“What state law will be used to interpret and enforce my prenup?”

by Jonathan C. Noble, Esq.

No, this isn’t a bar exam question. It is real life. How many adults do you know who have lived in the same state their entire life? Probably not too many. People are more mobile today than ever. A properly drafted and properly executed prenuptial agreement will help answer what state law will control in the event the prenup needs to be enforced. Since we live in a mobile society, and state laws vary widely, this issue could “make-or-break” the enforceability of your document.

Prenuptial Agreements are carefully crafted documents, tailored to suit your specific situation and your specific needs and goals.

I love when people inquire about prenuptial agreements. It shows they are taking a cautiously optimistic, yet pragmatic view regarding how life can and does change. People change over time. Circumstances change. Laws change. In the unfortunate event of divorce (or death), a properly drafted and executed prenuptial agreement can make the divorce process easier, more efficient, and help ensure you do not lose all that you have amassed. Properly drafted, and executed, a prenup is one very useful document.

Jonathan C. Noble, Esq.
Jonathan C. Noble, Esq.

Prenups make sense. When properly written and executed, prenups save time and money. They can help you exit from a non-functioning marriage without paying a king’s ransom to your lawyer and/or being potentially victimized by a non-cooperative, or unrealistic, soon-to-be ex-spouse. Prenups can help protect assets that you have earmarked for your children from a prior marriage. Prenups can help protect your assets from being depleted by the well meaning, but often slow churning, and over-burdened court system. As a very general rule, the less time you spend in court fighting over divorce related issues, the better off you will be at the end of the divorce process.

I believe the best legal advice is forward thinking, with the aim to keep you out of court as much as possible. A well drafted and properly executed prenup should be part of a pragmatic, forward thinking strategy.

Prenuptial agreements are never standard or “boilerplate” agreements. 

No two prenuptial agreements are exactly alike. Everyone has different assets, different goals, different financial histories and different family histories. While most prenuptial agreements are put in place in the event of divorce or death, no two marriages share an identical set of facts and circumstances.  You should never take a prenuptial agreement written for someone else and simply substitute your own information.

Like all contracts, the parties must enter into a prenuptial agreement voluntarily. Prenups require full disclosure. No surprises. 

If you are thinking about springing a prenuptial agreement on your significant other during the rehearsal dinner the night before the wedding, you can forget it. In most, if not all jurisdictions, a prenuptial agreement will not be enforced if the party seeking to have the prenup set aside can prove they were not given adequate time and a reasonable opportunity to review the document with independent counsel of their own choosing. Presenting a prenup for the first time and demanding it be signed a few days prior to a wedding is inviting trouble down the road. Some jurisdictions require a minimum amount of time for the parties to retain separate counsel,  to examine, and to sign a prenup. The earlier you handle discussing and putting a prenup in place, normally the better. Getting a prenuptial agreement properly wrapped up before the wedding invitations are mailed is one suggestion that deserves serious consideration.

If you are planning to marry and would like to learn more about how a prenuptial agreement can help protect you, please feel free to contact me via email at jonathancnobleesq@gmail.com or call my office at 610 256 4843 to set up an initial consultation.

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A VC’s Term Sheet and a Prenuptial Agreement – both define important legal rights at exit

New businesses are started every day around the world. Some businesses will become hugely successful (i.e. Twitter, Google, Amazon, Facebook), others, not so much. Many start-up businesses seek funding to help grow their business. The source of start-up funds often comes from a venture capitalist, also known as a VC. Angel investors are similar to venture capitalists, but they usually provide seed-stage funding (less than $1,000,000). Often, angel investors are high net worth individuals with excess liquid capital they want to invest. As this blog post is being written (May 2015), the amount of angel investment money and venture capital money available to fund new ventures has never been higher. However, it still remains very difficult for many start up companies to raise money from angel investors and VC’s for reasons beyond the scope of this blog post.

Jonathan C. Noble, Esq.
Jonathan C. Noble, Esq.

When founders and VC’s choose to work with each other, some people, (myself included), believe it is similar to a marriage, with one major exception. Investors almost always expect their investment relationship in the companies they finance (known as their “portfolio companies”) to eventually end. VC’s properly prepare an exit strategy from day one.

Unlike a marriage, nearly every single investor has the primary goal of someday exiting the company they once funded.  For many reasons, some investors remain on the board of directors of their portfolio companies even after the company has gone public or has been acquired.

Certain provisions contained in a VC’s term sheet act like a prenuptial agreement for investors. A term sheet controls the economics of the investment deal when the relationship between the portfolio company and the investor ends. In many ways, prenuptial agreements act in the same manner as a term sheet. 

In very basic terms, before money changes hands between the investor  (VC or angel) and the founders of a company, a document known as a term sheet must be negotiated and signed by both. The term sheet is a critical document for both the founder and the potential investor. The term sheet controls the economics of the deal and often, control of the company. Basically, the term sheet sets forth the economic terms when the company experiences a liquidity event. The term sheet establishes who is entitled to how much money when the company is acquired, merged, issues an initial public offering (IPO), or the company is otherwise liquidated. Modern day investors could not function without a term sheet.

In the technology sector, it is not unusual for some investors to earn 25 to 50 times back on their initial investment if a company they funded becomes successful. If you were an early investor in Google or Facebook, that could translate into hundreds of millions of dollars in profit. The term sheet becomes critical when valuing the everyone’s share of the company.

What does a term sheet have in common with a prenuptial agreement? 

Venture capitalists and angel investors make investments with the expectation they will eventually exit. In contrast, people do not marry each other with the expectation that they will eventually divorce. However, statistics tell us about 50% of first time marriages in the United States end in divorce. The divorce rate is even higher for second and third marriages.

Given the high likelihood of divorce, having a prenuptial agreement in place is simply a good economic decision. For high net worth individuals, it can save tens of thousands of dollars, (or more) in legal fees and costs in the event your marriage ends.

At first, it may seem difficult to approach the subject of entering into a prenuptial agreement. In reality, many people are surprised to discover the idea is welcomed and even embraced by their significant other.

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Prenuptial Agreements – an ounce of prevention may be worth ten pounds of cure

by Jonathan C. Noble, Esq.

Prenuptial agreements in Pennsylvania can save tens of thousands of dollars in costs and fees in the event of a divorce.  It can also save your business, limit your exposure to your spouse’s non-marital debts, limit possible alimony payments, and safeguard other valuable assets.

A prenuptial agreement (also known as a premarital or an antemarital agreement) is a legally binding agreement between two people who are planning to marry. The goal of this post is simply to have you think about some of the advantages of using a prenuptial agreement.

While every situation is different, nobody goes into a marriage hoping the marriage will end. Unfortunately, many marriages do end. Some end amicably, with mutual respect, and without much disagreement. Many others, not so much. While bringing up the subject of entering into a prenuptial agreement can be stressful in certain situations, it is certainly worth speaking to a family law practitioner about how a prenuptial agreement can help safeguard you, safeguard your business, safeguard your assets, and safeguard your children from a prior marriage in the event your marriage ends.

Jonathan C. Noble, Esq.
While the subject of entering into a prenuptial agreement can be a little stressful in certain situations, it is certainly a good idea to consider. Consult an attorney to help you determine if a prenuptial agreement makes sense for you.

A prenuptial agreement can help streamline property distribution in the event of a divorce.

In Pennsylvania, if you divorce, your assets are categorized as either marital or non-marital property. Marital assets need to be valued, so they may be divided properly in the event of a divorce.

Marital property is broadly defined as property acquired during the marriage, or the increase in value (during the marriage)  of non-marital property. For example,  you may own rental property prior to getting married. Any increase in value of the rental property during the course of the marriage is considered marital property and subject to equitable distribution should you divorce.

Non-marital property is broadly defined as property acquired before the marriage, or property acquired by gift or inheritance. This is important: Non-marital property also includes anything normally considered marital property that you and your (soon-to-be) spouse agree to designate as non-marital property in a properly drafted and executed prenuptial agreement. That could include a business you own and have built for many years.

There are many reasons why a prenuptial agreement makes perfect sense for many people. Both women and men often initiate the use of a prenuptial agreement upon contemplating a second (or third) marriage. One of the many benefits of having a prenuptial agreement is that a prenuptial agreement can serve to protect the interests of children from a previous marriage.

Enforceability of Prenuptial Agreements in Pennsylvania

In broad terms, Pennsylvania courts have generally treated prenuptial agreements using contract law principles. Normally, a prenuptial agreement must be executed voluntarily and with a full and fair disclosure of a party’s assets and liabilities.  (If a party voluntarily waives the full and fair disclosure of assets and liabilities requirement in writing, a prenuptial agreement may still be upheld in Pennsylvania). Full and fair does not mean “exact” in the context of a prenuptial agreement.

There are several very important steps to making sure your prenuptial agreement is both enforceable in Pennsylvania and/or decided under Pennsylvania law should you move to another state during the course of your marriage or move to another state after you have separated. You should also leave plenty of time before the wedding to finalize and properly execute a prenuptial agreement. One rule of thumb is to try to properly handle the prenuptial agreement before the wedding invitations go out. Both parties should have time to examine the contents and consult with counsel of their choosing if they so desire.

If getting married is in your future, you should seriously consider consulting with a family law attorney who can guide you through the process of using a prenuptial agreement in an effort to protect your assets in the event your marriage ends.

Similar to purchasing insurance, you hope to never need to use a prenuptial agreement, but if you do, it could be well worth your investment.

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