Speaker 1: Welcome to the Bloomberg Law Podcast. I'm June Grosso. Every
Speaker 1: day we bring you inside an analysis into the most
Speaker 1: important legal news of the day. You can find more
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Speaker 1: of the Roses paints a really bleak picture of divorce.
Speaker 1: In the dark comedy, a wealthy couple's marriage falls apart,
Speaker 1: and their fight over their opulent home and everything in
Speaker 1: it becomes bitter and violent. I fum the one who
Speaker 1: found in this house. I fought with my money. It's
Speaker 1: a lot easier to spend, but it's a vaking honey bottom.
Speaker 1: You might not have made it not for me, So
Speaker 1: we takes. When a couple of starts keep his score,
Speaker 1: there is no winnings, its only degrees of losing. The
Speaker 1: yellow areas are mine, the red areas for hers. This
Speaker 1: seems rational, t boats I got more square footage now.
Speaker 1: With a well written pre nuptial agreement, the Roses would
Speaker 1: have avoided this havoc. A prenuptial agreement is a safeguard
Speaker 1: against a messy divorce, and it's becoming the answer for
Speaker 1: more couples, including millennials. In a survey by the American
Speaker 1: Academy of Matrimonial Lawyers, three and five divorce attorneys said
Speaker 1: more clients were seeking pre nups in the past three years.
Speaker 1: About half said they'd seen a spike in the number
Speaker 1: of millennials requesting the agreements. And in Silicon Valley, where
Speaker 1: entrepreneurs believe their ideas are worth billions, even those who
Speaker 1: are not wealthy want to protect the money they may
Speaker 1: have in the future. Joining me is divorce attorney Monica
Speaker 1: Mase of sidmon Bancroft. So Monica, tell us about the
Speaker 1: experience you had with the founder of a startup years ago.
Speaker 1: So about seven years ago, I had a client come
Speaker 1: to me. She was young, in her early thirties, getting
Speaker 1: married for the first time. She didn't have any assets,
Speaker 1: that she had an idea for a company that she
Speaker 1: had already kind of started the wheels in motion, and
Speaker 1: she was admit that she needed a prenup to protect
Speaker 1: her her business idea, this business that she was going
Speaker 1: to build that she hadn't yet built. So we prepared
Speaker 1: the prenup. Prenup st that this business idea and this
Speaker 1: business would be her separate property. We find it. And
Speaker 1: then about three years ago I was in the airport
Speaker 1: and I saw her on the cover of Forbes, and
Speaker 1: now her business is worth a billion dollars. You know,
Speaker 1: at the time myself, she told me the idea of
Speaker 1: her business, and I thought it was a clever idea
Speaker 1: that I didn't necessarily think it was going to be
Speaker 1: kind of the next unicorn. And sure enough she was right,
Speaker 1: and that business now is her separate property. And so
Speaker 1: he was really smart and savvy um and knew what
Speaker 1: she wanted and communicated that to her fiancee, who was
Speaker 1: completely on board with this concept and idea, and she
Speaker 1: really ended up protecting herself pretty well. So and they're
Speaker 1: still married, by the way. That was my next question.
Speaker 1: Does it cause problems though in some marriages because you
Speaker 1: have an idea, but also you may put money into
Speaker 1: that idea from you know, your joint funds. You put
Speaker 1: energy and time into it. Both partners may do that.
Speaker 1: The beauty about a prenup is it forces people to
Speaker 1: talk about all of that. We address all of that
Speaker 1: in the prenups, so they actually have to have a
Speaker 1: discussion about all of those concepts and ideas. You know
Speaker 1: before entering into the agreement. But I think it's more
Speaker 1: problematic for couples that don't have a premarital agreement and
Speaker 1: find themselves in that situation during the marriage and resentful
Speaker 1: or unhappy. But in a prenup, we we spell all
Speaker 1: of that out. For example, in that client's prenup, we
Speaker 1: had a provision that if community funds were contributed to
Speaker 1: her business and there was a divorce, the community would
Speaker 1: be reimbursed. So we address all of that in the
Speaker 1: premarital agreements so that people don't find themselves in that situation.
Speaker 1: It used to be that you thought of pre nups
Speaker 1: for people who were established and had a lot of assets,
Speaker 1: or people who are going to inherit. Do you see
Speaker 1: a change. Do you see more millennials with nothing wanting
Speaker 1: a prenup? I do, And I think that might be
Speaker 1: a virtue of where I practice. You know, I practice
Speaker 1: in the Bay Area many of my clients or San Francisco,
Speaker 1: Silicon Valley. And I noticed two things. One the millennials,
Speaker 1: the prenups seems, you know, not taboo to them. They
Speaker 1: don't seem to have a problem bringing it up to
Speaker 1: their fiance or discussing it. Maybe that's become prenups have
Speaker 1: become more talked about in the media and celebrity prenups,
Speaker 1: and but it's not a foreign concept to them and
Speaker 1: they don't seem offended by it. They're more open to
Speaker 1: this idea that we're going to have a contract that
Speaker 1: we get to choose the terms of that dictate um,
Speaker 1: what's going to happen during our marriage and our divorce.
Speaker 1: There doesn't seem to be much stigma to it as
Speaker 1: there was fifteen years ago. And secondly, they just seem
Speaker 1: to be more savvy about protecting their assets and it's
Speaker 1: more financially savvy, and that just could be a result
Speaker 1: of that type of information being more readily available to
Speaker 1: people online. You know, it could be because a lot
Speaker 1: of these millennials are coming out of divorced families and
Speaker 1: they want to make sure that they don't go through
Speaker 1: a nasty divorce. Said things and depth heading that way.
Speaker 1: But they're very open to the idea and they are
Speaker 1: pretty educated about what prenups do and that they exist.
Speaker 1: It just seems like, well, yeah, of course we're going
Speaker 1: to get a pre up. Did you ever have an
Speaker 1: engagement fall apart because of disputes, Yeah, I have. I
Speaker 1: have had one that fell apart during the negotiations of
Speaker 1: the prenup, and I think that my client is very
Speaker 1: happy that it did fall apart and that she didn't
Speaker 1: go through with it, because, you know, I think it
Speaker 1: really brings things to the forefront, right, and it shows
Speaker 1: people's true colors. So they ended up not only not
Speaker 1: getting married, but ending their relationship. But my client was
Speaker 1: very grateful for the experience and having that happened before
Speaker 1: they got married. So under what circumstances can you contest
Speaker 1: a pre nup? So in California, it's really if there's
Speaker 1: undue influence at the time that someone signed the prenup,
Speaker 1: they were being pressured to sign it, or they didn't
Speaker 1: understand what they were signing. Although that's less common, it's
Speaker 1: more common the claim of you know, I was I
Speaker 1: was pressured, I was being yelled at at home during
Speaker 1: the negotiations. You know, we had invited three people to
Speaker 1: the wedding. I didn't want to back out. More of
Speaker 1: those types of arguments, and I think the second most
Speaker 1: common is that the terms of the agreement at the
Speaker 1: time someone seeking to enforce them are unfair. So in California,
Speaker 1: the standard is if, at the time someone seeking to
Speaker 1: enforce the prenup or at the time of the divorce,
Speaker 1: if the prenup or any of its terms are unconscionable,
Speaker 1: the court does not have to follow them. It's got
Speaker 1: to be something that's a pretty extreme example. You know,
Speaker 1: I had a client who waived spousal support but um
Speaker 1: at the time of the divorce or around the time
Speaker 1: of the divorce, she had been diagnosed with breast cancer.
Speaker 1: There were going to be a lot of uncovered medical bills,
Speaker 1: and her share the community probably wasn't going to be
Speaker 1: enough to last her through her lifetime ampide uncovered medical
Speaker 1: So obviously, in that situation, the court found that the
Speaker 1: spals of support waiver wouldn't wouldn't be fair, and they
Speaker 1: did work her some support um, mainly to cover her
Speaker 1: uncovered medical So there's exceptions. But you know, in California,
Speaker 1: to have a valid prenup, each person has to be
Speaker 1: independently represented by an attorney. So I'm finding that these
Speaker 1: prenups are getting invalidated less and less. You know, people
Speaker 1: have counseled, they're well drafted, they're well advised, things are
Speaker 1: well documented, emails, text messages about the negotiations. You know,
Speaker 1: we're very careful to preserve our file to show all
Speaker 1: of the back and forth and a tone of the negotiation.
Speaker 1: So I'm not seeing a lot of these agreements being
Speaker 1: invalidated in California. If you do not have a prenup,
Speaker 1: is it a community property half and half? How does
Speaker 1: it work? It is? So California has a community property state.
Speaker 1: And I always tell people if you if you don't
Speaker 1: have a prenup, you know, California basically has one for you,
Speaker 1: and it's called the Family Code, and everything that you
Speaker 1: earn or acquire during the marriage is community property and
Speaker 1: a split fifty. So vent your capital firms often demand
Speaker 1: that the founders husbands and wives signed spousal consent forms.
Speaker 1: Explain what that is and the partnership agreement for then
Speaker 1: your capital firms they're putting in spousful waivers into their
Speaker 1: corporate documents. So the spouse of waivers and the corporate
Speaker 1: documents are interesting. They typically say that the spouse is
Speaker 1: waiving any ability to become an active partner in the business.
Speaker 1: And the spousal waivers really started and the corporate documents
Speaker 1: to protect against the scenario where the partner spouse passes
Speaker 1: away and a certain they don't want their surviving spouse
Speaker 1: trying to take over and actually be part of the business.
Speaker 1: So a lot of times the spousal waivers will not
Speaker 1: apply in a divorce situation, and they only say that
Speaker 1: the nonpartner spouse won't have any voting rights or you know,
Speaker 1: won't have any right to run the business. But what
Speaker 1: they don't say is they don't say that the non
Speaker 1: partner spouse has no community interests. So I have not
Speaker 1: seen a spousial waiver and a corporate document yet that
Speaker 1: would waive the nonpartner spouses community interest And there would
Speaker 1: be an argument that if the nonpartner spouse find that
Speaker 1: waiver without counsel advising her, that it wasn't valid even
Speaker 1: if it was worded in the way that waves our
Speaker 1: community interests. Are these spousal waivers? Are they something new
Speaker 1: or have they been around for a while. It's been
Speaker 1: around for a while. People just you know, really weren't
Speaker 1: focused on them or talking about them, and they weren't
Speaker 1: asserting them in a divorce context. So yes, they have
Speaker 1: been around, and you know, I've seen them the last
Speaker 1: seventeen eighteen years. Not in all corporate documents, but in
Speaker 1: a fair amount. There's been some high profile divorces in
Speaker 1: recent years, like Google co founder Sergey Brin that seemed
Speaker 1: to have gone off smoothly or without much fanfare. Is
Speaker 1: that because of well written prenups? It is? You know,
Speaker 1: the prenup is like a road map in a divorce.
Speaker 1: So if a client comes to me and they're divorcing
Speaker 1: and they have a prenup, you know, unless someone is
Speaker 1: contesting it, the prenup tells us what we're supposed to do.
Speaker 1: A divorce attorney's to split up this estate. You know.
Speaker 1: It saves everyone a lot of money and possibly years
Speaker 1: of their life in enough divorce. Thanks for being on
Speaker 1: Bloomberg Lawmonica. That's Monica Mase of Sidman Bancroft. Thanks for
Speaker 1: listening to the Bloomberg Law podcast. You can subscribe and
Speaker 1: listen to the show on Apple Podcasts, SoundCloud and on
Speaker 1: Bloomberg dot com slash podcast. I'm June Grosso. This is
Speaker 1: Bloomberg