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Prenuptial agreements change with time but remain tricky

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Prenuptial agreements are not written to be fair. Nor should they be, according to some Indiana attorneys who draft them.

“It’s unfair no matter how you look at it,” said Marvin H. Mitchell, a partner with Mitchell Dick Hurst & McNelis LLC in Indianapolis, who recently shared with attorneys his advice for drafting effective premarriage agreements.

il-prenup09-15col.jpg Attorneys James Reed, left, and co-presenter Marvin Mitchell talk about how to draft effective premarriage agreements during a recent event hosted by the Indianapolis Bar Association. (IL Photo/ Perry Reichanadter)

“They’re not intended to be fair. Someone is getting the benefit,” explained Bingham Greenebaum Doll LLP partner James A. Reed, who joined Mitchell in an Indianapolis Bar Association panel discussion recently.

“Fifty percent of premarital agreements will be closely scrutinized in a judicial setting,” Mitchell estimated. Reed suggested that figure could be higher, because people with prenup agreements typically are in second marriages, which experience a higher rate of breakups than first marriages.

“You have to presume that this agreement will be challenged and your file will be reviewed,” Reed said.

Mitchell and Reed discussed one of the largest Indiana court cases in which a prenuptial agreement was involved, DeHaan v. DeHaan, 572 N.E.2d 1315, 1320, decided by the Court of Appeals in 1991. Jon and Christel DeHaan battled over the fortune they had created in RCI, a timeshare marketing company. Mitchell quipped that the amount at stake was enough to fund the deficit of a Central American nation.

Though the DeHaans had a prenup in which Christel DeHaan would have been entitled to 20 percent ownership in the company in the event of divorce, the trial court ruled that she was entitled to 50 percent of the company’s value – $67 million – because of the partnership nature of the business. The appeals court affirmed the ruling but reduced the award by $20 million for tax purposes.

Those types of premarriage agreements, in which wealth preservation is the key factor, remain the most common. Mitchell and Reed suggested that if parties entering a long-term relationship aren’t able to discuss assets and expectations before marriage, problems are likely.

Clarity is paramount, Mitchell said. “At the very least, have consistency about what is protected property” throughout the document. “Try to anticipate problems so the client won’t be moody. … We want the judge to see this is plain, obvious and clean.”

A 2010 survey by the American Academy of Matrimonial Lawyers found 73 percent of divorce attorneys reported increases in prenup agreements in the prior five years, and more than half said more women were initiating the requests. A 2012 AAML survey found a similar increase in postnuptial agreements.

Mitchell and Reed offered premarriage agreements and forms that can serve as models to create prenups that comply with the Uniform Premarital Agreement Act adopted by the Legislature in 1995.

Indiana is one of the few states that does not require financial disclosure in premarriage agreements, but Mitchell and Reed counseled that it was good practice to do so, and the attorneys they questioned agreed. Of about 30 in attendance, none said they had drafted a prenup that didn’t include financial disclosures.

Prenups can be attacked on bases such as the agreement was not voluntary, is unconscionable or ambiguous, or will result in hardship. Mitchell advised attorneys to include clauses in prenup agreements for the wealthier spouse to pay attorney fees in the event the agreement is challenged by the other party; some attorneys said they insist on such language.

Mitchell also warned against language that, for instance, would strictly limit a spouse’s entitlement to 10 percent of an estate. Such terms are “inviting the judge to find a problem with the agreement.”

Reed said it’s important for heirs to be involved in the discussions. He said the entire family – wealth originators, adult children and their heirs should sit down and talk frankly.

“It’s a tough conversation to have,” Reed said. But he said when adult children or heirs learn about trusts or assets they were unaware of, “that may change the way they look at their life.”

While the agreements are often unfair to one of the parties, Mitchell and Reed said those that strive for some degree of fairness are less likely to be challenged. Reed said prenups are also useful planning tools, especially for someone’s long-term needs.

“What’s the incentive for the much younger spouse” to provide care for an older spouse, for instance, Reed asked. Using tools such as escalating percentages of asset distribution over time can provide those incentives and give the older spouse peace of mind.

“It sounds very mercenary, but that’s real life,” Reed said.

In his practice, Reed said he’s experienced a new trend among those seeking prenups: younger professionals whose attitudes are, “I’m not into this whole ‘till death do us part’ crap.”

These type of prenups include entrepreneurs or young professionals who are entering their first marriage and are doing so on a strictly trial basis, he said. They often each have high net-worth or the expectation of wealth that they wish to protect.

But prenups also can serve those whose estates aren’t upwards of seven figures.

Attorneys Tara Rabiola and Jaimie Cairns of Ruppert & Schaefer P.C. in Indianapolis took some pointers from the discussion. They said their practice typically includes writing prenups for clients with estates that usually involve a principal homestead and more modest assets.

“We do a lot of agreements for second marriages,” Rabiola said.

But Cairns said the agreements can be useful in many situations. She said a recent prenup that she worked on involved a couple who was getting remarried.

In that instance, the spouse with greater assets had to come to the table with assurances in writing that were sufficient to persuade the other that the arrangement would be worthwhile, at least financially.

“I call it a reverse prenup,” Cairns said.•

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    I'm getting divorced and we have prenuptial and judge said it stands even though he made me sign it 2 days before wedding then I be c ame ill and left with nothing butbills

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  1. Applause, applause, applause ..... but, is this duty to serve the constitutional order not much more incumbent upon the State, whose only aim is to be pure and unadulterated justice, than defense counsel, who is also charged with gaining a result for a client? I agree both are responsible, but it seems to me that the government attorneys bear a burden much heavier than defense counsel .... "“I note, much as we did in Mechling v. State, 16 N.E.3d 1015 (Ind. Ct. App. 2014), trans. denied, that the attorneys representing the State and the defendant are both officers of the court and have a responsibility to correct any obvious errors at the time they are committed."

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  3. I have been on this program while on parole from 2011-2013. No person should be forced mentally to share private details of their personal life with total strangers. Also giving permission for a mental therapist to report to your parole agent that your not participating in group therapy because you don't have the financial mean to be in the group therapy. I was personally singled out and sent back three times for not having money and also sent back within the six month when you aren't to be sent according to state law. I will work to het this INSOMM's removed from this state. I also had twelve or thirteen parole agents with a fifteen month period. Thanks for your time.

  4. Our nation produces very few jurists of the caliber of Justice DOUGLAS and his peers these days. Here is that great civil libertarian, who recognized government as both a blessing and, when corrupted by ideological interests, a curse: "Once the investigator has only the conscience of government as a guide, the conscience can become ‘ravenous,’ as Cromwell, bent on destroying Thomas More, said in Bolt, A Man For All Seasons (1960), p. 120. The First Amendment mirrors many episodes where men, harried and harassed by government, sought refuge in their conscience, as these lines of Thomas More show: ‘MORE: And when we stand before God, and you are sent to Paradise for doing according to your conscience, *575 and I am damned for not doing according to mine, will you come with me, for fellowship? ‘CRANMER: So those of us whose names are there are damned, Sir Thomas? ‘MORE: I don't know, Your Grace. I have no window to look into another man's conscience. I condemn no one. ‘CRANMER: Then the matter is capable of question? ‘MORE: Certainly. ‘CRANMER: But that you owe obedience to your King is not capable of question. So weigh a doubt against a certainty—and sign. ‘MORE: Some men think the Earth is round, others think it flat; it is a matter capable of question. But if it is flat, will the King's command make it round? And if it is round, will the King's command flatten it? No, I will not sign.’ Id., pp. 132—133. DOUGLAS THEN WROTE: Where government is the Big Brother,11 privacy gives way to surveillance. **909 But our commitment is otherwise. *576 By the First Amendment we have staked our security on freedom to promote a multiplicity of ideas, to associate at will with kindred spirits, and to defy governmental intrusion into these precincts" Gibson v. Florida Legislative Investigation Comm., 372 U.S. 539, 574-76, 83 S. Ct. 889, 908-09, 9 L. Ed. 2d 929 (1963) Mr. Justice DOUGLAS, concurring. I write: Happy Memorial Day to all -- God please bless our fallen who lived and died to preserve constitutional governance in our wonderful series of Republics. And God open the eyes of those government officials who denounce the constitutions of these Republics by arbitrary actions arising out capricious motives.

  5. From back in the day before secularism got a stranglehold on Hoosier jurists comes this great excerpt via Indiana federal court judge Allan Sharp, dedicated to those many Indiana government attorneys (with whom I have dealt) who count the law as a mere tool, an optional tool that is not to be used when political correctness compels a more acceptable result than merely following the path that the law directs: ALLEN SHARP, District Judge. I. In a scene following a visit by Henry VIII to the home of Sir Thomas More, playwriter Robert Bolt puts the following words into the mouths of his characters: Margaret: Father, that man's bad. MORE: There is no law against that. ROPER: There is! God's law! MORE: Then God can arrest him. ROPER: Sophistication upon sophistication! MORE: No, sheer simplicity. The law, Roper, the law. I know what's legal not what's right. And I'll stick to what's legal. ROPER: Then you set man's law above God's! MORE: No, far below; but let me draw your attention to a fact I'm not God. The currents and eddies of right and wrong, which you find such plain sailing, I can't navigate. I'm no voyager. But in the thickets of law, oh, there I'm a forester. I doubt if there's a man alive who could follow me there, thank God... ALICE: (Exasperated, pointing after Rich) While you talk, he's gone! MORE: And go he should, if he was the Devil himself, until he broke the law! ROPER: So now you'd give the Devil benefit of law! MORE: Yes. What would you do? Cut a great road through the law to get after the Devil? ROPER: I'd cut down every law in England to do that! MORE: (Roused and excited) Oh? (Advances on Roper) And when the last law was down, and the Devil turned round on you where would you hide, Roper, the laws being flat? (He leaves *1257 him) This country's planted thick with laws from coast to coast man's laws, not God's and if you cut them down and you're just the man to do it d'you really think you would stand upright in the winds that would blow then? (Quietly) Yes, I'd give the Devil benefit of law, for my own safety's sake. ROPER: I have long suspected this; this is the golden calf; the law's your god. MORE: (Wearily) Oh, Roper, you're a fool, God's my god... (Rather bitterly) But I find him rather too (Very bitterly) subtle... I don't know where he is nor what he wants. ROPER: My God wants service, to the end and unremitting; nothing else! MORE: (Dryly) Are you sure that's God! He sounds like Moloch. But indeed it may be God And whoever hunts for me, Roper, God or Devil, will find me hiding in the thickets of the law! And I'll hide my daughter with me! Not hoist her up the mainmast of your seagoing principles! They put about too nimbly! (Exit More. They all look after him). Pgs. 65-67, A MAN FOR ALL SEASONS A Play in Two Acts, Robert Bolt, Random House, New York, 1960. Linley E. Pearson, Atty. Gen. of Indiana, Indianapolis, for defendants. Childs v. Duckworth, 509 F. Supp. 1254, 1256 (N.D. Ind. 1981) aff'd, 705 F.2d 915 (7th Cir. 1983)

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