When people think about cohabitation agreements or prenups or postnups, there’s this sense that you’re against the other side and all you are thinking about is the demise of the relationship. And that’s really not how I like to practice or the approach I take. Because you’re sort of, if you think about it, there’s really like three phases in your life: you’re in wealth building, then family building, and then legacy building. What it takes to build a business is contribution of both parties regardless of whether they’re married. And unfortunately when you rely upon marriage or probate or divorce or anything like that or the rules around family law, you’re getting a really inefficient really clunky system.
So when you get married, you’re opting into a bunch of laws that you may not actually like very much around splitting assets or custody visitation stuff like that. And so when you actually sit down and make an agreement between the two of you, I rarely have ever used the phrase postnup prenup whatever. I usually end up setting up like an LLC, like a family LLC partnership. I don’t tell you guys like the asset protection aspect, but if you’re going to be paying rent, separate bank accounts, putting money into it, if you’re buying art, if you’re buying anything else of value, it’s sort of really easy to track. And there’s really good laws around LLC’s and businesses, but when you maybe don’t have that in place, there’s no legal recognition.
Particularly in the case of non-married couples, the law probably isn’t what you want which is if you’re incapacitated, the person that you’re living with, the person that you want to have a life with is not going to be the person in the hospital making decisions for you. It’s probably going to be your parents. Same thing when it comes to your financial and business affairs.
So when I send out an engagement letter to a married couple, I always say there’s an inherent conflict between the two of you and what one of you says to me I have to share because one of the parties, married or not, can walk out the door, hire a different attorney, and change their will, do whatever they want. There’s nothing I can do. That’s the leap of faith you’re taking. But if you come in my office, married or not, and you sign a contract together, that supersedes will. It is the only document that you’re both signing. So I believe more in those contracts than I do in marriage in terms of protection and stuff.
And so if I have an estate where someone has passed away, I’m able to bring in those other agreements that they have signed and they supersede state law, marriage, whatever it might be. And again, when we do these agreements, it could be how do we pay for costs, what does a breakup look like. If we sort of default to what the law says a breakup is, you live apart from one another. Well, people live apart from their spouses or their partners all the time. Like I have a couple where one of them is a wine buyer and is in France for six months a year. Does that mean they’re not married? Like no. I have another couple who maintain separate houses. They live together and then they’re sometimes like “I need my space.” Which sounds great. And you go and you live in your separate house. You’re still committed to a life together. Or people are committed and they always live separately. And it doesn’t necessarily mean they have kids or even that a couple is only two people. So the way the laws stand is that even in the best case scenario, they’re generally are not going to really provide what you want.
That’s a great question. I will repeat the question which is a married couple where one party has committed fraud and a sort of joint and several liability, does it apply to the other spouse? And I will give a very lawyerly answer which is it depends. Because there are certain things that can be off limits which is like the homestead which is the idea of like your home ownership that is reserved for married couples is like the ven diagram is a perfect overlap. So you don’t want to evict someone, but there’s other things like yes, if there are assets that maybe don’t fall within that same protection, then sure they’re up for grabs. That’s why an LLC agreement may be interesting. Or you limit the liability to X thing.
Like I’m a big fan of separating high-risk assets. Being from Maine we have a lot of coastline like your boat should be here, your house is here, your business is here, and these things operate very separately. And the same idea of like life insurance. Should you own life insurance on your own life? Like in that case even if it was like the person who committed the fraud own the life insurance, the redemption value or the value in that would have been accessible to a creditor. So that is another marriage unfortunately brings you that.
There’s also always the option although it is not as attractive for tax purposes to be married filing separately. So you can also do that. There’s certainly an argument from an economic perspective of why a combining of income even if perhaps you don’t share expenses equally can be disadvantageous if you’re calculating loans or if someone has a higher risk career or something like that where co-mingling can be difficult. So and it also depends on the state. So that is a lawyerly answer of oh it depends, it’s case specific, blah blah blah. All right? Yes.
That is such a good question. So during life there’s like legacy. You can go on Facebook, Apple, whatever. You can name stuff. After you pass away, Apple is not going to let you access someone’s phone like sorry it’s lost. During life you can write a letter and say I nominate this person to be the custodian and they can access your data. They can make decisions on your behalf. There are certain assets however for which there is absolutely no beneficiary designations. If you have a Coinbase wallet, there’s nothing I can do. It’s going through probate. That’s just the way it is. You can’t put it in a trust. You can’t put it in an LLC.
So stuff like that. And then there’s other digital assets that are— I can’t give you an acrosstheboard answer on Sky Miles or American Airlines because it depends on the airline. And so the suggestion as uncomfortable as it is is like sometimes you just share your password. Perfection is the enemy of good. So if you go online and just print out like statutory power of attorney or healthcare directive just do it. Even like a basic will, whatever. Just get it done because the worst way to put my son through college is your parents calling me because you died without a will and I have to probate your entire estate and I’m going to the probate court and we’re spending money and they’re dealing with your loss.
So I would say the best thing that you can do is don’t feel like you need to reach a certain level of wealth because right now in many ways you’re at the most risk. There’s not a default if you’re not married. So that’s it. Anything can happen. You could get hit in the face playing Fidel. Thank you. My pleasure. Always.
So I know it’s unconventional but we play, we drink, we learn. That’s really the idea of tonight. I hope you liked it. We want to do this on a regular and we want to make it good. So thank you.
