Podcast: The Dos and Don’ts of Prenuptial Agreements in Pennsylvania

Maria Cognetti discusses the dos and don’ts of prenuptial agreements in Pennsylvania in this podcast with Divorce Magazine, including who should get one and what should be covered in a prenup.

Hosted By:
Diana Shepherd, Editorial Director, Divorce Magazine

Guest Speaker:

Maria Cognetti, Camp Hill/Harrisburg Family Law and Prenuptial Agreement Lawyer in Pennsylvania.

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Read the Transcript of this Podcast Below.

Diana Shepherd: My name is Diana Shepherd and I’m the editorial director of Family Lawyer Magazine and Divorce Magazine. Joining me today is Harrisburg Pennsylvania Family Lawyer Maria Cognetti, who’s here to discuss the dos and don’ts of prenuptial agreements. Maria is known for her skills in drafting, defending, and challenging prenuptial agreements for high-asset individuals. With 40-plus years of experience in family law, she knows how serious the consequences can be when there’s no prenup, or a poorly crafted one when it comes time to divorce.

Maria, thank you for taking the time to be with us today.

Maria: Thank you. I appreciate being here.

Let’s dive right in. What is a prenup? And how is it different from a postnup in Pennsylvania?

Maria: A prenuptial agreement is a document that is executed before the marriage, and it generally deals with how two people want to divide up their assets and or their income. In cases of, generally, divorce but it can also cover death. It is totally different from a postnuptial agreement, which, as the term itself signifies is after the parties have been married. It’s always done before a final decree is entered, and it is generally negotiated during the time of separation. They deal with similar items like the assets but in totally different ways. The postnuptial agreement has generally been negotiated over a period of time, and it is basically the final agreement as to the division of assets and alimony, but it can also include things like custody and child support.

Who should get a prenup in Pennsylvania? Does everyone getting married need one? Or are there specific groups that need prenups more than others?

Maria: To me, there are definitely specific groups. Anyone considering a second marriage should consider a prenup, especially if the first marriage ended in divorce as opposed to the death of the spouse. If the first marriage ended in divorce, that person has probably already given up a major part of the assets or the marital estate that they had amassed. So you now want to protect themselves from that happening again. Anyone who has a major asset to protect  – such as someone coming into this next marriage with a pre-existing business, anyone who perhaps has a large settlement from something like a personal injury claim – should have a prenup. And the person that I also like to consider getting one is someone who perhaps is young, hasn’t had a prior marriage, but they have the possibility of a significant career. The best example would be the doctor who is not just out of med school but has finished their internship or their residency. And right now they may be making a nominal salary, but that may be the person who within years will be making a six- or seven-figure salary. That’s someone you really want to protect down the road. And then the other category would be someone who has a possibility of a significant inheritance in addition to those categories where you have reasons to protect assets. If you have children from a prior marriage, that’s when you should also consider a prenup because you want to protect them and their rights of inheritance. And that’s more where you would see the dead-end of a prenup coming into play.

Should a business owner get a prenup or postnup done by their corporate lawyer since that lawyer presumably already knows everything about their financial situation?

Maria: That’s a topic near and dear to my heart because so often when someone comes into me with a prenup that someone else did. And the first question I ask them is: “Who did it?” And when the answer is “My business attorney,” or “My estate attorney,” I cringe inside, because prenups should only be done by experienced matrimonial attorneys. The business attorney may be intimately familiar with the person’s assets or their business dealings. Corporate counsel likewise, but because the main point of the prenup is to protect against what can happen in a divorce, then that’s going to be knowledge that only the experienced skilled divorce attorney knows, and therefore they can best protect against it. A lot of people think they should go to their estate attorney. And I get that because one of the things that you can do in a prenup is to protect what happens in your death, in addition to what you might do in your will. But for the same reasons, the estate attorney generally knows nothing about family law. What I will say, though, is if you do have a sizable estate, you would have your prenup done by a matrimonial attorney, but they should be consulting with your estate attorney.

It sounds like that’s a bit like going to a dentist to have heart surgery – you just wouldn’t do that. They’re both experts, but not in the same field.

Maria: Clearly. Frankly, a better example might be going to a regular dentist to clean your teeth and having him do a major dental surgery – like a root canal, or something even worse than that. Some people think that a lawyer is a lawyer, and that’s simply not true anymore in this day and age.

What should a prenuptial agreement cover?

Maria: The real answer is, it can cover anything from soup to nuts. The best or worst example of that being the client I had oh so many years ago who actually wanted to and we did put language into the prenup which dealt with which of the two parties would be responsible for the household chores, who would be responsible for kid duties. To my mind that doesn’t belong there at all. It’s not even really something that’s enforceable. But what you can do in a prenup, basically, as I said, is anything. Oftentimes people will ask well, okay, do I need to be fair? That’s one of the first questions. And the answer is in Pennsylvania, believe it or not, there is no fairness requirement. So, the higher income or more assets a spouse has, you can go to the far end where you keep the other spouse from virtually getting anything that you’ve come into the marriage with. And anything that you amass during the marriage. That’s the farthest end of the spectrum. On the other hand, that person can choose to be reasonable and make reasonable provision for the spouse. And sometimes when we do that, sometimes we base that on the number of years of the marriage, the longer the marriage goes on, the more the lower-earning spouse may get out of the prenup. You can also do things like deciding how much spousal support or alimony you’re going to pay. And again, that’s often generally based on the length of the marriage. Some clients want to include child support. I try to get them to understand that that’s not a good thing, child support is never binding, and no parent in any form of an agreement – pre, post, or whatever – can bargain away the rights of the child. So the real answer is that what you can put into it is only limited by your imagination and your drafting skills.

So hearing that there’s no fairness requirement in Pennsylvania makes me think that the financially disadvantaged or naive spouse should really have someone in his or her corner to look over the prenuptial agreement to try and insert some fairness into it. Would that be a fairly accurate statement?

Maria: Yes, absolutely. And one of the things that you want to do when you’re representing the higher-earning spouse is to encourage them to tell their spouse to get counsel and not to find counsel for them and not to pay counsel for them, which sometimes happens. But from the end of wanting to make sure that what you draft doesn’t get thrown out of court. And having counsel is not a requirement. I will say that. But when you want to do everything you can possibly do to make it enforceable. You really want to encourage that person to get counsel. And like you said, especially when there’s a lot of disparity.

What about the property that the couple acquires after the marriage? Can a prenup cover that – even if you don’t know exactly what that property is going to be?

Maria: Absolutely, and you can do that in many ways. One of the most normal ways of wording it would be to say, any assets that flow from something you have now, and that especially comes up when you have a business, you don’t want to say you’re just protecting the business, because the business may change the business may be bought out, the business may buy other businesses. So you want to include language that says basically anything that flows from what I have today. But you can also kind of go the other way and say that any assets that we get during the marriage together, we will call marital property, which in a normal case, would throw them into the divorce. But you take that one step further, and say, okay, those assets we get during the marriage, we’re going to divide 50/50. By doing that, you’ve removed one of the most horrible, time-taking, expensive issues out of the divorce, because how property gets divided, is always difficult. So you can say, Okay, we’ve got these assets, we’re going to get them during the marriage, we don’t know what they are. But as long as we buy them in joint names, then we will divide them 50/50. Or, if you’re probably going to have one person really contributing to those assets bought during the marriage, the parties can opt to divide the assets in proportion to the contributions that went into the acquisition. Let’s talk about the do’s and don’ts when it comes to getting a prenuptial agreement.

What are the top three mistakes that you have seen in such an agreement?

Maria: The first one would be something we’ve covered, which is having it drafted by a non-matrimonial attorney. That’s really key because that’s really going to affect the entire thing. The second one that I see even in agreements that are drafted by divorce attorneys is no full and fair disclosure. In Pennsylvania, the agreement doesn’t have to be fair – but there has to be full and fair disclosure, the complete disclosure of everything each party had their income, their assets. In my case, when I’m drafting my prenups, they may run about 20 to 30 pages. But my addendums will often be more than that, if not double, I attach tax returns, I attach lists of assets, any valuations that the parties have had. And again, this is especially so when you’ve got a business involved. And then the third mistake, believe it or not, still happens is when somebody has it executed the night before the wedding or right before the wedding. Now, that alone doesn’t throw it out. But it certainly leaves it as an issue as to was there duress, or was there fraud? If a client comes to me, and the first question my staff asks is “When are you getting married?” And if they say the wedding is in less than a month, we try to convince them to put it off. So those are the top three.

What would make a Pennsylvania prenup invalid down the road? And conversely, how do you ensure that a prenup can stand up to a court challenge?

Maria: That kind of goes hand-in-hand with what we just discussed: the single most legitimate issue and what will most often knock out a prenup is when there was less than full disclosure. Oftentimes, when I’m teaching a class to attorneys, they will ask me how much disclosure is full disclosure, what needs to be done? My theory on that is the more the better; more detail lends more credibility to the validity of the agreement. Some things that we covered a minute ago: tax returns, pay stubs, lists of assets, a balance sheet for a business supporting documentation for the larger assets. And one of the things that you want to do there is if you are guessing as to value, you want to overvalue because you don’t want the lesser income asset spouse to be able to say, Oh my gosh, I had no idea he was worth $20 million. And therefore, if you have to err on the side of making sure that that lesser earning spouse really understood that there was a lot of money or a lot of value involved. Sometimes we get appraisals, but it’s not really necessary. But depending on the case, and depending on where you think it’s going to end up if they divorce, then, by all means, get appraisals as well.

You mentioned timing in one of your answers today; I’m wondering when a person should get a prenup in Pennsylvania? And how much does timing matter?

Maria: Obviously, it has to be before the date of the upcoming marriage, I have had people who couldn’t manage to pull that off. So although they could and would have reached an agreement, it doesn’t get done before the marriage, they then end up doing something after they’re married. And what really looks like a prenup will then just be called a mid-nups. But that’s a topic for another day. Preferably, you just don’t want to do it too close to the date of the marriage. I tell my clients, the minute they tell me I’m like, discuss it, you know, bring up the topic. Bring up the topic before you get engaged. Before you set a date, because it’s either going to be a yes or no, yes, I’ll listen to what you have to say. But when you talk about two people who have significant wealth or assets, and both need to get attorneys, and then there needs to be some negotiation, if you want to put a time on it, a prenup should be done six months before the wedding.

Can one of the issues be that a prenup is just not romantic? People who are thinking of getting married are looking through life through rose-colored glasses, and the thought of asking for a prenup seems to kill the romance?

Maria: I think that’s often the case. But there you will see the person who has the business sense part of them kind of overrides the romantic part of them. And it’s tough because you’re about to get into this most important thing. Oftentimes, it’s a first marriage for the lower-earning or lower-asset spouse. So they’re the romantic one, the spouse that we’re talking about being the client is like, this is a business deal. And yes, it’s romantic. But it’s still a business deal. And so it’s really hard to broach that subject. You know, if you haven’t asked someone to marry you. And your first question is, you know, I think we’re getting pretty serious here. But, you know, if we get serious and we keep going down this route, oh, gee, will you sign a prenuptial agreement? And, to my mind, I think that if that person can say to their intended, and by the way, I’m going to be fair, then I think it doesn’t kill the romance quite as much as “You know, I want to make sure I protect all my assets.” But I will tell you that I have seen prenuptial agreements that absolutely – and I won’t name names, but there was a Pennsylvania attorney who did prenups that only protected the monied spouse – cut the non-monied spouse off from everything. Even if it was a 50-year marriage, those agreements will fly. If they’re done properly, they’ll fly. But that’s not where most of them end up. Most of them are very legitimate reasons for wanting to protect a long-standing business, a family business, an inheritance, or a personal injury settlement that you have because you were injured. But yes, asking for a prenup could definitely affect the romance.

Diana: My guest today has been Harrisburg, Pennsylvania family lawyer Maria Cognetti, a fellow and past-president of the American Academy of Matrimonial Lawyers (AAML), and a diplomat of the American College of Family Trial Lawyers. Maria has received countless awards from national organizations over the years, including being named as the AAML’s Fellow of the Year in 2011. For more information about how Maria and her team protect their clients’ assets with comprehensive prenuptial agreements, please visit her website at www.cognettilaw.com

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