Cindy Hide:
Welcome to Love, Money and the Law. The subject is Unusual Clauses in Prenuptial Agreements. I'm Cindy Hide. My guest today is Robin Klein, a family law attorney in Houston, Texas. Welcome.
Robin Klein:
Hi Cindy. Thanks for having me.
Cindy Hide:
You bet. Okay, we've made a list of some very common and some not so common clauses that do come up when we're drafting prenuptial agreements, but there's a few things in here that are particularly interesting. So before we jump there, let's talk about what prenuptial agreements could typically include. I mean, we've talked about earnings, keeping our property separate, but there are some situations where, if we're getting married and couples want to totally separate their assets, we need to balance the ledger in a way that it's not so lopsided, especially if you don't have compatible earning capacity.
Robin Klein:
Exactly.
Cindy Hide:
So, there are a few ways to do that.
Robin Klein:
One of the main reasons to have a premarital agreement usually is because you've got a moneyed spouse and then you have a spouse that may be less moneyed. So, the reason for the premarital agreement would be to protect the moneyed spouse's earnings and then future earnings, because without that premarital agreement, those future earnings are community property. So, the moneyed spouse would want to protect those future earnings. In order to do that, the less moneyed spouse is going to come in, and you don't want it to be punitive to them. So, some of the ideas that people have had with this are-
Cindy Hide:
Excuse me, meaning punitive ... because they're not enjoying the benefit of a community property situation, which, of course, we're talking about things that are unique to Texas.
Robin Klein:
Right.
Cindy Hide:
It wouldn't be this way in a separate property state, but for Texas, if one is making a lot of money and the other person is not making nearly as much or nothing, so that's what we're referring to.
Robin Klein:
Right. That's exactly what we're referring to.
Cindy Hide:
Okay.
Robin Klein:
That's really common and it's also common for people to have these premarital agreements that protect their separate property, that's already there before marriage, which they're still entitled to upon divorce. However, earnings from separate property, such as stocks, that would normally be considered community property, but if you sign a premarital agreement, that will be separate property. So those are common ways of why people want to have a premarital agreement, saving except the interesting clauses that we will be talking about today.
Cindy Hide:
One of the ways to do that is to have a signing bonus or an exit bonus of some kind, so talk about a little bit.
Robin Klein:
Yes. So, the signing bonus is really something like because the moneyed spouse is trying to protect their future earnings that the less moneyed spouse is not going to get, for them to give up their right to those future earnings, the idea of a signing bonus can come into play because that can give the non-moneyed spouse a benefit to entering into the premarital agreement, and that could be cash in a lump sum. It could be a house titled in their name. It could be a car titled in their name. It could be a combination of many things that are done, and they're given that upon date of marriage, in an exchange for giving up the future earnings of the moneyed spouse.
Cindy Hide:
Sort of like a nice wedding gift.
Robin Klein:
Exactly.
Cindy Hide:
And then in consideration of these other things that you're not going to get later.
Robin Klein:
Exactly, exactly.
Cindy Hide:
Okay.
Cindy Hide:
Then, as an exit plan, that's another possibility. I think it's important to note, too, that these are a little tricky sometimes because you have to draw something that's not an incentive to divorce either, because you don't want to get married for a month and then go, "Well, thank you very much. I guess this is not working out." There needs to be a very deliberate way of crafting exactly how you're calculating these sorts of amounts as well.
Robin Klein:
Well, there is a lot of sensitivity that needs to go into the preparation and construction of a premarital agreement. You know that as well as I do, that we're not trying to craft something or have communications about this future marriage that's going to be doomed in divorce. We're trying to be sensitive, what either our client or the other side, what their intent is and what their meaning is, without making the other spouse say, "There's no way I'm marrying you or I'm signing this." So I think that's why the signing bonus comes in as being something that puts not on equal ground, but it does give some assurance that-
Cindy Hide:
It's a good faith gesture.
Robin Klein:
It's a good faith gesture, exactly. Now, the exit bonus would be sort of the opposite, but it is in the event of divorce, we have very high divorce rates in the United States so it can be inevitable in more than half the cases. So an exit bonus would be if this doesn't work out and we divorce, then you will get a certain sum of money, or it could be a percentage of something, or you could ... You can craft whatever. You can draft that the parties will have some community property. You will craft an exit bonus. There's various different things that you can put in premarital agreements that can be beneficial to the less moneyed spouse in the event of divorce.
Cindy Hide:
Right. Okay, so let's talk about a few reasons that could possibly be the path to a split. One of those is the famous adultery issue. So, fidelity clauses, that we know about, are not very unusual. I don't personally like to draft them because you have an issue of proving them, first of all.
Robin Klein:
Exactly.
Cindy Hide:
That's the first obstacle, but a lot of times, that's something that couples really want to see. So, what's your experience with working with fidelity clauses?
Robin Klein:
I personally also do not like them. I do believe that burden of proof can be very difficult, and then you're putting parties, married couples, in situations where they may have an inkling of something and then they've got private investigators or they're looking into cell phones, and then-
Cindy Hide:
That's another video about privacy.
Robin Klein:
Yes, that's a whole nother area. It can be common, and I want to preface, too, that the other clauses that ... this and the other clauses we may talk about, it's important to draft in, I'm going to call it, damages. If this happens, this is what the innocent spouse will receive.
Cindy Hide:
Right. In other words, how much is this going to cost me if that were to happen?
Robin Klein:
Exactly.
Cindy Hide:
And get caught, right?
Robin Klein:
Exactly, exactly.
Cindy Hide:
Well, it's a good clause to think about, whether or not you actually put it in a contract, because it calls to question the whole subject in conversation, and my personal feeling is if you have to have one of these clauses, there might be a trust issue, and so that's another basic element of the relationship. So, anyway, that's just a personal aside.
Robin Klein:
Right.
Cindy Hide:
Okay. Moving on here, we've talked about weight gain and grooming clauses. Okay, grooming is not something I'm familiar with, but weight gain, certainly. If you gain more than whatever, how many pounds, we're done?
Robin Klein:
Exactly. It's a very, in my opinion only, superficial clause. However, when people meet, they may have a disparity of age between them. They may be very young and fit, and that's what attracted them to one another in the first place, and that's very important to them. So they may want to put in a clause. "You will not gain over 10 pounds during the course of our marriage, except for pregnancy obviously." I mean, that would be impossible.
Cindy Hide:
I think we should do one of those, "Okay, for the next 10 years, until you're 30, you get ... and then for the next 10 years, you get to gain another five, and then in the last quarter of your life...."
Robin Klein:
And then, yes.
Cindy Hide:
Unless you do have a little extra weight, you don't really look that good.
Robin Klein:
Post-menopausal, you need a good 50 pounds added, right?
Cindy Hide:
Yeah, I think we need to put some allowances in there.
Robin Klein:
Absolutely.
Cindy Hide:
And it should be mutual, hello!
Robin Klein:
And I think it would be mutual. I would hope that it would be mutual, and then there's also the part about grooming, and the part about grooming is the fact that, again, some people have let themselves go when they get married.
Cindy Hide:
That's true.
Robin Klein:
It happens and it happens a lot. They either gain the weight, they stop working out.
Cindy Hide:
Get comfortable.
Robin Klein:
They don't groom or color their hair anymore. They don't shave their beard or they grow long beards and whatever it may be.
Cindy Hide:
Nasty, scraggly ...
Robin Klein:
Yeah, I mean the stuff that if you were dating them prior to ... you'd be like, "No, I don't want that and I'm not interested in that."
Cindy Hide:
Not in the first place, right?
Robin Klein:
So the grooming clause is basically keep yourself in the shape or appearance that you have had before.
Cindy Hide:
And that's good for anybody at any stage in their marriage.
Robin Klein:
Right.
Cindy Hide:
In this case, we're writing it down. Okay, so now the snip clause or the tubal ligation, there's even that possibility.
Robin Klein:
There is, and what's interesting about that one is that it is usually for people who I would think have already had their children or there's a little bit of a disparity in age and things, but ... So there's the snip clause or the tubal ligation, and I have absolutely heard of this. It usually is something after a period of time-
Cindy Hide:
Well, excuse me, the snip clause is referring to a vasectomy.
Robin Klein:
A vasectomy, yes. I'm sorry.
Cindy Hide:
Right, okay, and then the tubal ligation for the ladies.
Robin Klein:
Is for the ladies. Usually after a period of time, could be a couple years, maybe less, that if it's the snip clause, a vasectomy, the male or husband would get a vasectomy within that period of time or the woman would have tubal ligation because they don't want any more children and that's just part of their agreement. I recently know someone who did a clause like this and it was a two year mark for the snip clause. They got divorced right before the two year mark, so he's able to keep it all intact.
Cindy Hide:
Oh, I thought you were going to tell me she had a child at the age three.
Robin Klein:
No.
Cindy Hide:
Or time three in their marriage.
Robin Klein:
No.
Cindy Hide:
Okay. All right. So, here's an interesting one about open marriages and the sexuality clause. These are complicated for lots of reasons, on lots of levels, but there are couples who have open marriages, meaning they share partners very openly and in some cases, both male and female, and it's a lifestyle that they both enjoy. So, when we're crafting a clause like that, it brings up a lot of issues, particularly the high risk lifestyle.
Robin Klein:
Exactly.
Cindy Hide:
What do you think?
Robin Klein:
Personally ...
Cindy Hide:
Well, maybe not personally ....
Robin Klein:
No, but I understand that it's important to people. Again, it's something that brought these people together in the first place and it's something that they want to protect. It's important to them, judgment free, whatever it may be. If they're swingers, if they're into BDSM, which is the bondage, submissive type lifestyle, similar to a 50 Shades of Grey type interaction-
Cindy Hide:
Where there is legally battery and assault and all sorts of other legal definitions of things that are happening, so in these cases they're actually ... they're not only acquiescing, they're waving any-
Robin Klein:
They're waiving.
Cindy Hide:
Any possibility of later tort claims.
Robin Klein:
Yes, exactly. I mean, of course anything that's against public policy is not going to stand up, and that can be many different things, but yes, they're waiving ... I mean, a tort claim during marriage is ... If you contract an STD from your spouse and they did not tell you that they had it, that's a tort claim. So, in these type of situations, you're waiving that because of your preference of your sexuality with your spouse, and you agree that that's what y'all are going to do.
Cindy Hide:
I think for many people, they don't understand that contracting an STD during marriage from your spouse, if your spouse has not disclosed or had knowledge of that, that is an actionable tort that does and can carry very high damages.
Robin Klein:
Very high damages.
Cindy Hide:
That's another video discussion, but I think it's an important point to mention. Okay, so incremental payment clauses. What about that?
Robin Klein:
I do see this, actually. Probably more than I see the fidelity clause, and it is really ... Again, we're protecting future earnings. Less moneyed spouse is not going to get what they would have normally gotten, had they not had their premarital agreement. So the incremental payments are something where they would get a certain sum of money, and it's going to vary. People are going to be in all different types of brackets, but it's what their agreement is. So, for example, if you're married up to five years, or we'll say the five year mark, five to nine years, then you will get on that anniversary either a five or a nine or whatever, you will get a lump sum payment. You can get it during marriage, whatever that may be, when you reach that mark, and then you can do 10 to 15 and so on and so forth.
Robin Klein:
You can do them upon marriage. You can make it an anniversary date of five years, 10 years, or in the event of divorce, if you've been married 20 years, then let's say you would look and, okay, at 20 years, let's say you get $20,000.
Cindy Hide:
It's a table. $20,000 out of 20 years of marriage? Are you kidding me?
Robin Klein:
Yeah. Well, I just threw out a number. So let's just say, yeah ...
Cindy Hide:
Let's throw out that number.
Robin Klein:
Let's do $2 million that you-
Cindy Hide:
Now we're talking, after 20 years of marriage ...
Robin Klein:
That you would get that, but the thing is, is what happens at 19 years? And I literally have had a case where it was a five year ... to five year was one and then it continued and at literally eight months shy of five years, they divorce and there's nothing. Now, in that case, he honored it anyways, but yeah, I mean, it's a longevity type clause.
Cindy Hide:
Well, these are contracts. This is the difference ... We're talking about this is contract law when we have obligations that are written into the relationship, and so if that's what it says, that's what it says.
Robin Klein:
That's right, and to each his own. No judgment here.
Cindy Hide:
Okay, so the other issue is privacy. We touched on that earlier, but now, with all the social media happening and many people want to document their entire lives minute by minute on the internet for whatever reason, this is a great clause to have. I think I'm a big proponent of this because truly I think your personal marital circumstances, your personal finances, whatever it is you've agreed to privately is not something that necessarily should be shared with the world, and even if one person thinks it's fine and the other person doesn't, this would stop them from being able to do that.
Robin Klein:
Yes, I agree, and I think that that is a good clause to prohibit the other spouse or either spouse from posting their personal lives on social media and then also their kids, protecting their kids out there, because it's a crazy world we live in. People may be a well known couple. For example, I was talking about this recently, you could have an NBA star and he's married, and they don't post anything. You want to protect your kids because, again, crazy people out there can start finding out where you are and you never know, you put a lot of people at risk. Let's just say that they start ending up in a divorce, and it's not like ... You know, we could have like a Kardashian situation where then the hurt spouse will start posting terrible things, or private things about their relationship for all the world to see and hear. So that would protect that.
Cindy Hide:
Yeah, and you would think, just as a matter of courtesy at minimum, out of respect to your marriage, that no one would do that, but that's not the case. So this is a great clause to have, I think.
Robin Klein:
Right. Well, we're divorce lawyers and we both know that that respect goes out the window as soon as people start considering divorce.
Cindy Hide:
That's true. We see the worst sides of everything.
Robin Klein:
Mm-hmm (affirmative).
Cindy Hide:
Okay, poison pill clause.
Robin Klein:
Yeah, the poison-
Cindy Hide:
That's a big one.
Robin Klein:
That is. That is the one basically where ... I mean, because in most premarital agreements, I think in all of them, you really are waiving a right to challenge the prenup. You don't have to put that in there, but if you do challenge the premarital agreement by seeking a declaratory judgment or basically when divorce happens, you say it's not valid ... So the poison pill clause is really in order to not contest the validity of your agreement ... Let's tie it in with the exit bonus. So then you'll get what you're going to get in the event of divorce. But if you do question the validity of your agreement, then you can say goodbye.
Cindy Hide:
There's a penalty.
Robin Klein:
There's a penalty, to whatever you were going to get, and those are also fairly common.
Cindy Hide:
Yes, and it's another way to secure the contract in a way.
Robin Klein:
Exactly.
Cindy Hide:
And it's also another reason why both parties need to be represented. I get that call a lot. "Oh, well can we just use one ..." I guess you could, but I don't think it's a good idea. You really ... You have a better contract, too, when you have two lawyers.
Robin Klein:
Exactly.
Cindy Hide:
Negotiating on behalf of your clients. There are lots of reasons for that, but this poison pill clause is ... It's typically in there.
Robin Klein:
Yeah.
Cindy Hide:
All right. We've talked a lot about different possible clauses that can go in a contract. We haven't touched on enforceability because that's not the purpose of our discussion here.
Robin Klein:
Exactly.
Cindy Hide:
Enforceability is really up to a court to decide what will stick and what won't, but the general rule is you can put anything in these contracts as long as they're not against public policy. I think a couple of those that we've talked about might be a little bit controversial.
Robin Klein:
Sure.
Cindy Hide:
But again, that's not what we're here to do. The point today is to raise issues and to consider the possibilities, really.
Robin Klein:
Right.
Cindy Hide:
More than anything, in order to negotiate your life and your lifestyle, full disclosure, it is really key on both sides and you can't just say half the story about yourself. You need to really be very candid and transparent. You have anything to add?
Robin Klein:
Yes, well, yes. I mean, generally the premarital agreements and postmarital agreements, they have been questionable in the past. Do they stick? Are they enforceable? Well, they are becoming more and more enforceable because-
Cindy Hide:
They're more common.
Robin Klein:
They are more common and you do have to have voluntary-ness and you do have to have ... You have to have disclosure, and the very first document that actually anyone signs is their waiver of disclosure, and that is key. If you do not have that waiver of disclosure, then it can put your agreement at risk. But you do have to make sure that you have full disclosure of your future spouse's assets and their financial obligations, because if you don't, you really don't know what you're contracting for.
Cindy Hide:
That's exactly right.
Robin Klein:
And so that is really key right there. You really need to have those discussions and you need to look at some bank statements and you need to look at values, because that ... I mean, it makes a huge difference, and if you don't know what's there, what are you contracting for? You have no idea.
Cindy Hide:
Exactly. Yeah, you have to know what either you're giving up or what you're gaining.
Robin Klein:
Exactly.
Cindy Hide:
Or what liabilities you might be exposed to or not, so again, it's another reason to have a family law attorney involved, and emphasis on family law attorney. Not a business lawyer, who that's not their world. Not a criminal defense attorney. Not anyone else who doesn't regularly handle these kinds of contracts, because they are very unique.
Robin Klein:
They are. They're absolutely very unique.
Cindy Hide:
Anything else you want to add?
Robin Klein:
No. I think that we've covered most of the interesting clauses.
Cindy Hide:
Okay. Thank you, Robin. I appreciate you being here today and thank you for joining me on Love, Money and the Law. I'm Cindy Hide. Thank you for joining me.
Unusual Clauses in a Prenup