Getting Cute About Prenups Won’t Fly in Georgia
There is nothing less romantic than a prenuptial agreement – the contract between two lovebirds deciding how they’ll divide assets in the unthinkable event that they divorce. But if you’re going to have that awkward conversation, you might as well do it correctly.
We’ve noticed a lot of cases lately in which one soon-to-be ex-spouse claims the other didn’t fully or fairly disclose their assets before they signed the document. If a judge agrees, the spouse with more assets loses all benefits of the agreement – ultimately protecting certain amounts of money, keeping matters private and saving the time, money and psychic energy of litigation.
In our experience, when a court rules a prenup can’t be enforced, 99% of the time the problem occurred with disclosure. The same thing applies with post-nuptial agreements, which serve the same purpose of prenups but are enacted by couples after they get married.
Georgia law is clear that parties to a pre-or-post-nuptial agreement must identify and disclose their assets; that way the spouses signing away their rights to share in those assets know what they are relinquishing.
Sometimes spouses or their lawyers try to get cute with these agreements and their interpretations, but that won’t cut it in Georgia law. Here are some examples:
- The “TBD” excuse: Imagine a spouse discloses $300,000 in a retirement fund, $26,000 in a bank account and an interest in a company that isn’t valued at all. List an accurate assessment of what you own and what it’s worth. If that company becomes a huge success, your ex-spouse will want a share, and if you listed its value as “to be determined,” a judge is likely to toss your prenup that limited what the spouse could get.
- The “you knew we were rich” claim: Sometimes the spouse defending a prenup will argue that even though their assets were not completely disclosed, the other spouse should have known – by their lifestyle, their joint bank account or their tax discussions with accountants – how much money was at stake when signing a prenup or postnup. Again, Georgia courts have rejected that idea, holding that the “other spouse does not have a general duty to investigate the assets of the other party.”
- The “hidden waiver” trick: Sometimes buried in a prenup is a clause that says a spouse has accepted the information disclosed by the other party and agrees not to seek further information. That’s clever, but Georgia courts have said they won’t support “the proposition that a party who is not fully informed can contractually waive her right to information.”
The goal of creating a prenuptial or postnuptial agreement is to have an enforceable contract in case of divorce. The risk of losing the protections in this agreement far outweighs any benefit a spouse can get from trying to gain a small advantage now.
Surprisingly, spouses who regret agreeing to a prenuptial agreement were often represented by a lawyer when they signed it, at least nominally. Sometimes the spouse has a family member or friend with legal experience look over the agreement, not a lawyer with experience in family law.
Just as the spouse trying to protect assets should be open and honest, the other spouse needs to take the agreement seriously. Don’t view it as a technicality only lawyers care about.
“I just want to get married” is not the basis of a sound financial decision. You should want to know what assets your spouse is bringing to your relationship.
Michael Hodes is a partner at Boyd, Collar, Nolen, Tuggle & Roddenberry, where he practices family law and focuses on the financial aspects of divorce.