Thoughts on an investor's prenuptial agreement

Personal finances
1

Hi

Now we’d need a bit of swarm intelligence regarding a prenuptial agreement.. My other half and I can’t seem to reach a consensus on a fair and just prenuptial agreement.

Our situation is such that our current incomes are roughly similar. We both see that when entering into marriage, life and finances with it are shared, meaning that if the marriage were to end in divorce, the assets accumulated during the marriage could be divided equally.

Where our views differ: the fair division of assets we’ve accumulated so far in the event of a divorce. The difference in our current wealth is approximately threefold.

Let’s say, for example, that person A has accumulated 300 units of money and person B has 700 units of money. These assets are partly tied up in their own home, partly in investment properties and stock portfolios. How should these assets be dealt with in the event of a divorce if one wants to act fairly..?

One sees the matter such that it would be fair to stipulate in the prenuptial agreement that person B gets to keep the current monetary difference, i.e., 400 units of money, in a divorce, and all other assets would then be divided equally.

The other sees it such that person A should receive in a divorce what has happened to their initial 300 units of money during the marriage, and person B should receive what has happened to their initial 700 units of money during the marriage.

What kind of thoughts does this evoke in you? Can you guess which one, A or B, thinks in the way described first? Why would you advocate for person B receiving the initial difference (400 units of money) more in a divorce? And why would you advocate for both person A (300 units of money + its yield) and person B (700 units of money + its yield) receiving the point to which their initial assets have grown?

I hope I was able to explain our deliberation understandably…
Thanks for your thoughts in advance!

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2

I have this:

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I personally feel that a fair option is one where neither has the right/obligation to profit from the increase in value of the other’s initial share, or suffer from its decrease in value.

This is an exaggerated example, but a division based on the difference in initial situations could lead to a situation where one person gambles/wastes their money, and the other has to compensate them because of it.

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To me, it makes more sense to divide assets owned before marriage. For example, if there are 10 hectares of forest, it’s 10 hectares of forest and its value isn’t calculated. Similarly, if one owns 75% of a shared home, it’s 75%. Thinking about this in euros sounds complicated.

With stocks, it’s more difficult because shares are traded, money is added and withdrawn during marriage. It’s quite hard to say which money is which.

Example: A person sells a stock for 1000 euros and adds another 1000 euros. When there’s a market dip, they buy Kone for 1000 euros and Nokia for 1000 euros. Which money was which? What if Nokia’s stock price increases a hundredfold and Kone’s halves?

It would be possible to keep some kind of accounting in case of divorce, but that sounds like a rather depressing hobby. Or to establish a second marriage portfolio alongside a divorce portfolio. It probably affects one’s mindset if they prepare for divorce every week/month.

It’s probably best to ask a lawyer for their opinion :thinking:

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We had a mutually exclusive condition. It was easy at the time of separation to just divide the furniture and the apartment that we had acquired together.

One of us was interested in investing and saving, the other wasn’t, so I will never give access to my hard-earned assets.

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I myself would favor separate assets - especially from the time before marriage - and JHeiskanen and Huuhaa above described the grounds well. To that, I would perhaps add the “autonomy argument,” meaning that in this solution, both are free to form their own investment strategy and make their own investment decisions (or make joint investments, if they so decide).

The party who examined the wealth distinction in the question, on the other hand, presents a solution where all investment decisions are completely joint - or at least the consequences are joint. Every decision, how forest management is implemented, or at what price Nokia shares are bought and sold, should be a joint decision. It certainly depends on the relationship, but for me, this would probably be too integral a solution.

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It makes sense to limit assets acquired before marriage.
During a marriage, there can be many instances where one partner’s contribution at home helps in the formation of the other’s assets. For example, one stays home with a child/children, enabling the other to work, especially if they are on call or have irregular working hours. In such cases, both contribute to earning the same income, but income and pension accumulate for one partner while the other does not. It would not be fair or reasonable for the partner who stays home to be left uncompensated in such a situation.

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Well yeah, it’s pretty easy to railroad yourself into getting everything valuable there. It could be that, proportionally, the woman invests more in the family, buys all the children’s clothes and pays for their hobbies, and sacrifices her time for the common good, while the man buys a car and builds up a stock portfolio. In the end, it’s said that the car and stock portfolio were bought by himself, and the woman’s money just went somewhere, as she was financially illiterate. It can also stir up bitterness. Divorce is a crappy situation anyway.

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10

I won’t bother thinking about it too much, at least not in the first round. When you have children and have to be flexible in your work life in many ways, it would be petty in all cases to start separating everything possible. I would find it absurd if the higher-earning spouse didn’t want to buy hobby equipment for the child, etc., because now it’s the stay-at-home parent’s turn to do their part! There are enough of these kinds of people.

If there are no commitments like children, or if the wealth difference is truly significant, then I would reconsider the matter.

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I have a prenuptial agreement which states that neither of us has marital right to property received or inherited from parents, or to the proceeds thereof. Of course, property acquired together is subject to marital right in the event of divorce.

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12

In the event of a divorce, I would draw up a prenuptial agreement where neither spouse would have matrimonial rights to the other spouse’s current property, but they would have rights to future property and its proceeds. My reasoning for this is that this option of the prenuptial agreement would neither improve nor worsen either spouse’s financial position relative to the situation before the agreement is made.

In the event that the marriage ends due to the death of one spouse, I would leave the spouses’ matrimonial rights in effect. This would protect the spouse with fewer assets if the spouse with more assets dies first. The widow(er) would receive an equalization payment without tax implications before the rights of heirs and legatees.

During the marriage, it is possible to balance financial disparity, for example, with a joint account from which common household expenses are paid, etc., and which the higher-earning spouse can contribute to with a larger share.

It’s best to keep love and money separate. Those who have been divorced once usually understand this best.

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I would say fair play would be for B to get 400 more, but only if A and B both first get at least 300 in case of a difference. The rest split in half. It’s possible that B also wastes larger sums of money, and it would be unfair if B got more if there was only 600 total left in case of a difference, and it went 500 to B and 100 to A.

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This is the most common clause in these. I recommend it.

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Yep. Straight from the marriage law textbook.

You can arrange it by putting things in the other person’s name or with different shares if you feel like it. Spoons will be divided that way then.

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Assets separate. I recommend a law firm; they can advise on how to handle things.

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As several people already noted, 1) it is advisable to consult a professional to ensure understanding and proper documentation, and 2) the life situation certainly plays a big role. Ultimately, there is a significant difference between whether a couple is “starting a family” or in a “second round,” and whether they already have children or are not expecting any due to age.

What is considered fair certainly depends on life’s starting points, the choices life brings, and future prospects. It also depends on the actual monetary amounts involved.

If the intention is to start a family with offspring (whether already present, expected, or desired), then I would personally assess fairness, for example, based on one’s role regarding the children and how long each was planned to be at home, or what kind of work one earns a salary from (e.g., own business, employee with a monthly salary). For instance, staying on home care allowance significantly cuts into pension accrual, and how this would then be compensated by the other party.

If one wishes to (try to) keep the already accumulated property (and/or its returns) outside of marital property rights, but without excluding everything with a prenuptial agreement, the most important thing would be to define and subsequently keep this property separate from marital property. For example, the return from an investment apartment could be outside of marital property rights (a maintenance account with its returns), and if the funds mix with other assets, they become subject to marital property rights. The same applies to investments.

These are difficult questions, as financial power can even be used to harm another. Above all, it is an agreement on how things are handled if things go south, so that there’s no need to argue about that too.

It is also worth noting any assets received as gifts or inheritances and whether such significant assets are known and how they are treated—whether they are subject to marital property rights or remain outside of them.

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-In a marriage, money is shared, and the law even mandates spousal support. For example, in social security, due to the aforementioned law, a spouse’s income is disregarded only if an official separation has been applied for; otherwise, incomes are considered joint regardless of which spouse earned them. It becomes difficult to separate expenses and money during marriage. If not carefully separated, one can easily trick the other into cumulatively accumulating tens of thousands of euros from small streams in a few years and investing them in, say, stocks. In such a case, the spouse who doesn’t own stocks practically pays for the owning spouse’s stocks without benefiting at all from the appreciation.

Thus, the only viable solution is to proceed from the assumption that incomes, expenses, and capital gains during marriage are shared. Assets acquired before marriage, on the other hand, are separate. If it’s necessary to keep them separate, for example, due to one’s reckless spending, then a joint account to which a fair sum is deposited monthly and the rest of the income is kept by each individual, but this does not, in itself, prevent one from benefiting more. It’s better to remain in cohabitation if one wants to keep their finances entirely, or almost 100%, separate.

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