How and When to Renegotiate an Out-of-Date Prenuptial Contract

Silicon Valley is known for three things: startups, technological innovation, and huge swings of financial fortune. When entire industries can change overnight because of a single startup, it’s easy for a founder’s finances to skyrocket – or sometimes, collapse. This is an exciting environment for energetic creators and investors, but it’s not necessarily the best for stable relationships.

Luckily, many tech-savvy young people understand this. As a result, Silicon Valley residents are signing prenuptial agreements before tying the knot to protect themselves and their companies from the financial effects of divorce. However, even the best contract can’t predict the future. That’s where renegotiation comes in.

Yes, it’s possible to renegotiate a prenuptial agreement. In fact, it can be in your best interest to do so, especially if you’ve started a business since signing the original. This results in a “post-nuptial” agreement that can help you and your spouse organize a fair split of your assets, just in case.

The Prenuptial Agreement

Prenuptial agreements have been around for thousands of years. They were just called something else. Historically, just about every culture comes up with agreements for how two families will combine into one when people get married, and how assets will be divided if the marriage ended. It’s simply a practical consideration.

In America, prenuptial agreements as they are known today were codified in law with the Unified Premarital Agreement Act in 1983. This bill, which California adopted, was designed to standardize premarital agreements nationwide. It specifies that prenuptial agreements are enforceable as long as both spouses understood the agreement and had legal representation during its negotiation.

Furthermore, both partners need to receive full financial disclosures from the other person. The goal of a prenuptial agreement is to assign fair rights to both partners. That requires that everyone involved knows exactly what they’re getting into.

Prenuptial agreements can include a wide variety of terms and conditions, covering almost any subject. There are two caveats: the terms should not break any California laws, and they should not affect the rights of any potential children of the couple. Essentially, as long as the prenuptial agreement doesn’t waive the right to child support or require anything illegal, it may be considered enforceable.

Common prenuptial agreement clauses include:

• Distinctions between what’s marital property and what is separate
• Protections again the other spouse’s debts
• Instructions for property division in case of a divorce
• Protections for specific property like heirlooms, patents, and businesses

At its core, a prenuptial agreement is a layer of protection for both spouses. The goal is to guarantee that neither spouse leaves the relationship worse-off than they started. Of course, with changing life circumstances, a prenuptial agreement that made sense at the time may no longer be adequate.

The Post-Nuptial Agreement

That’s where a post-nuptial agreement can help. Post-nuptial agreements, sometimes called mid-marriage agreements, can be made whether or not a prenuptial agreement exists. These contracts are a more recent development, so the law surrounding them is still being written. In 2012, the Universal Premarital and Marital Agreement Act was designed, but it has not yet been ratified in California. As a result, courts have more discretion over the execution of post-nuptial agreements, but they are still a valid form of contract when written well.

These agreements are important for couples whose circumstances have changed. No one can predict the future. One spouse may not see themselves joining or creating a startup before they get married, so they don’t think to include a clause protecting their shares. After all, there’s no company yet to protect. If that partner does build this startup after getting married, any shares in the company become marital property – unless a post-nuptial agreement is signed.

A postnuptial agreement can cover everything that a prenuptial agreement might. As long as the postnuptial agreement is handled with the same care as a prenuptial agreement, it may be considered enforceable by the court system. A post-nuptial agreement can be a helpful solution to changing financial situations years and decades after a marriage begins.

The Benefits of Renegotiation

There are some significant benefits to renegotiating a prenuptial agreement into a post-nuptial contract. Finances are one of the top three causes of divorce – specifically, arguing over finances. A serious change in a couple’s financial situation can place significant pressure on the relationship. A post-nuptial relationship can help reset that.

Post-nuptials manage this by specifying exactly what financial assets belong to whom. In doing so, they also outline which partner is responsible for certain assets. A startup can be stressful for both people, so declaring it firmly the responsibility of one partner can remove a source of stress.  

Many people find that adding a post-nuptial agreement to their marriage can even save their relationship. These contracts help provide clarity on what each partner wants and values. They also protect both partners from potentially hurtful actions if the relationship does take a turn for the worse down the line. There are too many horror stories of an angry spouse claiming parts of a business in a divorce and causing financial problems for everyone involved. A post-nuptial can save you both from having to deal with that in the future.

Finally, post-nuptials can also help balance out prenuptial agreements that have simply stopped being relevant. If a startup from before the marriage has been sold and the founding partner doesn’t mind listing the proceeds as marital assets, post-nuptial agreements can help there, too. Post-nuptial agreements can help combine finances just as well as they can help divide them.

Relationships Change – Contracts Can, Too

Marriages change, grow, and evolve over time. An agreement made while both partners are young and early in their careers is unlikely to cover every possible future. So, while prenuptial agreements are a good idea, they can and sometimes should be renegotiated after marriage. Your agreements can change, just like you have.

If you and your spouse have gone through life changes since getting married, you might benefit from a post-nuptial agreement.  You can get in touch with our qualified family law attorneys to discuss your options today.