Often there are real or imagined power imbalances in negotiating the prenup. This may be triggered by financial disparity, business acumen differential, discomfort in expressing non-negotiables, or fear of risking the marriage. Good news! If managed correctly, a prenup can be an equalizer, empowering both parties in their relationship. Negotiating a prenup demands that both parties take a seat at the boardroom table and develop a Business Plan together. This forced communication can heal the less powerful partner who may be uncomfortable speaking up for themselves for fear of losing financial/emotional support. One focused conversation leading to a fair agreement can alter the dynamics and set the stage for their entire marriage.
What is a power imbalance in a relationship, and why does it matter for a prenup?
A power imbalance in a relationship is present when one partner has more control or influence over their partner. This may be a function of personalities, i.e., introvert versus extrovert, or if one partner has more financial resources, education, or social status, or if one is more emotionally dependent and tends to capitulate. Power imbalances may exist in any romantic, familial, or professional relationship.
However, when negotiating a prenuptial agreement, it is imperative to balance the power. Otherwise, there is a risk of residual resentment, anger, guilt, or shame. Trust and transparency are key ingredients in developing the marital Business Plan.
How to identify power imbalances
Before diving into what you can put in a prenup to address power imbalances, let’s discuss how to identify the signs:
Financial Disparities
Financial disparities are the most common power imbalance that can and must be resolved through a prenup. For example, if one person is a multi-millionaire and the other is financially dependent on their partner, those with fewer resources may feel they have less agency and withhold their independent thoughts. They may be more inclined to yield to their partner, and going forward, this dynamic will create issues in the relationship.
Emotional Dependence
Emotional dependency is another source of power imbalance since one person is deferential to the other, usually resulting in resentment.
Social Status
Social status can also create power imbalances in a relationship. If one partner has a higher social status, education, or influence, they also likely have more money or financial security.
Negotiation strategies
In order to address power imbalances in a prenup, the first thing to do is to discuss the terms with your future spouse. Once you have come to an understanding, you can then begin drafting the prenup.
Identify your negotiables and non-negotiables.
Both partners should come prepared with a list of negotiables and non-negotiables to give them room to better understand each other. In other words, be willing to wiggle on the negotiables in order to maintain your non-negotiables. For example, John is a CEO millionaire, and Jen is a starving artist with no money. Jen’s non-negotiables include an equalization clause (i.e., a lump sum payment) of $500,000 upon divorce; her negotiables include inheritance, assets, and the marital home. On the other hand, John’s non-negotiables include making sure his $100,000,000 inheritance from his parents remains separate, while he is negotiable on everything else.
Transparency
Both parties should be transparent about their financial situation to ensure that there are no secrets. The first step to reducing a power imbalance is to put all the cards on the table. Not only is this important for the relationship, but it’s also a legal requirement. If you do not provide full and fair financial disclosure, your prenup could be at risk of being thrown out. The intent behind the law is that this gives both spouses an equal understanding of one another’s financial situation and enables them to negotiate on equal grounds.
How to resolve power imbalances in your prenup
Full disclosure of finances
Both partners should provide full disclosure of their financial situation to ensure that there is no information asymmetry. This will give both parties an equal understanding of each other’s financial situation and enable them to negotiate on an equal footing. It also allows the person with less money to truly understand the breadth of their partner’s wealth (if that is the source of the power imbalance). Without this knowledge, they have even less power in the relationship.
Spousal support
Leaving in spousal support (a.k.a. alimony), which is the temporary or permanent financial support from one ex-spouse to another, is a great way to even out power imbalances. This may be especially important for spouses that are financially dependent on the other (e.g., stay-at-home parents). You can also allow for stipulations in spousal support, such as waiving spousal support until and if children are born.
Equalization clause
An equalization clause, or a lump sum payment clause, is when one spouse (usually the one with more power) pays the other spouse a lump sum of money when the marriage ends. This is separate from alimony and asset division; it’s a straight-up, flat-rate payout that helps “equalize” any power imbalances, quite literally. You may also add stipulations to the equalization clause, like “the longer the marriage, the higher the payout.”
Sunset clause
Sunset clauses put an expiration date on the prenup after a certain amount of time. This can be a win-win for both parties because the party with more money can ensure they aren’t being taken advantage of, while the party with less money can rest assured that they will be taken care of in the event of a divorce.
For example, you could say the prenup “sunsets” on the couple’s 10th wedding anniversary. After that date passes, the prenup is null and void, and state law will apply (depending on the state and the circumstances, this could benefit the lesser-earning spouse) OR you can create a postnuptial agreement at that point in time to make new stipulations.
Fair division of assets and debt
Ensuring that assets and debts are split up in a fair and equitable way between spouses can help reduce power imbalances in a relationship. How? By allotting certain assets to the person with less power and making sure any or most debt is allocated to the higher-earning person.
Primary residence clause
A primary residence clause basically says that one of the spouses is allowed to remain in the home for a set amount of time after the marriage comes to an end. For example, the clause might say, “Spouse A shall live in the marital home for a duration of five years after the divorce is finalized.” This doesn’t necessarily change the ownership of the home but simply allows Spouse A to remain in the home. This can be especially beneficial to spouses who have young children and are their main caregivers.
Joint bank accounts
Did you know you can create marital obligations through a prenup (not just working out divorce issues)? That’s right; you can include clauses in a prenup that lay out requirements for the marriage itself while it is still going on. For example, you can require that the parties maintain a joint bank account, which can be extremely helpful in balancing out power dynamics in a relationship with great financial disparity. Legally requiring via prenup the person with less money to have access to a joint bank account can help put both partners on even ground.
Negotiate in Good Faith
Each party should come prepared to the negotiation table ready to reach a fair and mutually beneficial agreement. An agreement deemed unconscionable can be overturned by a court.
Independent legal advice
For enforcement purposes, it is mutually beneficial for both parties to consult with separate counsel before signing the document.
Conclusion
Recognizing and overcoming power imbalances during the premarital agreement negotiations will generate a huge amount of goodwill and ensure the marriage relationship’s longevity, safety, and security.
Susan Scherman is a family law attorney, mediator and consultant, with extensive expertise in helping individuals and couples navigate Prenuptial Agreements, business issues, and divorce.
0 Comments