Prenup jitters
Carrie (not her real name), the only child of the eldest son of a family fortune, falls madly in love with Doug. Doug on the surface appears besotted to his partner, but when Carrie’s father, Andy, discovers Doug has siblings who have never worked consistently, he demands that they sign a prenup agreement.
Doug refuses. Carrie comes to his defense, refusing to “start marriage with the love of my life with something so insulting.” Andy threatens to call off the wedding, but his wife, who can never resist their daughter’s tears, calms her husband down.
As a wedding gift, Carrie receives substantial shares of stock of the family business, several pieces of jewelry previously owned by Andy’s mother, and a mansion in an exclusive subdivision.
Things are fine in the first few years, and the couple have a daughter. But Doug embarks on an affair with his assistant. When Carrie cannot bear the whispers and the looks anymore, she decides to seek an annulment.
Doug resists at first, citing his love for his child, but soon it becomes clear things will proceed much faster if Doug gets a huge share of Carrie’s wealth.
Carrie’s lawyer is dismayed that no prenuptial agreement has ever been executed, and in the end, her family pays Doug off, even giving him shares in the business.
Andy’s heart is broken. “My parents would never want him to be an owner in the business they worked so hard to build.”
But Andy also tries to look at the bright side. For growth purposes, the company is planning to go public anyway.
“Giving shares to an outsider now is just a prelude to the main event, and it’s worth it, to get this no-good creature out of my daughter’s life.”
Discuss prenup early
Unfortunately, though Carrie, Doug and Andy carry fictitious names, the preceding account is mired in reality. Though divorce is not legal in the Philippines, annulment is common (even among couples with several children).
Unless the law can come up with other ways to protect assets particularly inheritance, prenuptial agreements should be executed between parties, especially if family fortunes are at risk of being jeopardized.
“Whether a person’s betrothed or own family raises this issue, the ensuing conversation is likely to be about as romantic as deciding who takes out the trash,” says “Wealth Matters” columnist Paul Sullivan in the New York Times.
“Any discussion, after all, will focus on the parameters for who gets what at the end of a marriage that has not even started.”
Sullivan interviews Nathan Dungan, founder of financial consulting firm Share Save Spend, who requires clients to attend a prenup 101. Potential couples go through a six-month process where, with the aid of worksheets and quizzes, they discuss and make sense of how as individuals and as a couple feel and act around money. Are they spenders? Savers? Sharers? Why is it important to know how the other partner acts with regard to money?
“Recognize that this is not a romantic conversation,” Dungan tells Sullivan. “It’s an opportunity for [the couple] to … talk about their own family of origin and their own money story.”
Prenups have gotten a bad rap because often these are hastily signed, weeks or even days before the marriage, leading to a sense of ambush and distrust.
In the United States, “inherited assets and family gifts are generally protected in divorce proceedings,” says Sullivan. “But if, say, income from a trust was used to pay for the family’s lifestyle, it could be subject to division in a divorce … The same holds true for a family business, even if a new spouse is only partly involved in managing it and receiving income from it. Both concerns can be handled in a properly drafted agreement, but doing so takes time and discussions.”
Have an honest discussion with family about money: how to earn, spend, save, protect hard-earned wealth.
