Feb. 17, 2016 – Lawyers who treat negotiation as a traditional “take-it-or-leave-it” process of positional bargaining can leave a couple crafting a Prenuptial Marital Property Agreement to start their marriage at a place of distrust and negativity.
Best Practice and Legal Requirements for Preparing Sustainable Prenuptial Agreements
Best practice in creating a valid Prenuptial Marital Property Agreement (“Agreement”) in Wisconsin requires that both parties have independent legal counsel.1 Sound Agreements must meet four basic criteria to affirm “procedural and substantive fairness”:
1) Each party was represented by independent counsel;
2) Each party had adequate time to review the Agreement and financial summaries and enter it freely and voluntarily;
3) The parties understood the terms of the Agreement and their rights absent the Agreement; and
4) The Agreement was fair at the time of the making and at the time of divorce.2
Affirming that parties understand an Agreement and that each provides a full financial disclosure is best accomplished with the assistance of separate legal counsel3 and helps assure the viability of the Agreement at divorce or death.4
Unlike divorces that have no requirement that a party obtain legal advice on the clear understanding of a divorce settlement5, crafting a Prenuptial Agreement is more likely to include two attorneys if the parties intend to create a valid agreement under the criteria set forth in Button v. Button. Further, there is no “one-size-fits-all” approach default for an Agreement and therefore nearly all terms are subject to negotiation. Terms typically include property division, asset management, expenses, tax and estate planning in the event the relationship is not successful, or on death.6 As such, parties are effectively negotiating their divorce and financial future before they make their vows.7
Positional Bargaining vs. Problem Solving
Lawyers who treat negotiation as a traditional “take-it-or-leave-it” process of positional bargaining can leave a couple crafting an Agreement to start their marriage at a place of distrust and negativity. Some lawyers declare their unwillingness to represent a client in the negotiation of an Agreement if the client is unwilling to walk away from the marriage, and clients participating in positional bargaining must indeed ultimately be willing to walk away from the negotiation – and possibly their relationship – if they cannot reach mutual agreement.
Gregory M. Hildebrand (Marquette 2001) is a partner at Hansen & Hildebrand, SC, Milwaukee, a family law firm focusing on collaborative law and mediation. He is also the co-founder of the Family Mediation Center, LLC, the first interdisciplinary mediation center in Wisconsin using a team-based approach to assist couples in privately resolving child-related and financial issues. He has a Masters in Social Work and frequently trains on interest-based negotiation.
Is imposing a traditional bargaining process truly what the clients want? It is hard to imagine the couple where each believes that “take it or leave it” is a good foundation for a successful marriage. How each attorney approaches their representation should be part of their threshold assessment of how to best represent the client.8
If lawyers start with the goal of assisting a couple on the way to the altar to develop and confirm the financial terms and expectations of their marriage, and work from a goal orientation instead of a positional perspective, the lawyer is more likely to assist in meeting the fairness and validity criteria set forth in Button.9 Further, couples planning their marriage are prime candidates for an interest-based process, as presumably prior to their marriage they are moving toward developing and structuring a legal partnership.
The Case for Interest-based Negotiation in Improving the Validity of Prenuptial Agreements
Interest-based negotiation starts from a foundation of determining each party’s goals, interests, priorities, and goodwill rather than their respective rights from a place of limitation and restriction. The attorney’s role in interest-based negotiation is to advise a client regarding options and legal defaults, to proactively assist in compiling their client’s financial disclosure, assess their partner’s financial disclosures, and ultimately craft an Agreement that is mutually fair and acceptable.10 In doing so, the attorney is helping to shape their client’s financial future and mutually structure the financial terms of their marriage – and not simply pre-negotiate their divorce. In the event the relationship is not successful, the attorney is also more likely to have developed a viable Agreement that will avoid – and withstand – future litigation.
Ideally, this approach puts the parties and their counsel at the table together to outline the topics for negotiation, the options and approaches to asset allocation and management. More significantly, it creates an outcome that avoids the “take-it-or-leave-it” approach that is especially common when one party crafts a proposed “agreement” and delivers it to their partner’s attorney as an “offer” rather than a jointly crafted summary.
Attorneys using interest-based negotiation in crafting an Agreement can not only help their clients enter their marriage on the right foot, but if that marriage is unsuccessful, can ensure their clients' divorce is as smooth a transition as possible and not an opportunity to both litigate a divorce and the validity of the Agreement.
1 Although a valid Marital Property Agreement does not require engagement of two lawyers per se (Wis. Stat. 766.58(8)), meeting the fairness requirements for validity set forth in Button v. Button,131 Wis. 2d 84 (1986) make the use of independent counsel for each party advisable. Failure to do so will likely mount a challenge on that issue. See e.g., Schumacher v. Schumacher, 131 Wis.2d 332 (1986) (affirming a one-page Marital Property Agreement signed by two witnesses and neither having legal counsel, but invalidating on failure of disclosure requirements). See also, Greenwald v. Greenwald, 154 Wis. 2d 767 (Ct. App. 1990)(affirming validity of a Prenuptial Agreement prepared by only one attorney after determining other party knowingly and voluntarily waived right to independent review).
2 See Button generally.
3 Id and §766.585(6)(c)(1), Wis. Stats.
4 See Button at 95 (“if the parties fail to satisfy the [fairness] factors the agreement is inequitable under [767.61]”).
5 See §767 generally.
6 See §766.58(3)(a)-(h).
7 See §767.61(1)(upon every…divorce…the court shall divide the property of the parties)(emphasis added).
8 SCR Ch. 20:1.1.
9 See Button at 94 (“[Marital Property Agreements] serve a useful function. They allow parties to structure their financial affairs to suit their needs and values and to achieve certainty. This certainly may encourage marriage and may be conducive to marital tranquility by protecting the financial expectations of the parties.”
10 Roger Fisher et al., Getting to Yes at 4 (Penguin Books 3rd ed. 2011) – “Any method of negotiation may be fairly judged by three criteria: It should produce a wise agreement if agreement is possible. It should be efficient. And it should improve or at least not damage the relationship between the parties.”