What Would Happen if There’s No Prenuptial Agreement?

Divorce? There is a lot of speculation about what would happen if a couple were to divorce. We know for various reasons that the Trumps, for example, have a prenuptial agreement that would essentially define how assets are to be divided (if they are to be divided at all), and what, if any spousal support and child support Melania would receive.

The PreNup Is Never Set In Stone

Donald Trump had a prenuptial agreement with both of his previous wives, with varying success (his fourth prenuptial agreement with Ivanka was disputed, the parties settled). Though Donald has openly discussed that prenuptial agreements are a “hard, painful, ugly tool”, he also recognizes that they are necessary.

Like any good contract, the terms and conditions of a prenuptial can be modified over time as situations change – the family grows, a business fails, the roles of the parties change. Donald and Ivanka reportedly modified their prenuptial agreement 3 times over the course of their marriage.

Melania reportedly stalled her move into the White House to renegotiate the terms of their prenuptial agreement to favor their son. Melania signed a prenup when Donald was a media mogul/businessman. The agreement most certainly did not contemplate a change in her duties and obligations that would come when she became the First Lady of the United States. This put her in a good bargaining position to modify the agreement. The speculation is that Melania wanted to secure her son’s position as an equal heir to the Trump empire (equal to his children with Ivana), which can certainly be outlined in a prenuptial agreement. It would be surprising if she did not also modify the spousal support provision of the prenuptial agreement given their change in circumstances.

If Donald and Melania had married without a prenuptial agreement, they could still solidify the terms of any divorce in a post-nuptial agreement. The contracts both serve the same ends, but the timing of entering in to the agreement is different.

Prenups Offer Various Protections to Both Parties

A prenup is always a good decision because having numerous assets and interests would be difficult or undesirable to define, value, or divide in a divorce. Assets and interests are likely very complicated, which would make the valuation of these assets during a divorce proceeding extremely difficult, and would likely disclose private information of other individuals or businesses in the process. Simply completing a mandatory disclosure, as is required in California, would be a lengthy and difficult process. One benefit of a prenup is that this level of disclosure is generally not required. The need for expensive and sophisticated accountants to pour through boxes of documents to determine the community interest in an asset would be avoided. Take Donald Trump’s interests as an example in the various entities and assets disclosed in the prenup would be preserved upon divorce while avoiding a public spectacle or the disclosure of confidential information that would not be beneficial to him, especially while he is President.

A prenup for Melania is also a good idea because, as the lower income/asset spouse, her right to spousal support and Barron’s right to child support would be defined and straight forward.
During the Trump’s Divorce she would know exactly how much she could expect, when she could expect it, and what assets she would receive as part of any divorce. This would make planning for her future much easier. Often, a time limit would be in place in a prenuptial agreement that would trigger support, for example: if we are married for 5 years, no spousal support would be paid, but if we are married for 6 years, spousal support would be $120,000 per year for the length of the marriage. In previous agreements, Donald provided both monetary support and real estate to his future ex wife in the prenuptial agreement, so we would expect some type of mixed spousal support payment to be in place in the Trump’s prenuptial agreement.

Because of Donald’s hard to define monthly income, child support most likely is also defined in the prenuptial agreement, as well, to avoid future disputes about this issue. It would not be unusual if Barron’s college expenses are explicitly covered, as well. In Donald’s prenuptial agreement with Marla Maples, he conditioned child support to his daughter with Marla on their daughter never being fully employed or joining the Peace Corps. It is therefore likely that a similar clause would be in Melania and Donald’s prenuptial agreement, as well.

Likely Terms of a Prenuptial agreement

Both parties would have to disclose to the other in the prenup any assets or debts they have at the time of marriage. This disclosure is vitally important, and also the main source of conflict upon divorce for several reasons:

• The disclosure of assets or debts is not complete or is undervalued. When dealing with high net worth individuals who own business with complicated structures, it can be difficult to establish what business entities exist (i.e. which shell company is owned or owns another), and what the value of that company is. Similarly, he likely has complicated or even unusual assets which would be difficult to value or divide upon divorce (hotels, for example). For this reason, Donald would likely have overestimated the value of his holdings to avoid a possible issue with underestimating the value of his assets: when in doubt – aim high. This would avoid a potential conflict and possible set aside of the prenup later if it is determined that Donald underestimated his net worth at the time of marriage. Melania would not be able to argue later that she did not understand the high value of her interests in these assets when she waived these rights.
• The business or assets have changed over time or no longer exist. When Donald took office, he owned a lot of assets, including luxury apartments, undeveloped lots and other real estate. Since he has been in office, his company, now run by his sons, has sold over $118 million worth of these assets. If these assets were identified in a prenup, he would likely keep all of the sales proceeds as his separate property. We don’t know what he did with the sales proceeds, but what he does with the sales proceeds now may “muddy” his separate property claims. Common transactions that “muddy” a separate property claim could include the purchase of a new business that Melania runs as her own, or purchasing new properties in joint title.

Because circumstances change over time, a prenup can and should be modified to reflect these changes so that both parties have clear expectations about what happens to the assets upon divorce.

Perhaps the Most Important PreNup Advantage – the Nondisclosure Agreement

Donald’s divorce from Ivanka was a public affair, despite having a prenuptial agreement that was reportedly revised 3 times. We know about these revisions, and all the assets at stake because their conflict unfolded in a public arena. Donald did not repeat this mistake when he married Marla Maples – her nondisclosure agreement precluded her from giving interviews, writing articles or books, or in any way discussing their marriage publicly.

While Melania has been notoriously closed mouthed about her marriage and relationship with Donald, she also most certainly has an extensive confidentiality or nondisclosure clause in her prenup.

The terms of the prenup will most likely dictate how the assets are divided and how much support Melania would receive should the Trumps divorce. The more interesting question is, what would happen if the Trumps had no prenuptial agreement?