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Silicon Valley Prenups

Posted by Ron Kauffman on

The billionaire founder of Farmville has found himself in Divorceville. If divorces are tough, Silicon Valley divorces – with sophisticated spouses, high value assets, and hard-to-value assets – can be tougher. There is a reason more people insist on prenuptial agreements.

What are Prenups

I’ve written about prenuptial agreements before. Prenuptial agreements, or “prenups,” are contracts entered into before marriage that outline the division of assets in case of divorce or death.

Prenups, and Post-nups (agreements entered after a marriage) resolve things like alimony, ownership of businesses, title of properties, and even each spouse’s financial responsibilities during the marriage. As the UK Guardian reports, in Silicon Valley, divorces and prenup agreements go hand in hand.

Voiding Prenuptial Agreements

Farmville founder Mark Pincus, who was an early investor in Facebook and Twitter, is worth around $1.28b. Mark is separated from his wife, Alison Gelb Pincus, the co-founder of home decor business One Kings Lane. She also may be trying to get out of her prenup.

The couple married in 2008, a year after his company grew into a $1b company. Mark has a prenup. Unfortunately for him, in filing for divorce, his wife Alison has asked the court to set aside the agreement. Why? Because the value of his company increased so much after the marriage.

Prenuptial agreements are often used in high tech industries, and in Silicon Valley in particular, to protect ideas and future income – not just current salaries and property. This makes perfect sense in an age when intellectual property is so highly valued.

Because of Florida’s policy of enforcing agreements, prenups can be difficult to void – but not impossible. Florida has both case law and a statute to help lawyers, judges and the parties determine if a prenuptial agreement, for example, is enforceable.

In Florida, to test the validity of a prenuptial agreement, courts must consider things such as fraud, duress, coercion, in addition to the unfairness of the agreement, and whether there was any financial disclosure.

The Farmville case is a tough one. The spouse challenging the agreement, Alison, is herself very well off. She is the co-founder of One King’s Lane, which she sold to Bed Bath and Beyond for $30m. She is not exactly a stay-at-home mother who cannot work or lacks assets of her own.

Difficult to Value Assets

In divorce, determining the value of certain assets – businesses, stock options and restricted stock – is more complicated than it seems. As the shareholders of Snap Inc. have learned, startups may see their values skyrocket for their IPO, but later fizzle once earning reports become public.

Generally, anything you own before marriage counts as your separate or non-marital property. However, asset or debts acquired after the marriage is generally considered as marital or community property. In the event of a divorce, the law requires it to be distributed equitably, which usually presumes and equal split between partners.

A couple of weeks ago, tech analysts were hailing the IPO of Snap Inc. as a triumph. But a day after Snap posted a $2.2bn loss and decelerating user growth in its first earnings report as a public company, the stock’s value crashed.

Messy divorces don’t come cheap. When Elon Musk divorced his first wife Justine the two sides racked up $4m in legal and accounting bills in two years – around $170,000 per month. A prenuptial agreement can limit the costs of a divorce.

The Guardian article is here.

 

International Prenups

Posted by Ron Kauffman on

Welsh actress, Catherine Zeta-Jones married American actor, Michael Douglas. They reportedly have a prenuptial agreement that states she gets $2.8 million for each year of marriage, and a $5 million bonus if Michael has an affair.

While there are many benefits to prenuptial agreements in American marriages, the benefits of international prenups are multiplied when the spouses are from different countries, or hold foreign assets, or who contemplate living in other countries.

Prenuptial Agreements

A prenuptial agreement, sometimes called an “antenuptial agreement”, and/or “premarital agreement”, are commonly called “prenups.”  A prenup is a legal contract, much like any other legal contract, and it is entered into before a marriage by the couple intending to marry.

The contents of prenuptial agreements can vary widely. However, prenups commonly include clauses that spell out how to divide property accumulated before and after the marriage, and support or alimony in the event of divorce or death.

I’ve written on some of the more extreme clauses people insist be put in the prenups before. For example, prenups can include provisions to cover you in the event your spouse engages in excessive drug use, has extra-marital affairs, becomes an excessive spender, or begins a gambling habit.

International Prenuptial Agreements

A prenuptial agreement for international couples is generally a good idea, but international prenups have their own set of unique problems. For example, a prenup that is valid in Florida, may not be valid in another American state, let alone a different country.

When people live in different countries, hold foreign assets, or are planning to either marry overseas, or live in other countries, they should try to consider the law of all jurisdictions where they contemplate living.

There are many advantages and disadvantages to having an international prenup which states that the law of one country governs your divorce.

Issues with International Prenups

International prenups can involve couples from different countries, or couples from one country who live in different countries, or couples who have assets located overseas.

Since the law of each country can be very different, the choice of law clause in international prenups can take on great importance. Additionally, the language used in prenups can be extremely important for two reasons.

First, legal terms in the United States may have different legal meanings in other countries, or may not be terms recognized under foreign law.

Second, the enforceability of international prenups may just depend on whether it was understood by the signors, and they may not speak the language the agreement was written in sufficiently.

Whether in the United States, or in another county, make the effort to disclose all of the finances, even if financial disclosure may be waived in your country.

Additionally, any prenup should be signed well in advance of the wedding. In an ideal situation, the agreement should be fully signed before the wedding invitations even go out.

The Suggest article on the Zeta-Jones prenup is here.

 

Against All Odds: Voiding Prenups

Posted by Ron Kauffman on

What do prenups, and singer Phil Collins have in common? We will soon find out. Phil may be a witness in a divorce trial where Phil’s ex-wife is testing the validity of an agreement she signed with her new husband.

As the Miami Herald reports, the five-day trial on the validity of an agreement is scheduled to start April 24. The trial is a part of Phil Collins’ ex-wife, Orianne Mejjati’s, current divorce from Miami developer Charles Fouad Mejjati.

This part of the trial is designed only to validate, or declare null and void, a prenup or postnup agreement that Orianne and Charles signed in May 2015 – about the time Collins moved to be near Orianne.

Under the agreement in question, Orianne would be forced to turn over her $10 million Miami Beach mansion to Charles, in addition to giving him half the value of her property near Geneva, Switzerland. It has been on the market for $62 million.

Easy Lover: Prenups and Postnups

I’ve written about prenups and postnups in the past. Prenuptial agreements, or “prenups,” are contracts entered into before marriage that outline the division of assets in case of divorce or death. Postnuptial agreements are contracts entered into after the marriage.

Both prenups and postnups help try to resolve things like alimony, ownership of businesses, title of properties, and even each spouse’s financial responsibilities during the marriage.

True Colors: Voiding Agreements

Because of Florida’s policy of enforcing agreements, prenups and postnups can be difficult to void – but not impossible. Florida has both case law and a statute to help lawyers, judges and the parties determine if a prenuptial agreement, for example, is enforceable.

In Florida, to test the validity of a prenuptial agreement, courts must consider things such as fraud, duress, coercion, in addition to the unfairness of the agreement, and whether there was any financial disclosure.

Under Florida’s Uniform Premarital Agreement Act, a prenup may not be enforceable if a party can prove, in part, that it was not signed voluntarily; or was the product of fraud, duress, coercion, or overreaching; or it was unconscionable.

Some of these defenses may also require a party to show they were not given a fair and reasonable disclosure of property, and did not voluntarily and expressly waive that right, and did not have adequate knowledge of the property or financial obligations of the other party.

That’s Just the Way It Is

In Orianne’s case, she stands to lose a large portion of her fortune, so Phil Collins has been cooperating with the court system. He was grilled by lawyers for several hours in January on what he knew about Orianne’s mental state when she signed the post-nuptial agreement.

According to media reports, Orianne now believes her condition at the time she signed the agreement made her legally incompetent to sign anything and says she was ‘coerced’ and ‘bullied.’ Charles’ side claims Orianne was properly represented by a lawyer, and he has been playing hard ball.

‘The husband threatened that he would disclose and make public allegations about the wife,’ Orianne’s original divorce petition reads.

‘That would cause the wife great personal, professional and social embarrassment, humiliation and upset and would, the husband threatened, also result in the wife losing custody of her child.’

In 2015, Phil Collins bought Jennifer Lopez’s old house for $33 million. Collins then paid Mejjati, a builder by trade, to make substantial alterations to the property where Lopez broke up with longtime love Ben Affleck in 2004. Within months, Orianne had left her husband, and moved in with Collins.

The Miami Herald article is here.

 

Prenups and Your Idea for a Killer App

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By The Law Offices of Ronald H. Kauffman of Ronald H. Kauffman, P.A. posted in Agreements on Monday, January 9, 2017.

The New York Times reports that a growing number of people are signing prenuptial agreements to divide their intellectual property: things like iPhone app ideas, songs and restaurant concepts.

Protecting your ideas and future income – rather than on current salaries, real-estate and personal property – makes perfect sense in an age when intellectual property is so highly valued.

Employers increasingly require employees to sign away all future ideas and opportunities to compete with the company and divorcing partners too hope to keep these assets in case of a breakup.

I’ve written about prenuptial agreements before. Prenuptial agreements, or “prenups,” are contracts entered into before marriage that outline the division of assets in case of divorce or death.

Prenupts, and Post-nups (agreements entered after a marriage) resolve things like alimony, ownership of businesses, title of properties, and even each spouse’s financial responsibilities during the marriage.

There are many other concerns that can be addressed in a prenup: Caring for a parent; Going back to school; Shopping habits; Credit card debt; Tax liabilities; and even death or disability.

In the world of intellectual property, interpreting prenups for future intangibles is difficult: What did the parties actually mean to include? How are amorphous ideas and innovations to be valued?

There are dangers with this new prenup trend. Consider the example of a wife holding a steady job while the husband works on his app. They share the risk now, but if they divorce, the husband reaps the rewards of his intellectual property, and the prenup could ensure his ex-wife gets nothing.

Intellectual property – including music, art, literary works, films, scientific and medical developments, technology – is normally protected against third parties by copyrights, trademarks, patents and trade secrets.

But among couples, a need has developed to protect “ideas” conceived by either a bride or groom who see him or herself as the next Mark Zuckerberg. In the event of a divorce, these couples want protection for what may be each person’s most valuable asset – the product of their intellect or invention.

The New York Times article is here.