Speaker 1>a nasty divorce. Said things and depth heading that way.

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<v Speaker 1>But they're very open to the idea and they are

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<v Speaker 1>pretty educated about what prenups do and that they exist.

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<v Speaker 1>It just seems like, well, yeah, of course we're going

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<v Speaker 1>to get a pre up. Did you ever have an

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<v Speaker 1>engagement fall apart because of disputes, Yeah, I have. I

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<v Speaker 1>have had one that fell apart during the negotiations of

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<v Speaker 1>the prenup, and I think that my client is very

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<v Speaker 1>happy that it did fall apart and that she didn't

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<v Speaker 1>go through with it, because, you know, I think it

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<v Speaker 1>really brings things to the forefront, right, and it shows

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<v Speaker 1>people's true colors. So they ended up not only not

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<v Speaker 1>getting married, but ending their relationship. But my client was

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<v Speaker 1>very grateful for the experience and having that happened before

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<v Speaker 1>they got married. So under what circumstances can you contest

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<v Speaker 1>a pre nup? So in California, it's really if there's

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<v Speaker 1>undue influence at the time that someone signed the prenup,

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<v Speaker 1>they were being pressured to sign it, or they didn't

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<v Speaker 1>understand what they were signing. Although that's less common, it's

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<v Speaker 1>more common the claim of you know, I was I

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<v Speaker 1>was pressured, I was being yelled at at home during

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<v Speaker 1>the negotiations. You know, we had invited three people to

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<v Speaker 1>the wedding. I didn't want to back out. More of

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<v Speaker 1>those types of arguments, and I think the second most

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<v Speaker 1>common is that the terms of the agreement at the

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<v Speaker 1>time someone seeking to enforce them are unfair. So in California,

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<v Speaker 1>the standard is if, at the time someone seeking to

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<v Speaker 1>enforce the prenup or at the time of the divorce,

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<v Speaker 1>if the prenup or any of its terms are unconscionable,

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<v Speaker 1>the court does not have to follow them. It's got

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<v Speaker 1>to be something that's a pretty extreme example. You know,

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<v Speaker 1>I had a client who waived spousal support but um

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<v Speaker 1>at the time of the divorce or around the time

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<v Speaker 1>of the divorce, she had been diagnosed with breast cancer.

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<v Speaker 1>There were going to be a lot of uncovered medical bills,

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<v Speaker 1>and her share the community probably wasn't going to be

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<v Speaker 1>enough to last her through her lifetime ampide uncovered medical

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<v Speaker 1>So obviously, in that situation, the court found that the

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<v Speaker 1>spals of support waiver wouldn't wouldn't be fair, and they

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<v Speaker 1>did work her some support um, mainly to cover her

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<v Speaker 1>uncovered medical So there's exceptions. But you know, in California,

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<v Speaker 1>to have a valid prenup, each person has to be

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<v Speaker 1>independently represented by an attorney. So I'm finding that these

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<v Speaker 1>prenups are getting invalidated less and less. You know, people

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<v Speaker 1>have counseled, they're well drafted, they're well advised, things are

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<v Speaker 1>well documented, emails, text messages about the negotiations. You know,

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<v Speaker 1>we're very careful to preserve our file to show all

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<v Speaker 1>of the back and forth and a tone of the negotiation.

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<v Speaker 1>So I'm not seeing a lot of these agreements being

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<v Speaker 1>invalidated in California. If you do not have a prenup,

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<v Speaker 1>is it a community property half and half? How does

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<v Speaker 1>it work? It is? So California has a community property state.

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<v Speaker 1>And I always tell people if you if you don't

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<v Speaker 1>have a prenup, you know, California basically has one for you,

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<v Speaker 1>and it's called the Family Code, and everything that you

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<v Speaker 1>earn or acquire during the marriage is community property and

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<v Speaker 1>a split fifty. So vent your capital firms often demand

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<v Speaker 1>that the founders husbands and wives signed spousal consent forms.

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<v Speaker 1>Explain what that is and the partnership agreement for then

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<v Speaker 1>your capital firms they're putting in spousful waivers into their

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<v Speaker 1>corporate documents. So the spouse of waivers and the corporate

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<v Speaker 1>documents are interesting. They typically say that the spouse is

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<v Speaker 1>waiving any ability to become an active partner in the business.

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<v Speaker 1>And the spousal waivers really started and the corporate documents

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<v Speaker 1>to protect against the scenario where the partner spouse passes

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<v Speaker 1>away and a certain they don't want their surviving spouse

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<v Speaker 1>trying to take over and actually be part of the business.

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<v Speaker 1>So a lot of times the spousal waivers will not

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<v Speaker 1>apply in a divorce situation, and they only say that

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<v Speaker 1>the nonpartner spouse won't have any voting rights or you know,

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<v Speaker 1>won't have any right to run the business. But what

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<v Speaker 1>they don't say is they don't say that the non

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<v Speaker 1>partner spouse has no community interests. So I have not

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<v Speaker 1>seen a spousial waiver and a corporate document yet that

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<v Speaker 1>would waive the nonpartner spouses community interest And there would

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<v Speaker 1>be an argument that if the nonpartner spouse find that

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<v Speaker 1>waiver without counsel advising her, that it wasn't valid even

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<v Speaker 1>if it was worded in the way that waves our

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<v Speaker 1>community interests. Are these spousal waivers? Are they something new

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<v Speaker 1>or have they been around for a while. It's been

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<v Speaker 1>around for a while. People just you know, really weren't

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<v Speaker 1>focused on them or talking about them, and they weren't

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<v Speaker 1>asserting them in a divorce context. So yes, they have

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<v Speaker 1>been around, and you know, I've seen them the last

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<v Speaker 1>seventeen eighteen years. Not in all corporate documents, but in

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<v Speaker 1>a fair amount. There's been some high profile divorces in

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<v Speaker 1>recent years, like Google co founder Sergey Brin that seemed

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<v Speaker 1>to have gone off smoothly or without much fanfare. Is

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<v Speaker 1>that because of well written prenups? It is? You know,

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<v Speaker 1>the prenup is like a road map in a divorce.

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<v Speaker 1>So if a client comes to me and they're divorcing

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<v Speaker 1>and they have a prenup, you know, unless someone is

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<v Speaker 1>contesting it, the prenup tells us what we're supposed to do.

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<v Speaker 1>A divorce attorney's to split up this estate. You know.

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<v Speaker 1>It saves everyone a lot of money and possibly years

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<v Speaker 1>of their life in enough divorce. Thanks for being on

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<v Speaker 1>Bloomberg Lawmonica. That's Monica Mase of Sidman Bancroft. Thanks for

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<v Speaker 1>listening to the Bloomberg Law podcast. You can subscribe and

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<v Speaker 1>listen to the show on Apple Podcasts, SoundCloud and on

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<v Speaker 1>Bloomberg dot com slash podcast. I'm June Grosso. This is

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<v Speaker 1>Bloomberg