James A. Hennenhoefer, Vice-President AAML, San Diego, CA presented at the AAML/LBA Family Law seminar at the LBA on April 21, 2006. Jim has been instrumental in the creation and running of the AICPA/AAML biennial seminar in Las Vegas. His topic at the KY seminar was Pre-Nup/Post-Nup-“Love me forever, but not my Assets”
His opening quote was “Confidence is what you feel before you understand the situation.” In other agreements you are drafting with known facts. During the terms of these pre/post nuptial agreements, facts change. Law also changes. Attitudes change. Pre-Nups deal with the distant future. The potential liability arising from the drafting of these agreements is huge. He urged involving an estate attorney in the drafting and advised always to address choice of laws, as people may move during the marriage. Document every bit of advice you give your client before, during, and after the drafting.
Jim emphasized that charging an hourly rate for the drafting of these agreements is unfair to the drafting attorneys, and a large flat fee may be reasonable because of the attendant liability exposure for the failure to anticipate unforeseeable future events.
He discussed Blue v. Blue, 60 S.W.3d 585 (Ky. 2001) and what he considers the most important Kentucky case, Gentry v. Gentry, 798 S.W. 2d 928 (Ky. 1990), although his opinion of its importance may change depending on what happens with a Kentucky Supreme Court case in which discretionary review is pending.
Jim urges the Kentucky legislature to consider adopting some or all of the Uniform Prenuptial Act. It is always more difficult to draft these agreements when you are depending on case law rather than statutory provisions.
All that being said he presented some tips on the drafting:
Add choice of laws
Accommodate the passage of time
Anticipate birth of children, increase and decrease of wealth
Try to make it fair in the long term. Mitigate the idea that your client doesn’t want to share.
If there is a relinquishment of property or support rights, reflect the consideration so it will appear fair.
Consider a formula that increases with the duration of marriage
Make client comply with full disclosure, but include a waiver of disclosure
Do not attempt to limit child support
Advise client of danger of limiting spousal support
You must cause an attorney to be on the other side
Keep every revision of the agreement and all correspondence; make the correspondence show the negotiation that takes place
The pre-nup is usually the first pleading to be filed in the divorce in a few years. The drafting attorneys will be witnesses and unable to represent the clients in the divorce
Never draft in non-family law related issues; bring in an estate expert and other experts depending on the assets involved such as pensions
Consider videotaping the signing and recitation of understanding of the agreement. He gave us questions to ask the parties during the videotaping (the questions are also a good blueprint for the drafting).
Make sure every page is initialed and the signatures are notarized and give executed copies to both parties and lawyers
Give your client a letter advising he/she must comply with every provision of the agreement because noncompliance may be good reason not to enforce the agreement later
Make agreement language require changes to be only by subsequent written agreement
Advise client to keep written records of compliance with agreement
Also, tell client to still keep separate property separate and to keep tracing records even though they have a prenuptial agreement
Never draft unless it is at least 60 days in advance of the wedding
Procure and use the most thorough interview form you can find
Write your client advising in advance there is no guarantee that the agreement will be enforceable
Make sure the agreement specifically addresses economic disparity