Wednesday, March 07, 2018

PRENUP - Contact: The Art of Passing the Buck

The Art of Passing the Buck:




Marriage —
How to Get Better Results without a Prenup

By Frank C. Ozak
General Manager
Charles Arthur Enterprises
When dopamine, the brain chemical creating the passion in a relationship, runs strong, the heat is on; you have found your mate! So, intensely fascinated, you plan to elope. Oops! Mr. Right has no intent of losing his tightly guarded business and assets in a messy divorce. Suddenly, Ms. Sexy and Beautiful feels she is not trusted. That heat turns to pain, and will turn to ice if this lack of trust remains.
Both go to an attorney to get a Prenuptial Agreement. She believes any children in the marriage entitle her to the assets; after all, she will be his wife. He knows, though, he nearly lost everything the last time he divorced, and he will not take that risk again. This is the end of many romances.
There is an alternative, a healthy way to save both parties, and to build a dynasty. Before we look at the solutions, let us examine some of the demands of creating a premarriage agreement.
A premarital agreement, known as a Prenuptial Agreement or “prenup,” is a contract between two prospective partners before they marry. This signed commitment usually describes what each party's rights will be if they divorce or when one of them dies. Premarital Agreements most commonly deal with issues of property and spousal support—who is entitled to what property and how much sustenance, if any, will be paid if divorced.
The future spouse pushing for a Prenuptial Agreement lacks faith; and, obviously, feels uncertain about the marriage. Assuming a divorce, before the wedding, presumes a lack of fairness from the partner.
There is usually an “initiator” spouse, and a “compliant” spouse. The latter is less aggressive, and is likely to react later in the marriage by remembering his or her partner as being callous. This pattern permeates through the marriage, seeding discontent. When tensions rise, this effort to control provides fuel for retaliation.
Marriage is a mixture of a complicated set of laws, customs, expectations, and culturally based understandings. A premarital agreement upsets this balance. Love and trust are a matter of surrender. Entering a hard-core negotiation about a the heart wounds at least one of the parties, and most likely both, with unintended long-range consequences. This even includes the possibility of plotting the death of the partner.
Lacking sensitivity, some lawyers setting up Prenuptial Agreements may have no particular interest in feelings and emotions or how the “opposition” is likely to react to suggestions. This prenuptial contract is business to them, as it should be. Although there may be some counseling, it is usually about how to protect the client, and not couple counseling. Each lawyer represents one of the people to be married, and only ensures his or her client has the better deal.
Sometimes, only one party of the engaged couple can afford legal counsel, thus presenting to the lesser positioned partner a document to sign. Feeling befuddled, or uncomfortable, yet not wanting to lose the opportunity for the marriage, the weaker member often signs away his or her future.
Hammering out the details of a premarriage pact is not romantic; it can destroy a portion of a couple’s love forever. Being betrothed conjures up images of candlelight dinners and walks in the moonlight. Although marriage is a financial partnership as well as a romantic one, discussing property and finances, at the same time as the possibility of divorce, mars an otherwise beautiful time.
Because a marriage revolves around both trust and financial responsibility, it is necessary to look seriously at the assets and to consider plans. That healthy exercise, though, does not include a discussion about divorce.
In a purely legal sense, marriage is a business. Each partner is to come into the union with equal responsibilities. They build a life together, have children together, and reap the rewards together. Unfortunately the business of a marriage involves deep feelings and commitments, and cannot be treated as a cold, hard transaction.
Often the causing party (or the lawyer) states, “You can just put the premarital agreement in a drawer and forget about it.” That is not true. The premarital agreement cannot be forgotten and is legal when signed.
When married previously, a Prenuptial Agreement is more applicable if the bargaining power is unequal. The final arrangement, though, can be coercive and lacks fair and equivalent consideration.
One partner may try to use leverage on the other by beginning Prenuptial negotiations close to the wedding and after the invitations are sent. This is not conducive for arm’s-length bargaining about a financial contract that may affect the next 50 years of a person’s life.
The contract at the heart of the any premarriage accord involves the largest financial settlement a person ever makes. It includes all property—past, present, and future; earned, and unearned—of each of the spouses. Even mediators may lack the long-range vision of what occurs to the power imbalance in the parties when helping clients to negotiate a financial accord.
Mediators need to realize the arrangement proposed by “both parties” is likely to be the thoughts of one, while the other party feels compelled, and does not admit it. Although all motivations and feelings should be exposed and discussed in the mediation before continuing, it is often not possible. Speaking the truth, especially in a love connection, is more than likely, the most difficult risk each of the partners takes.
The skill of handling communication amid conflicting and deep feelings develops, usually, long after the wedding day. Untrained in appropriate methods of self-expression, emotionally upset people usually sling words at each other, rather than admit how wounded they feel and distressed at the behavior of the other. Not learning this skill at the beginning of the marriage, creates greater anguish during prenuptial negotiations, and later fosters an excuse to kill the alliance between the two.
Within the intricacies of an Irrevocable Trust are incredible opportunities and creative solutions to a myriad of problems. One resolution is to have joint assets handled by Trustees. Turning over a portion of one’s wealth to those skilled in asset management provides a long list of benefits the average person has never heard about.
There are many Trust types, some are Revocable, while others are not. Those Revocable allow the Grantors to change the terms of the Trust and cancel it before they die. This is how all Living Trusts are designed. Although, when a Grantor dies, the Revocable Trust becomes irrevocable. This means its terms are cast in stone and cannot be changed after he or she passes.
The Irrevocable Trust is set up when one is still alive. Giving assets to third-party Trustees removes ownership, and holds the possibility of drastically reducing personal taxes. The Irrevocable Trust offers a unique solution to a Prenuptial Agreement, and the Common-Law Irrevocable Trust offers the most thorough and flexible solution, making the union more secure, and especially ensuring the future of the children.
Searching for a mate is no easy matter. Reciprocal attraction is an exciting journey, and one where thrills happen with every telephone call. E-mails heat up, and suddenly marriage looms large.
Complications strike when either partner has been through divorce. Suddenly territorial about assets, the prospective marriage halts. She has children, he has children, and one of them owes alimony, sucking the life out of the future financial plans.
Thinking a Prenuptial Agreement solves some of the problems, the heat and passion now turns to disbelief. This is where the marriage becomes defined about how it ends. Almost a death blow to the relationship, this new level of negotiation is not about love; it is about cold hard cash, and who gets what when the heat wears off causing the curtain to come down on the marriage. These stated particulars often focus on adultery, alimony and child support when this marriage is over, long before it even officially begins.
There are options not often considered. Guarded by those who know details about asset administration, the use of irrevocable trusts becomes a healthy way to save both parties. It also allows the couple to build a dynasty, and this dynasty can include previous marriage partners and children of the previous spouse. Before we look at this solution, let us examine some of the demands of creating a premarriage agreement.
Prenuptial agreements are generally not proper for people entering into first marriages, whether or not there is a disparity in income and assets.
Marriage is an exciting joint venture and a financial partnership. If some of the fascination with each other while forming this unique bond is removed by a premarital contract, the marriage weakens. Because the purpose of a Prenuptial Agreement is to decrease the power of one of the partners, this fledgling enterprise becomes an unequal partnership.
Prenuptial Agreements can be useful for people entering second marriages who have children from the first marriage. An agreement can balance a spouse’s loyalty to the new spouse and with the spouse’s concern and obligation to the children of the first husband or wife.
A court may consider a premarital agreement the parties have reached about child custody or support, but a judge is not bound by it. Broadly speaking, parties cannot bargain away rights of children, particularly before children are even born. A search on the Internet about child support guidelines gives enough information regarding custody responsibilities and privileges.
The initiator of a Prenup usually fails to trust and recognize the balance of good common sense and equality embodied in state divorce laws. Developed carefully during a long period of time, these laws provide for fair divorce solutions, including sorting out joint finances.
Many unforeseeable events at the time the Prenuptial Agreement is signed will likely happen during a marriage. When divorce seems unavoidable, applying these state laws is more applicable to current events than arrangements made years before the divorce occurs.
If the result of a any premarriage financial settlement contract pertaining to divorce is better than one gained by state divorce laws, the result is most likely to be unfair and a result of overreaching. One of the people gets less than due him or her.
State divorce laws handle the issues of disparity of income and premarital assets if the couple divorce.
Because Prenups are often unfair at the time of divorce, parties struggle in courts over the terms. Generally, though, premarriage agreements are enforced by judges. This is because the right to contract is secured by all State Constitutions and Article I, Section 10 of the U.S. Constitution. This one principle ensures a free society. You have the right to make any deal you want to.
Judges routinely enforce premarital agreements even if the agreement gives one spouse a fraction of what he or she deserves under state law. This displays the unfair deal made in the premarriage arrangement years earlier; but without the right to contract people would be slaves, as they would have no rights. The right to contract away one’s rights is just as valid as the right to make a contract for the better advantage.
Because of the long-reaching effects of a prenuptial arrangement, even if the agreement is drawn up by the parties, and not by lawyers, some courts will not consider the agreement unless the couple has had proper legal counsel. So, even if no lawyers were involved directly, the contract needs to state both parties received separate legal counsel.
Developed over a long period of time, divorce laws are fair. Trust in them (and in your goodwill and sense of fairness to each other) to behave reasonably during divorce procedures. Do not rely on a set of financial agreements made years earlier before the marriage, as they may be out of sync with the facts of the divorce.
A Prenuptial Agreement, though, is invalid based on fraud if one person (the wealthier one) deliberately misstates his or her financial condition. For example, if a man hides assets from his future wife so she will agree to lower support in case of divorce, a court is likely to declare the agreement invalid. Similarly, if one person exerts excessive emotional pressure on the other to sign the agreement, a judge can declare it invalid because of duress.
The trick is to put assets into an irrevocable trust where Trustees administer them.
If all assets are in the Trust under the names of the Trustees, then any personal problems or divorce aspects can only attach to the joint or individual checking accounts, not Trust accounts. Having nothing else in the couple’s name, except personal cash keeps assets held in Trust for Beneficiaries safe. No mediation, lawyers or judges need to be involved.
Those interested in using any Trust, and especially an Irrevocable Trust, need to get educated. The intricacies require administration skills not taught in schools. I have discovered, knowledge about all areas of passing on wealth is regrettably deficient, and I encourage everyone to realize that wealth needs to increase within the family, accumulating over generations. Shrewd management skills allow this to happen.
Giving funds and assets to be held by Trustees initially goes against one’s need to own and control. Once it is understood that anything owned, controls the owner; then it becomes possible to understand the famous John D. Rockefeller quotation, “I want to own nothing, and control everything.” Nelson Rockefeller also said, “The secret to success is to own nothing and control everything.”
The disparity between your income and the one you choose to marry may be great, but when love strikes, financial realities can fly out the window. The passion dictates the direction of the relationship, and in the beginning, marriage is not considered.
Suddenly you wake up, and both of you want to dash off to Las Vegas to have an overnight marriage; except the issue of asset disparity enters the picture. In the back of the mind of one of these to-be-married people is a reminder, “You can be taken to the cleaners.”
The wealthier one stops the relationship to rethink the choices. As much as he or she wants to continue the passion; and as much as the brain chemical dopamine dominates at the moment, it becomes necessary to plan the escape route.
“Before it begins,” you think, “Let me figure out how to get out of it, if it doesn’t work out.”
Off to an attorney you go to get a Prenup. This spells the end of the marriage, either now or later. Putting every “what if,” clause in this premarriage agreement determines who gets what WHEN the marriage fails.
There is a better way, an alternative where assets are held by third parties. The vested interest the couple has, makes divorce unlikely and unnecessary. Should divorce occur, it does not disturb the bounty, nor does it financially impact the children. Together the couple puts together a dynasty, and can even include previous marriage partners and children. There is a way to do it, and this way has been known by the rich and super rich for a long time. It is time you take advantage of the knowledge.
A review of some of the steps creating a Prenup, and the thought process is necessary before revealing the alternatives.
Some people prefer to control their finances rather than to leave it to state control through divorce settlements. They may want to avoid misgiving about what a judge might decide if the alliance with their spouse ends in divorce. One who has less wealth than his or her partner, may feel love is the important factor and not be concerned about the financial details. For others, the premarital contract may provide enough security, even if it is not as generous as a judge might find. Still others may not like the agreement, but they are willing to take their chances and hope the relationship and the financial arrangements work out for the best.
One partner may try to use leverage on the other by beginning Prenuptial negotiations close to the wedding and after the invitations are sent. This is not conducive for arm’s-length bargaining about a financial contract that may affect the next 50 years of a person’s life.
Any premarriage assent can damage the relationship between the two families-of-origin, the parents of the married couple.
Although inherited wealth is automatically free from joint or community property, some may want to ensure this is clear in a Prenuptial Agreement and spell out the details. “It is mine, you cannot have it,” is not the best way to flaunt one’s wealth.
By making an issue of inherited property, it can cause the future spouse’s family to feel humiliated and disrespected; they may never forget the rebuff. This is not good for either member of the couple, as it results in family of-origin conflict.
When the future spouse does not want to have a premarriage contract, but the parents insist, the other spouse is likely to feel the partner is unable to stand up to his or her parents. This eventually can cause loss of respect for either the husband or the wife.
Any control or expressed dissatisfaction of the marriage by one’s family, disturbs the delicate balance of the union and makes the vows more likely to fail.
Within the intricacies of an Irrevocable Trust are incredible opportunities and creative solutions to a myriad of problems. One resolution is to have joint assets handled by Trustees. Turning over a portion of one’s wealth to those skilled in asset management provides a long list of benefits the average person has never heard about.
The prospective spouse who comes into the marriage with an Irrevocable Trust, can give the future spouse a separate Irrevocable Trust of his or her own into which to put personal assets. Alternately, if one is wealthier than the other, he or she can fund a Trust to bring the spouse onto a more equal footing. Even if this is done, the funds go to Trustees to provide a stronger cash flow and are not given directly to the spouse.
This avoids a Prenup Agreement. The assets put into the Trust belong to the Trustees to manage for the benefit of the Beneficiaries of the Irrevocable Trust—the future children—and provide a cash flow to those who work for the Trust, the spouses. Through distribution of profits to the Beneficiaries, they pay the taxes at, usually, a much lower rate. This offers a unique solution to sharing wealth, and Beneficiaries become assets by absorbing the tax burden. What is preferred, to pay the taxes to the IRS or to pay the same amount of money to the Beneficiaries? All primary and secondary school expenses, medical bills, private lessons are paid by the Trust, as a distribution to the child. Any taxes on this distribution are minimal.
Having a Trust keeps finances separate so previous spouses cannot seize assets. The same applies if there is a divorce. Funds stay in the Trust, handled by third-party Trustees, and cannot be attached, because they are not in either spouse’s name. The children remain safe.
Although much of the joint assets are held in Trust, spouses usually keep personal separate checking accounts and a joint account for funds coming to them, individually.
If all assets are in the Trust under the names of the Trustees, then any personal problems or divorce aspects can only attach to the joint or individual checking accounts. Having nothing else in the couple’s name keeps assets held for Beneficiaries safe. No mediation, lawyers or judges need to be involved.
Those interested in using any Trust, and especially an Irrevocable Trust, need to get educated. The intricacies need administration skills not taught in schools.
Giving funds and assets to be held by Trustees initially goes against one’s need to own and control. Once it is understood that anything owned, controls the owner; then it becomes possible to understand the famous John D. Rockefeller quotation, “I want to own nothing, and control everything.” Nelson Rockefeller also said, “The secret to success is to own nothing and control everything.”
Now you may say, “This is all well, but how does this translate into my life, and the way I live?”
Put in simpler terms, you can avoid both the problems of community property law, and the problems of handing your intended a prenuptial agreement. This is done by putting most of your assets and your property into a Trust for you and for others.
Then, when you have found a worthy mate, you can say to him or her, “My dear, all of my property and income are in Trust. I don’t own it. As of now, if we were to marry and I were to die, you would get nothing. I don’t want this to happen. I can, though, make you a Beneficiary of my Trust, or make a separate Trust for you. I could also arrange that if we have children, they will also be taken care of through this Trust set up. I will need your help to do that, though. Would this work for you?
At that point, if he or she is interested, you can teach the potential spouse what you know about community property law, about spousal agreements, and about Trusts. Instead of insisting on a Prenup, and thus saying, “I don’t trust you,” you can, instead, show in a real way your trust in him or her, and further, you wish to bequeath a Trust for his or her benefit.
Of course, you cannot teach what you do not know, just as you cannot give what you do not have. Making a decision of this importance needs study. This is not the Trust type to jump into without looking at all the facts.
In this Irrevocable Trust, even if there is a divorce, it does not change any cash flow either spouse receives from the Trust, nor does it change any plans for children.
We are not implying those who are guilty of fraud or deceit are untouched. They remain liable for their misdeeds. We are pointing out there is safety in number in hard times and it is easier to survive, unscathed, if you belong to a financially stable group which has notable resources.
Doing this takes study and education by learning how to avoid the pitfalls of life, and gaining the skill to build a dynasty together. While it is an art to have and use this knowledge, only those willing to put the time into ferreting out the details will reap the eventual rewards.


Frank C. Ozak is the general manager of Charles Arthur Enterprises and has contributed to both Volume I and II of the Art of Passing the Buck. These books, designed to teach the public how to handle the major ingredients of inheritance, share the experience of more than ten Trust Administrators. More information about passing on wealth is found at www.passingbucks.com or e-mail Frank Ozak at passingbucks@gmail.com.
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CHARLES ARTHUR ENTERPRISES
3435 OCEAN PARK BLVD, SUITE 107-668
SANTA MONICA, CA 90405
(818) 574-6122

passingbucks at gmail.com




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