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Ask Cari: Questions on Divorce, Debt and Prenups

Paper cutout family of four under a blue paper umbrella

Here are some recent answers from some questions I received on the Big D’s (Divorce, Debt, and Death):

1. What should people know when it comes to your spouse¹s debt when it comes to death or divorce?

In most states, all debt obtained by either party after the date of the marriage is considered marital debt while debt incurred before the marriage is considered separate/non-marital debt. Spouses are generally jointly and severally liable for the debt of the other person during the marriage and upon death. It’s very important for couples to have financial transparency regarding the debt incurred before and after the married. If someone is entering a marriage with significant student loans, he or she may be taking marital income to pay down that debt.

2. Do you have advice for those thinking about drafting a pre-nup or those who have one and are relying on it in case of divorce?

Prenups are not taboo — to the contrary, I believe it is one of the most intelligent, responsible thing that couples can do. It gives them autonomy by putting the law in their own plans. Nobody gets on an airplane thinking it’s going to crash, yet we go over the safety instructions. A prenup is akin to the safety instructions for a divorce.

Prenups are often upheld in most states if 3 things are satisfied: (1) the terms are fair and reasonable, (2) both sides are represented by counsel, and (3) there is no duress or undue influence. Ideally, prenups should be signed three months before the wedding or before the wedding invitations are sent out to avoid undue public pressure; however, there is no “rule” on when prenups should be signed so long as both people are entering the agreement voluntarily without undue pressure.

Prenups can discuss a myriad of issues including but not limited to: (1) identification of separate property and debt, (2) identification of marital assets and debt, (3) how marital assets will be divided in a divorce, (4) spousal maintenance, (5) estate rights, (6) promises during the marriage (e.g., life insurance), (7) break-up procedures (vacating or selling marital residence, alternative dispute resolution), and (8) other miscellaneous issues (e.g., confidentiality). In most states, with the exception of religion, prenups cannot discusses issues involving unborn children of the marriage such as custody, visitation and support.

3. Do you have advice for those of thinking of drafting a post-nup (such as advice for people who are wary to bring up a post-nup with their spouse)?

Going through the prenup negotiation process can be difficult for some couples, especially those who have not yet gotten financially naked with one another and have talked about these intimate financial issues. I believe that even if the prenup isn’t actually signed that couples are better off going through the prenup negotiation process, which also requires financial disclosures. It’s important for couples to work together and try to be on the same page.

Prenuptial mediation is of growing popularly. In this situation, the mediator helps facilitate a conversation between the parties about the terms of the prenuptial agreement. If the mediator is also an attorney, then that person can also draft the prenup as well. As a caveat, both parties will still need the prenup reviewed by their own independent counsel.

4. What are some things most people don¹t realize when it comes to a pre-nup or post-nup? Are there examples of major state differences?

A prenup isn’t just for when 1 party has money and the other does not. It can be helpful to couples that don’t have much in terms of assets and debt. Divorce litigation can be very expensive. In most states, the law requires that marital property be divided equitably vs. equally; therefore, couples can spend a lot of money fighting over what is “equitable.” Even if the prenup notes that marital assets or debts will be divided equally (50/50) or some other predetermined way, then there is a lot less to fight out later.
5. When it comes to divorce, what should people know about ³community property,² or the differences between wealth created before and during a marriage?

There are only a handful community property states, namely: Arizona, California, Idaho, Louisiana, Nevada, Texas, Washington and Wisconsin. Alaska is an opt-in community property state and there are some quasi-community property states, where are there aren’t such clearcut lines of separate and marital property. In community property states, the law tends to split property more evenly between the spouses in case of a divorce. Thus, prenuptial agreements can be especially important for people who are living or may be moving to a community property state during the marriage.

There are some types of assets that are more difficult to value, such as intellectual property and business assets. Prenuptial agreement can be especially useful with those types of assets.

6. What are your pieces of advice for people who may find themselves ³suddenly single² through divorce or spouse¹s death?

Life can certainly throw some curveballs when you least expect it. Losing a spouse to death and divorce is a significant loss in one’s life where a prolonged grieving process is expected. There are counselors and coaches that can help people go through the process. For example, divorce coaches can work with clients on a myriad of issues including offering support through the divorce litigation process. Studies show that when grieving the brain does not remember information the same way as it did before; a divorce coach may help keeping a person organized on the divorce “to do” list. Some of my clients work with bereavement counsels or life coaches. I believe almost everyone going through a divorce or separation can benefit from therapy — not only to help deal with the loss and life change but also to learn to coparent with the ex-spouse. Some people even work with stylists or dating coaches to help them with their next chapter. Whatever the need or budget, there are people available to help them with the life transition. Don’t be afraid to reach out.

7. Do you have (anonymous) examples of client interactions that could illustrate common misconceptions or surprises when it comes to dealing with divorce and/or sudden death of spouse?

I’m pleasantly surprised when couples enter my office for divorce mediation and it’s clear that they are putting their differences aside to come up with a plan that is fair for both of the parties and while putting the best interest of the children first. Divorce mediation can be one of the most economically efficient processes for couples going through a divorce and can happen at any stage during the process.

Disclaimer:
"This blog is for informational purposes only and is not intended to create an attorney-client relationship. It is recommended that you speak to an attorney licensed in your jurisdiction before relying on the information in this blog."

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