Season 3, Episode 6: Should We Talk About a Prenup?
Why, if you’re asking the prenup question, you probably already have the prenup answer
Am I the prenup type?
Will my house still be my house after it will be our house if I become a me again?
Will I sound shallow/greedy/pessimistic/calculating/shrill/selfish/gold-diggy/cold-hearted if I tell my partner I want a prenup before we get married?
So many questions and fears and misconceptions about what it means to consider the financial implications of signing a contract to join forces! For many, it’s super awkward and feels like the wrong vibe to be starting out with. Women on the Verge of a Financial Breakthrough need to turn that vibe upside down.
But first, we need more information. So, welcome to today’s episode.
Our guest expert, Hannah Hembree Bell, is a family law attorney who sets us straight on who needs a prenup (everyone?), what should be in it and why talking about money with your partner before, during and after marriage is ALWAYS a good idea. Follow @hembreebelllaw for all things divorce and lawyer and mom and mindset and all of that on all of the channels. It’s an education!
After you hear Hannah, you’re going to want to talk about this stuff a lot, to anyone who will listen. Even if you’re not getting married, you can bug your smug engaged friends!
Ask us your dumb investing and finance questions for Season 3 on our Ask Us page!
We have the social medias!! Here’s our Instagram and Facebook and LinkedIn.
This episode was edited by our co-producer Kelly West. Music by Bad Bad Hats and Devmo.
Transcript for Season 3, Episode 6: Should We Talk About a Prenup?
Caitlin [00:00:07] Welcome to Women on the Verge of a Financial Breakthrough, a podcast where we're figuring out finance, one dumb question at a time. I'm the dummy. Caitlin Meredith, a coach and mediator based in the Bay Area.
Sara [00:00:20] And I'm Sara Glakas. I'm an investor, advisor and founder of Black Barn Financial and the Austin Women's Investing Group, which can be found on Meetup and Facebook.
Caitlin [00:00:30] Before we start, do you know a woman who might be on the verge of a financial breakthrough? Will you text her a link to our show and maybe two other friends while you're at it? Also, if you can, please leave us a review. This helps other women on the verge find us and we read all of them and they make us happy cry. Like this one from a listener who said a provocative and insightful conversation for brilliant women of all ages and stages immediately takes intimidating subject matter and makes it accessible and fun. Thank you so much for this review and thank you to all of our listeners. Now let's get started.
Sara [00:01:13] Today as our guest, we have Hannah Hembree Bell from Hembree Bell Law in Austin, Texas. Hannah is a family law attorney who I met. I don't know, maybe a year or two ago, Hannah and, I was just taken with her expertise and her personality and her ability to take complex conversations around family law, divorce, custody, things like that, and really boil it down to really some simple concepts. So we've had Hannah to the East, a women's investing group, to teach our members in person, and Caitlin and I thought it would be a great idea to have her come on. Women on the verge of a Financial breakthrough. So welcome, Hannah.
Hannah [00:01:53] Hey, thank you so much for having me. I am so super glad to be here anywhere Sara is. I want an invite, so I'm happy to be here.
Caitlin [00:02:01] Well, you're going to have to start a podcast with her. Get in line. Yeah, yeah.
Hannah [00:02:07] I yeah, I love having Sara and the team, at Black Barn as a resource. Because a lot of times in my practice when you're getting divorced, your kids, your money, your business, everything you really care about is affected. And one of the big things I think a lot of attorneys miss is when we go to mediation and when it's time to make a deal, sure, we can tell you what the law may do, but we really shouldn't be telling you about the tax effect or the consequences of taking an IRA versus a 401 K. And that's what I love to hear. People like Sara and the team come in and help advise clients, not just, you know, we'll tell them the legal rules, but they are able to work with the client and help them think through the deal that they make, the decisions that they make, and how long term that's going to impact their family and the rest of their life. So love, love, love having that as an option.
Caitlin [00:02:58] Wait, Hannah, I'm just putting this together. I'm a divorce coach and a mediator and my other life, and I use financial advisors to do that for my clients. I never thought about it for Sara.
Sara [00:03:12] Thanks, Caitlin. Where to keep you?
Hannah [00:03:14] Awesome. Well, there you go. So.
Sara [00:03:19] Caitlin, meet Sara. Sara, meet Caitlin.
Caitlin [00:03:22] Hannah, you're really bringing people together on this podcast. Yeah.
Sara [00:03:26] I mean, and Hannah, I don't remember if I told you this, but, my my first job out of undergrad, when I first moved to Austin, was working in a family law firm as a legal assistant. And that's where I saw firsthand people going through this often financially traumatic, you know, and emotionally traumatic experience. And people just did not have the toolset to navigate it very well. And it scared me. And that's why I went back to business school. I got my MBA kind of steeped myself in the financial world so that, I don't know, we could we could help get more information into the hands of more women, especially when they're going through things like this.
Caitlin [00:04:05] But we're actually going to talk about the pre divorce part. Right. What we do before the divorce before that that actual marriage.
Hannah [00:04:14] Yeah. Hopefully we'll be talking about things that never end in a divorce. But if you do get there that the path is a paved road instead of like scary mud filled gravel road in the back of the farm. That's the idea. More like a sidewalk.
Sara [00:04:32] And Hannah has a great tagline too. It's helping marriages end well.
Hannah [00:04:37] We help marriages end well. And for us that is, not sort of like come by your Gwyneth Paltrow consciously uncoupling. Like we're not that sort. Exactly. I mean, that's so cute for all those people who can do that. But for the rest of us, what it means is we want to help and marriage as well as as it applies to that particular family. And sometimes ending well means throwing down and hearing. Sometimes that means taking a deal that, you know, messes with child support or custody provisions or whatever, so that you can move on with your life. Get back to doing what you do, get back to business, get back to work, get back to playing with your kids on the playground. And so for us, it's really, I think, more than anything, a goal oriented approach. Like, okay, in that first meeting we sit down with, people were like, what are your goals? What are you trying to get out of this divorce? What does success look like at my whole thing? I'm divorced. I've been through two custody modifications, and so for me, I'm just a very practical person. And that's like to Sara's point that she said earlier when talking about this stuff, I think some lawyers feel good about themselves by making it over complicated for me. I'm like, it's just not rocket science. I just happened to have been looking at these papers longer than you. Pretty much anybody can understand it. If you just applied yourself for a minute and just go apply yourself in other areas. And I've done it, you know, and this one.
Sara [00:05:59] I love that.
Caitlin [00:05:59] I want to hear about it forever.
Sara [00:06:03] And just to remind you, Hannah and listeners, Caitlin is in California in the Bay Area, and Hannah is in Texas, and I'm also. So in Texas. So, none of this is intended to be legal advice or investing advice, but, just wanted to, like, just really quickly just point out that we're in different locales. Yeah.
Hannah [00:06:24] Because there's a long Texas law in this area, and California law in this area are very, very, very different. And they have very, very different outcomes as it concerns divorce. So that's because, you know, I think we'll want to talk a bit about marital agreements. We call in Texas. People mostly call them like a prenup prenuptial or a post nuptial agreement. In Texas, that's like a formal word, like when a tournament mentor of mine said, and act like you've been here before. So it's a marital agreement if you want to act like you've been here before. And, the thing is, what those ultimately do, like, if you want to know what is that it up ins the schedule and characterization of property as determined by the state of Texas for your specific situation. So anywhere that's kind of going to be the case, it says the law would have one result. We want a different result. And so to really understand what's best and how to do it and everything in your state, you'd have to know what the law would do to then know whether you want to change it, and if so, how does that make sense? So like you have to have a basic understanding. So the biggest split would be in states that recognize community property and the states that don't. In general, anybody listening wherever you would be, understand that some of the advice I'd give to someone in Texas would be very different if I was in your state, because I just don't know the way all of those states work. The community property states include Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. So like it's a limited set. And even so, custody provisions, alimony, spousal maintenance those vary significantly from state to state. And the difference in California law and Texas law in those areas very, very, very different. So not as it concerns community property, although I'm sure that's different and how and why it's awarded. And I'll try not to be too, too Texas specific, but I can give some general thoughts.
Caitlin [00:08:33] I think the first question, as a non-legal non-financial is like an unmarried person, how would I even know if I'm the type of person that should consider a prenup or a marital agreement? Like, is there some sort of financial threshold you have to be, or like a particular attachment to a possession that you don't want to be in jeopardy even if you get married and then later, like what? Who who should think about this?
Hannah [00:09:06] I guess if you're asking the question, you already have your answer. So if some part of you thinks I may need to get a marital agreement, you probably should look into it and visit with a lawyer. And here's why I say that. So what a marital agreement can do is totally change the property scheme, and it helps you understand what is the property scheme in your state, why people get married. Oh that's great. Let's like move in together and have babies and whatever. And they really have no idea what they're doing with their property. I see this all the time. You'll have a client come in at, you know, at the back end at the divorce and say, well, oh, that's my car, that's my house, that's my business. My name's on the title, but that's not how it works, at least in Texas, because generally speaking, states are going to determine the character of property. Meaning is it community separate like they determined that at the inception of title in the thing. So in a community property jurisdiction, if you got your right to title during the marriage, it's going to be presumed to be community. So that car with your name on it that you bought with your money from your job while you're married is both of yours. That house, both business, both yours. And so if you want are getting married and you've got probably at least some assets, or you think you're going to have some decent assets, and by this I mean, you know, six figures go, well, at least think about it, because you may not have the money in your hand, but you may come in to it later. And that's why if you're asking the question, you need to think about it. So what you've got to get, you know, understand or conceptualize is what the marital a premarital agreement. Let's talk about those first because you can do it after. But it's different. But a premarital agreement, with that general rule was talking community property states the general rule that after the date of marriage, everything's presumed agreed, assumed to be community, unless you can prove with clear and convincing evidence, which is like a high burden. Like real dang sure I call it evidence, then, that is separate. So here's the thing. If you get. Get married. You need to understand the money that you make, the inheritance that you get. The stock options that finally vest, the business that grows. How is that going to be treated? And so let's say, for instance, you're, you know, in California, you're at a startup, okay. And you were thinking about getting married. Well, and you already know that in the end of next year you're going to get some equity as part of your position. And by then you'll be married. Well, that equity, at least in Texas, I don't know the California law, but in Texas, that equity, that vest after the date of marriage would be both a yes. And so even if you're at a startup and you're broke and you don't have any money, but you see it come in, then you need to understand from an attorney who can explain it in a way that kind of resonates with your brain, of how it's going to work in the future, so you can decide whether to do anything about it now or not. So anyone listening to this podcast who is thinking about a financial breakthrough, if you're thinking of getting married, you should at least consider a premarital agreement. It is the most practical, wisest choice, and necessarily the most romantic, but it's certainly the most advisable thing to do.
Caitlin [00:12:30] Do you advise it for men and women?
Hannah [00:12:32] Of course. I think men and women should approach it similarly. I mean, here's the thing. So if you're going into a marriage in a community property state, everything is both of yours. What if one of y'all makes a ton of money and one of y'all is kind of a lazy bum who sits on the couch and doesn't even watch kids, and you just eat Cheetos and, you know, ad divorce, they're still going to get half of your medical practice you started after the marriage or whatever the value, okay? And you usually don't marry someone you think is going to be a bum in the future, but you have to foresee that potential consequence. And so what guys and ladies need to do upfront is just think about what in your own heart feels right and fair. And the people who most like absolutely need to consider a prenup premarital agreement are those who already possess a decent bit of assets. Okay. And it can help you protect those assets in the future because, for instance, in Texas, the income on separate property is community. And so those separate property assets you held that grow or spin off income or whatever, that's community. And usually they'll take often anyway, they'll take those dividends or whatever, reinvest. And then you've made a big muddy mess okay. So what you can do is the way some of these laws think of it, like streams off a river, that you can sort of divert the stream and you and it doesn't have to be all or nothing. And I think that this is what people think, that a premarital agreement means we don't make any joint stuff. Man is mine and his is here. Yeah, yeah. Okay. That's what they think. It's all or nothing, but it's not. It can be super specific and unique to your situation. So say each person comes in with $1 million in assets, each between a house they own, some stocks, some cash. Let's just say each person had $1 million. Well, what they may want to be sure of is that the the assets that they bring in maintain their separate property status when they go out. I mean, that's the law. However, there are delicacies and intricacies like the income from separate property I mentioned that can make it more complicated. So what you may do is say like, okay, I've got the house I lived in when we met. I just want to make sure that at the end of this marriage, this stays my separate property. Oh, you know, funds paid on the house are separate property. All taxes, everything is my separate. The house is fully mine. You know, they relinquish all claims. I take this out of the marriage and this set of assets, these set of bank accounts, this set of stocks, all mine. And then once they get married, they kind of splice and dice those separate assets, just that we bring out what we brought in, everything we do after that we do together where our fates are tied together, our ships are tied together. You can do that. And for me, this is a pretty easy sell, a pretty equitable thing to do. Even if you've got one more moneyed spouse and one lesser moneyed spouse. So, you know, it may be that someone with that much money is marrying somebody with a bunch of money. For both of them, it's probably feels kind of fair enough that what you brought in, you take out. And they may still but they may say, hey, once we get married, I want this union and I want the benefit of that bargain. So that's one way to do it. Really. The sky's the limit on what you can add into that. With the exception of you can't mess with child support, custody, stuff like that, because that's against public policy. Like we don't make contracts in advance about our kids. So that's a. A different sort of a situation with some, you know, you made some of the money about the kids may be a different thing, but generally speaking, you know, that's the rules as far as the kid stuff goes. But a lot of times what couples will do and the most like, if you came to me and said, I want a premarital agreement, here's what I'm going to think you probably want. You probably want both of y'all to take all your own stuff out. Everything you earn or acquire during the marriage to be your own, unless you agree otherwise. And that's the most standard way. What's mine is mine. What's yours is yours. I earn my money. You earn your money. This is especially true with older couples. People maybe who is their second or, you know, more marriage? Who? Maybe their spouse. They're a widower. Like maybe their spouse has died or whatever. And they come in and say, I don't need this joint mess in my life anymore. So then what they'll do is create totally, basically separate financial lives. And what we can provide for is a joint account that they both perhaps agree to put a certain amount of money in each month for household expenses, necessaries. You know, I always tell people you don't want to be going to dinner and being like, who's paying this time with your husband or wife? Right. I paid last time at Taco Deli. It's your turn to buy, you know, torchy's like I can't imagine. So what sometimes people do is make this joint account that they even say, if we could divorce whatever's in there, we split it according to a plan and say, one, one spouse is going to put $10,000 a month and one spouse is going to put five, right? Because of just the disparity in incomes that same pro-rata, they may say at the end, that's how we take it out. If there's anything left over or we split it. And what I like about doing that is I think it provides for some, you know, family cohesion as is just kind of like it's not really my business, but my opinion. I've got four kids. So like I have thoughts I'm thinking. Is then it doesn't put at odds for you or the kids. The kids, you know, we respond of like, is mom, pay your dad, I need new kids. Who do I ask? Right? So putting it in this joint account that both of you have access to, I think is a good idea, and then say you want to buy a house. This is what I'll do. Like you can agree in writing to amend. Basically, like most contracts, you can agree in writing to change it. So then you may say, oh, we're on a house in the future if we want to take it as community property interest versus just like joint tenants the way like regular folks would, we can amend that. So you can always agree to change it in the future. I think it's something to consider if somehow, you know, I think the idea of community property, if you're 18, nobody has a dollar, you're all in it together and throw it all in. Let the chips fall where they may, right? I get that, but for those of us like, I'm divorced and you know, you get into another marriage, it makes sense, especially if you bring a bunch of assets, because you have to think about the way future inheritance can be affected. And so the pre-marital agreement can help delineate that. And you'll see this in like gray marriage situations with older people like, look what's mine is mine. And then that way I have the ability to pass that on to my kids. But if you don't do that and they get married and they get income from different spots, it ties up both estates in probate. Because when they said, I leave everything to my daughter, well, what is everything? Well, it's a part of the community. But if you've blocked off, everything is separate. You don't have that future inheritance probate situation. Like if I was advising somebody, get married who's, you know, at least 60, you're up. Definitely. I'd be saying, let's just go ahead and get this done. You've worked 60 years. You don't want that money. Probably going to your spouse, you know, new spouses, kids or being fought in probate with all your kids against each other at court.
Sara [00:20:15] I mean, Hannah, I'm I'm curious like when someone approaches you do do couples come in together to try to have you I don't know like help them navigate this. And what are the conversations like. Are they I mean I when people come into my office they tend to come in anxious at first, but then kind of feel better as the conversation goes on. Is that the way it is when you have these conversations with people, or is it always fraught with emotion? Do people tend to be analytical about it, like what are the different ways the conversation can be started and then be go?
Hannah [00:20:53] Yeah. So as far as started, typically there's one person driving the train in the relationship, right. Like usually one person is the phone call maker. In my life I'm the phone call maker. My husband was sent 10,000 emails if he picked up the phone. So who is the phone call maker in the relationship? They're probably the one who's initiating the process, right? So they will call our office. Can you help us? They'll say, I say, look, we can help you with drafting a premarital agreement. We're going to recommend that your future spouse, your fiance, things like that, they, have their own counsel on their side of this. It makes it more enforceable and stuff later, and creates this separation that allows you both to get independent advice. Because lawyers, I'm a fiduciary, I cannot give advice to both of you that would put your interests in conflict. And I'm in advise my client of how to get secure and keep more than the other person. So I mean, that's kind of my idea. I've got your back, not their back. So that's how they get to us. So let me say that for one quick second. Generally speaking, we want both parties in a marital agreement to be represented because you're going to do some asset disclosures, and that's crucial. You can waive the disclosure component. I suggest you do not, because it does open up some enforceability questions down the line.
Caitlin [00:22:15] Like if someone's hiding something later it comes out, then we'll say the prenup or the premarital agreement wasn't valid because those assets weren't disclosed beforehand.
Hannah [00:22:26] You would certainly argue that, right? So the idea is you need to understand when you're when you're entering into a contract, what are you getting? What's the benefit of your bargain. And so there's this requirement that you either disclose A or B waived disclosure. But if you waive disclosure yeah okay. Well you sign a document right. Didn't you do you signed your name here. You mean you can here how the questions would go and you're represented by a lawyer. Yeah. But I don't want my client in ten years from now when they're getting divorced, relying on that hope that sometimes people will because they're like, look, if she knew how much I really had, she wouldn't do this. So that doesn't want to sniff test, does it? They're trying to sneak it through. So they may be willing to take the risk and say, look, I want us to both waive disclosures and move on. It's okay if it may not be enforceable later. And believe me, I'm going to put that in an email me like I told you. And so that later they're not coming back for me.
Sara [00:23:24] But you would never advise that. Well would you would you advise someone like in the case of the equity, like someone's going to receive like a big bonus or equity a year from now and it hasn't really happened yet. And it could be argued that like, hey, it's not money.
Hannah [00:23:40] What if I don't work there, right?
Sara [00:23:41] Like it might not happen. How do you either find out that's the case, or compel or advise your client to not disclose something like that?
Hannah [00:23:50] Well, so that's that's a different thing. So disclosures would be assets in existence at the time of disclosure, not future hopes. So I'd file that under future hopes. And I would never advise a client to mislead in a disclosure. I might advise them if this was their goal, if their goal was to just see if she or he would sign it without knowing everything. And I've advised him of the risks of doing that. I'm not going to force you to disclose. I let people do what they want to do with their own life. I'm not one of these lawyers who tries to make you do what I think is whatever. I mean, I won't do things unethical wrong, but I mean within reason. So in that situation, we definitely like I would from time to time consider a waiver. And I've done that when that's what the parties agreed to or want. And sometimes that's the only way they're going to get a pre-marital. And they both have their own valid reasons for doing that. Right. So long as both parties are represented by counsel. Both people have lawyers you both decide not to disclose. I might have some questions about whether you should get married in the first place, but I think this. So there's that. Now to your point about disclosing something that might happen, something this is one of the reasons people do a premarital maybe I'll get maybe I'll win the lottery.
Caitlin [00:25:08] Or your rich aunt will die and you're the only heir.
Hannah [00:25:13] Right? All kinds of reasons, so I wouldn't. It's like one of those things in law. You can't tell everything you know. So, rivers, you don't tell everything you know, necessarily. But if you're trying to really go into this marriage with the idea that this is forever, this is the thing, you know, it is a, good idea to give as much disclosure as you can, but what'll happen? And this goes to like sort of how parties feel is a lot of times people get to the situation, they both kind of want to make sure or somebody has something to protect. Somebody has a reason they want to protect something. Best case scenario, both people do. So they both think this is a good idea and they will, ask us to draft it like, well, sort of what I'm telling you is what we tell them, like, oh, that sounds like a good idea. Mine, mine, hers, hers joint account. Okay, that's sort of like the standard way to do it, in my opinion. That seems a little bit fair for like, practical life, especially if they want to have kids and stuff later. But one thing I would advise clients to always be careful about is don't expect your lawyer to do your dirty work. I mean, it's not that they can, but it's not going to go good for you. And what I mean is, if you want a premarital agreement, the best thing to do and for you to get what you want and to start your marriage off, right, in my opinion, is to have a very clear conversation with your future spouse. Why are we doing this? Like what seems fair? What are our goals like here? And then just like, hey, maybe here's what I'm worried about. Well, here's what I'm worried about, honey. Okay? Come to those terms together as a couple. I'd start that that we're not at odds. Like this is us as a couple making this decision together. Let's just sort of have the money conversation and look, if it goes terribly and awful and horrible, you may have some insight of how, you know, the money conversations are not going to stop once you say I do. Right. So like use that as a data point in considering this marriage. And then really give yourself the opportunity to show up for what you want, advocating for what you want and what you need. Also with the spirit of compromise, right? Like what seems fair? And if you can do it in that way and then give to one of the lawyers the terms you've already agreed to in advance to draft, and then we'll send that draft to the other lawyer, and then they review and have comments and advise their client like that versus surprise, we want this game. And she's thinking, oh, I thought all we cared about was taking stuff out of the marriage. Why does he think that he's going to get all the money from that job? And I'm just going to stay at home and raise kids? What am I how am I going to live if he leaves? Why would I do that? Right? So communication on the front end is a good idea.
Caitlin [00:28:03] I have a question. Well, I have many questions for you, but the first one is I want to go back to the house thing because I own a house in Austin. It is always been my understanding that if I got married, that house is mine. Like that house predates my daughter. It predates everything. And so it's very threatening to me that idea that anyone else could have a legal claim over that if. And I would be your client, that's like, well, my name's on the title. I paid the insurance, I paid for it. So how does that talk me through what that looks like when you have something like a house beforehand, how it could possibly turn into community property, or how to avoid doing that along with a prenup. Our premarital agreement.
Hannah [00:28:48] Yeah. So I can tell you from the Texas perspective. And it's not that it turns it into community property necessarily. It's that you open yourself up to other claims. So if you own a house prior to marriage, then let's just say, like I was from ten years, you know, your house you've had since you were 21 years old and you're now 41 years old or whatever, and you've been paying the payments. You've been married for ten years or probably to make those payments. You were using money from your job, your job, the income you make from your job while married without a premarital agreement. Otherwise altering its character is community property. So you use community property to pay down the debt on a separate property asset. That doesn't feel quite fair. I took money of ours and benefited and put in my own pocket so the community would have entitlement to a claim in equity, which just means being fair and equitable claim for reimbursement. Like, okay, in ten years you spent $200,000 reducing the principal on that house. I want that $200,000 back in the community. And then it's a question of taxes and upkeep. And then here's what you're going to do. The House is going to need a new roof. It's going to need a deck. You want to make it an Airbnb is you have to get things up to code. You're going to use money from your job to do that. Then what? And they're going to want a dollar for dollar money back. But you're not going to get a dollar for dollar upgrade, probably in the value of your separate property asset. So you see you've set yourself up by not splicing it off. This isn't interest to other claims and issues. Here's the other thing. The house goes on the spreadsheet at divorce, even though it's separate. You have to confirm your separate property. Technically, a court cannot make you do anything with your separate property that's yours. They can't. And yet decent amount of mediations. When I go that separate property asset that technically is the other person's, but was treated as both the house. Maybe you bought it a year before and it's a lake house. And y'all went there and she planted flowers and she wallpapered it. It feels 100% hers. Okay. To her that divorce one thing way is fine. Like I'm sorry. She may come and say, look, I'm not making other deals unless you give me that house. Now, if she went to court, she couldn't get it. Probably. But in mediation, it just injects this question. And so this goes with the marital agreement. You can get ahead of this. Like all monies paid from my job are not community. It's enriches the separate whatever like it's not going to. You can specify that maybe you pull some sort of a property thing with the bank and put it in a trust or an LLC, or you refinance it or something. You may do something that could alter the character of the property and not realize what you're doing, because you didn't ask a lawyer before you did it. So we would like re finances is a whole different thing, but what you don't want to be is in your divorce, arguing over whether that refinance and all those new deeds that were signed and the deed of trust, and they had to sign because of their community interest on, like, whatever title companies make you do, you don't want to be arguing that you will spend a lot of money arguing that that should still be your separate. So it's better if you can to splice it off.
Caitlin [00:32:11] And think about a fair way. Like, I think it's one thing, are we going to be living in the house? And because of that, the other person isn't investing in their own house. And so you're getting all this like amazing equity and a house wherever. And they're not. And it wouldn't be fair if you divorce and they don't get any benefit from having paid into it. But in my case, I'm renting it. So if I kept all the rental income to pay for the whole thing.
Hannah [00:32:40] As a company, you're getting income from separate property.
Caitlin [00:32:45] So the fact that it's in would make it community property then.
Hannah [00:32:50] Well, yeah. And it gets like I don't know in California. Right. So like.
Caitlin [00:32:53] Yeah. Well the house is in Texas, so we're safe.
Hannah [00:32:56] Well. No, ma'am. That's not true. Because probably what's going to happen is California law would govern it. Even if that house sits in Texas, like in Texas, you can own properties wherever, but they're going to be treated how they would be treated by Texas law, because that's where your divorce is and stuff. This is different from probate in an estate planning world. You would have to probate probate your assets in Texas and probate your assets in California if you don't already have a trust that's dealt with this. So that's where it's treated. But in at least in Texas, your property is all over. God's green earth are going to be treated according to Texas law. Okay. And so it depends on the income. And it depends on a lot of things. So that's why a marital agreement is a sound decision. So it removes those questions and later inequities. This isn't that big of a deal if you don't have much to start with. Yeah. But if you got a decent bit of stuff and you got kids from other marriages and stuff.
Caitlin [00:33:57] Well, that sounds just like a really good time to get educated because you come into, I have all these assumptions about what's mine will stay mine and what that means. And so just no matter what, if I want the agreement or not understand what it means to sign this contract. Also unrelated, do you know any single men?
Sara [00:34:19] Or soon to be single?
Caitlin [00:34:21] Yeah.
Hannah [00:34:22] Yes. I got an hour long. Thought I should start something with former clients of, like, meetups for these great guys and ladies who are now, they tell me for sure when they're going through. I'm never getting married again. And then I'm like, as you are.
Caitlin [00:34:34] Do they know about my house?
Hannah [00:34:37] Right. But dang, they're going to you're going to get a premarital agreement. So it's not going like.
Caitlin [00:34:44] Yeah. Sara. You had another question. I had one but I'll wait.
Sara [00:34:48] Yeah you I if let's say a couple goes through all of this effort in negotiation, they have a premarital agreement. Can that ever be invalidated.
Hannah [00:35:00] Yes. Two ways about invalidated. Like not made effective. Like you can agree like essentially shredded up. You're not going to shred it up. And that's one thing I want to say that let me say that real quick that can insert some equity into a situation. And I learned this from a law school professor where she and her husband met later in life, and they had a premarital agreement that beginning at five years, things started to change back to where it was gone. So it's like, look, let's just make sure that we're going to be together for an appreciable period of time before we start up ending things. So you can have like a workout situation. And then as far as how to invalidate, like you never want to be in the position of trying to invalidate a prenup, but some things that could do to is like if it's unconscionable, like it's so unfair that it offends the notions of justice, but you gotta be careful, because if both had lawyers, like both probably were given that advice, this is what happens. People make a deal. Back then they were advised by counsel. The rest is I don't care. I'm gonna do it anyway because I want to get married, he says I have to, and then later there's going to how unfair it was. You have counsel. You made that decision, right? And it kind of chaps me a little bit like you gave your word. It's the deal. And if you didn't like it, you should have negotiated for a post marital. So I'm divorcing you. We can get remarried under the rules. Right. So it's like that. If maybe one of you wasn't, represented by counsel and somehow got, like, think fraud, think things don't pass the smell test. Failure to disclose. Like there are some sort of those pieces you have to do disclosure waiver. You don't do either or, you know, maybe that's it. Or maybe it's that in your disclosures, you didn't talk about the $10 million valued oil interest you had or something. Right? So it's those sort of things. But a good rule of thumb would just be like, does it smell fishy then? Like and one of the things I always tell people is, the best time to get a prenup is like today. If your marriage is in a long time, the next best time is every day thereafter, right? So like the sooner you can do it, the better. The closer in time to the marriage will end. Well. Could be used as an argument to show that this was unfair. It was like under duress at the at the church sign this or the marriage is off. You know, you would hear that in those kind of a hearings, but I, I would caution people to assume they're valid. Okay. Assume that that paper you're going to sign, no take backs, no changes, no nothing. And don't just think oh I'll worry about that later. You may have found yourself being a stay at home parent, taking care of the kids, not making any money, given up your career, and you sign that premarital agreement and she's made $10 million and you've been doing the kids and you leave with nothing.
Caitlin [00:37:56] That's what I was going to ask you about. Yeah. When, you know, it's one thing, if you imagine things won't change and it's another if as a working couple with small kids and you realize, oh my God, the cost of childcare, it doesn't even make sense for both people to work. One person stays home. And so there's all these like significant financial adjustments that can go towards the like business of the marriage that get altered, that were completely different than the assumptions made when they signed a premarital agreement. And I'm wondering how you hope everyone's been fair, but I've seen enough divorces to that, you know, hurt feelings, hurt feelings go a long way, and making people decide something different is fair. And so what, you know, if those agreements continue to be valid, what what other recourse are for women that are like looking backwards on a ten year, 15 year marriage who are like, I have to get back into the job market, and the expectation is that I'll be earning what I was earning when I left it ten years ago to take care of the kids.
Hannah [00:39:04] If the deal you made changed. So say up front, you're both career people, both take each own, and then together you all decided you wanted to stay home, right? Then renegotiate.
Caitlin [00:39:17] Okay, that was my question, is that if you find yourself like upstream from the problem, but where things significantly change, then the circumstances under which you signed that document, what are your options that.
Hannah [00:39:29] You can't sit on your rights. So at that point and this is this is easier said than done, okay. And I don't have a, marital agreement in my own life. So like I do, I mean, right, I understand why people don't do this, as I say, is not the most romantic decision, and I wouldn't have signed one at the time, but it is good advice. So anyway. I think what you have to do is really take full personal responsibility for your own life. And if some new arrangements in your home are going to mean that because of your agreement in that, that premarital, it's no longer fair. You must then assert a new right or say, I'm not going to just stay home until you change the agreement. You're going to get a doctor, you're gonna go get a girlfriend nurse, and you're going to leave me. And I may get $100,000 out of this when you're going to get $100 million out of this. So, no, I won't say I won't raise the kids unless we change it. If you don't agree, then you have choices. Do you want to get divorced, or do you want to live off this and hope he doesn't ever leave you? And you stay home and raise the kids and then own full personal responsibility for the outcome of that choice. But you can't affect the entire scheme under which you operate your finances, and then hope later people feel sorry for you and change it for you. They're not going to.
Caitlin [00:40:46] Well, and historically, men have had all the assets, so they're the ones who.
Hannah [00:40:51] And if you're not the sort of guy who in the front end wants you to get married, you leave with 100,000, even if he's, you know, owns all the oil in Texas, you know, and you're willing to agree to that. And he wants that because he wants have all the control, whatever. Then probably don't marry that kind of guy on the front end. And the other. The last thing I wanna mention too is you can do a post marital agreement, and that is same sort of thing after the marriage. This happens a lot of times when you have some leverage, somebody's done something naughty and you want to get something out of it and you'll stay with them if they do this. Like it's kind of one of those things, it'll happen where she's cheated. She wants to stay together. You'll stay with her, but you want the premarital agreement to change. Okay? That's when it may happen. Or just it can also happen in very normal circumstances, like job changes happen and some exposures, risk exposures, exposures to tort claims in the future, things like that. And it's like, look, I don't want anything to do with that. I don't want something at your job being able to come after some of my money. So we need a post marital agreement to change the way our money works. So that can't ever happen. So to protect like there are good reasons for sort of because somebody has been naughty reasons. And the number one thing I want to make sure people know is if you do a premarital agreement, make sure after the marriage that you ratify that agreement, if it affects qualified plans, like if you have a 401 K, that's a federally, regulated asset. And so you can't waive in advance when you don't have entitlement to it. So if you have a 401 K or something like that after the marriage, you need to sign a document ratifying that prenup so that it's valid later. So that's one of the things that sometimes people probably miss.
Sara [00:42:43] Oh my gosh, I imagine that would be a really big one to miss, especially over the course of had a long marriage or a lucrative career.
Caitlin [00:42:52] I'm curious, how do you advise people to start the conversation? Let's assume all the best for both people, but they're nervous. They either didn't grow up in a household where they talked about money, or it's hard for them to talk about money, and you're telling them all these great reasons why they should consider it. Do you coach them on how to start the conversation with a partner?
Hannah [00:43:13] They usually get to me after that, but here's what I would say early and often. As soon as y'all are starting to talk kind of serious, just make it part of the convo. We'd have to. You know, any marriage I have in general, I'm going to have to do a marital agreement because I'm not going to like subject my assets, my business, my houses to a divorce process so early and often as adults. And understand that you're talking about money, and let it be a way for y'all to have those difficult conversations on the front end would be my best advice. But for more info like this. In all things divorce and lawyer and mom and mindset and all of that, people can follow our firm, which is at Hembree Bell log on all of the channels. That's b r e bell like ring a bell, all over the place. And then my own personal stuff is Hannah Cannon, like in in C and in RH. So they can follow us on there. And I talk about this kind of stuff all the time.
Caitlin [00:44:14] And we'll put the both of those links on the show notes for this episode too, so people can find you there and on our website. Sara, did you have any last question?
Sara [00:44:23] Oh my gosh, that was amazing. Hannah, thank you so much. This is like one of the most common questions we get in the women's investing group. And I don't think we've we've really like taken it head on yet. So being able to dedicate a whole almost an hour to it has been just invaluable. So thank you for that.
Hannah [00:44:39] Oh well thank you all so much for having me. Any time. Any other stuff you ever want to chat about, just holler.
Caitlin [00:44:44] Okay, maybe divorce next time.
Sara [00:44:47] Oh I see, I see Caitlin's wheels.
Caitlin [00:44:50] Sparkling, and also the matchmaking service that you said that you're going to plan.
Sara [00:44:56] So we'll we're all going to invest in that. So we're going to invest in a Hannah's matchmaking service. All right okay.
Caitlin [00:45:03] Thank you Hannah.
Hannah [00:45:04] Bye. Thanks for having me.
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Sara Did you have a question about finance or investing? Send it to us in an email or voice memo on our website. Womenontheverge.com.
Caitlin Hey, we want our listeners to know that economic abuse can be subtle, but it's a serious form of control. Watch out for partners who limit your access to money. Sabotage your job or rack up debt in your name. If this sounds familiar, know you're not alone and there's help available. Please learn more at the hotline.org or call 800 799 safe.
Sara This episode was edited by our co-producer Kelly West, with music by Bad Bad Hats and Devmo.
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Sara This podcast contains general information that is not suitable for everyone. The information contained herein should not be construed as personalized investment advice. Past performance is no guarantee of future results. There is no guarantee that the views and opinions expressed in this podcast will come to pass. Investing in the stock market involves gains and losses and may not be suitable for all investors. Information presented herein is subject to change without notice and should not be considered as a solicitation to buy or sell any security.