Learn to Love the Prenup

by Corinne Asturias

Take the case of Kathy* and her husband, Bill*. They started out as hardworking career people with promising futures—she with a Harvard MBA, he with a law degree from Cornell. Like many couples in New York, they figured that a typical community-property arrangement (in which both people get to keep the property they started with, and split equally what has accumulated during the marriage) would be adequate. But life took some unexpected, though not unheard-of, turns.

Kathy’s employer started doing phenomenally well, doling out generous bonuses in the range of $800,000 to $1 million a year to top execs. Kathy, a financial manager, realized the potentially short-term nature of this windfall and scrupulously stowed most of the money in special accounts.

Fast-forwarding a few years, the couple started having marital problems. When they decided to divorce, it turned out that their base salaries were a wash, but Kathy’s hard-earned bonuses—and interest—were up for grabs. She argued that they were not simply her own earnings, but a result of savvy investing and some of the best and brightest working years of her life.

Her husband felt the money was a lucky break that the couple should share equally. If the tables were turned, he argued, and he’d gotten the bonuses, she’d want half. (Need I mention that she scoffed at this?) Without a prenup spelling things out, the courts saw things his way.

Entrepreneurial endeavors are another tricky area. When marriages end, the collective booty can involve products, entire companies, and even the right to sell products under a person’s name. Amy*, a cosmetologist who married a dermatologist in 1987, tells how she worked in tandem with her spouse for more than a decade to create a large operation in cosmetology and skincare.