
A Prenup Is the Latest Must-Have for Tech Startup Founders in Love - siberianbear
https://www.bloomberg.com/news/articles/2019-10-11/prenup-is-latest-must-have-for-tech-startup-founders-in-love
======
drblast
The simplest way to do this is to not get married. Unless one party is truly
in it for the money, there is very little advantage to it other than the
social acceptance that comes from being married which is vanishing anyway.

Legal marriage is a lifetime obligation where the terms aren't decided until
after you sign. It's anachronistic and ridiculous. You wouldn't sign a job
contract where if you got fired or quit you would face unspecified financial
and personal penalties, but for some reason everyone wants to do that despite
a 50% divorce rate. Insanity.

~~~
nostrademons
> Legal marriage is a lifetime obligation where the terms aren't decided until
> after you sign.

That's part of the point - customary marriage vows are usually something like
"to be true to you in good times and in bad, in sickness and in health, for
better, for worse, for richer, for poorer, to love you and honour you until
death do us part". There's a recognition there that life is uncertain and you
can't predict exactly what the terms will be for the remainder of your life.
But like most contracts, marriage is an exercise in giving up _freedom_ to
build _trust_ \- it's a way of aligning incentives so that two people can each
know that the other has their back, _even_ when they don't know exactly what
that means.

If you're not interested in making that contract or don't feel you could
possibly be ready for it, then by all means, don't get married. It's not for
everyone. But there's stuff you miss out on with that choice too.

~~~
nordsieck
> it's a way of aligning incentives so that two people can each know that the
> other has their back

But it doesn't align incentives. Instead, it creates unaligned incentives.

In most relationships, one person is more of a spender and one person is more
of a saver. Marriage is one big F-U to the saver.

As far as I can tell, the real reasons to get married are the medical decision
making and visitation rights. That's about it.

~~~
yodsanklai
Also immigration and tax benefits. Sometimes, getting married is the only way
to be able to live with one's partner.

For instance, a friend of mine married his gf so he could get a visa to follow
her after she got a job in the US (they had a child already, but didn't plan
on getting married).

~~~
nordsieck
> immigration

That's fair

> tax benefits

I don't think marriage is a net positive if you were to do an "expected value"
calculation and included the risk of divorce. However, I could be wrong.

~~~
epicureanideal
You're absolutely right, and here are some approximate numbers to go with
that.

Based on a Bay Area tech salary of let's say $200,000 per year, you would save
about $5,000 on taxes assuming your partner earns very little and you enjoy
almost the maximum tax advantage.

If you get divorced after 10 years, you've saved $50,000 in taxes, half of
which will belong to your partner, so you've gained $25,000 assuming you kept
your half so far.

A cheap divorce might only cost $5,000 and so you'd come out ahead, but a high
conflict divorce could cost $100,000, or $200,000.

And on top of that if you were actually getting "tax savings", that means your
partner earns much less than you, which means you'll be paying a lot of
alimony to them for possibly the rest of their life, or at least half the
length of the marriage.

Even in the case of a "cheap divorce" of $5,000, the alimony will surely eat
up far more than the remaining tax savings. If you're earning let's say
$200,000 and your spouse was earning much less, you're paying $1,000+ in
spousal support per month for several years at least.

So yeah, the math definitely doesn't work out.

~~~
henrikschroder
Things I have never understood about the US: Why does a divorce cost money?

~~~
CydeWeys
Lawyers are expensive. Divorces are doubly expensive for the same reason that
the Civil War saw the most dead American soldiers.

~~~
henrikschroder
Why do you need a lawyer for a divorce?

I understand that if there's a _conflict_ you need a court to resolve, then
yes, you need a lawyer. But there has to be a significant number of divorces
that are amicable, both parties agree to divorce, and you can divide your
shared assets 50/50 in a fair way that both parties agree on, right?

Do you need a lawyer in those cases?

Or are those cases so incredibly rare because of cultural reasons that
everyone just assumes a divorce costs money?

~~~
nordsieck
> Why do you need a lawyer for a divorce?

You don't need a lawyer for a divorce in the same sense that you don't need a
lawyer ever.

Plenty of people succeed at pro se law all the time.

There is a good reason why people recommend lawyers, though, and that is
because the law is very complicated.

I think lawyers are great at a few things:

1\. They'll help you dot your i's and cross your t's. Even if the divorce is
amicable, it's probably a good idea to do up the paper work and then take it
by a lawyer just to make sure everything is done up right.

2\. They'll keep everything above board. A decent lawyer will tell you about
what is achievable in a divorce, which is a much better starting place for
amicable negotiations than what feels right.

3\. They'll help you protect yourself. Is it a good idea to move out of the
marital home? What happens if your spouse incurs debt during the separation?
These sorts of questions are often quickly answered and very important to get
right.

> Or are those cases so incredibly rare because of cultural reasons that
> everyone just assumes a divorce costs money?

The breakup of personal relationships, such as a marriage, often result in
very strong, negative emotions. I don't have any data on how frequent divorces
are contentious, but it would not surprise me to learn that most are.

My guess is that part of your perception, however, is anchored in media - both
social and traditional. There, contentious and expensive divorces are simply
more interesting and are probably over-represented.

~~~
henrikschroder
Just as a preface, where I'm from, divorce does not typically cost any money
at all, you never use a lawyer, it's simple paperwork that you send in to the
tax authority and that's it. Only if the disagreement on how to split the
assets is so strong that one party threatens court do you need a lawyer.

Also, if there's kids involved, you need a shared custody agreement which
might result in one party paying child support to the other, but that's a
thing that's triggered by the divorce, it's not part of the divorce itself.

> it's probably a good idea to do up the paper work and then take it by a
> lawyer

How hard can divorce paperwork be? "We're done, signed: A, B" How can you
screw it up? If you get confirmation from whatever government body that keeps
track of it, you're divorced, right? Otherwise you're not divorced?

> what is achievable in a divorce

What? You split your assets 50/50 and then you're done? What else is there to
argue about?

> What happens if your spouse incurs debt during the separation?

Wait, what, how long does a divorce normally take in the US?

> My guess is that part of your perception, however, is anchored in media

No, no. I was specifically responding to some grandparent poster that claimed
a "cheap divorce" only cost about $5000. I think that's an outrageous amount
of money, and I don't understand why people in the US seem to be ok with
divorce having to cost any money at all?

~~~
nordsieck
> Also, if there's kids involved, you need a shared custody agreement which
> might result in one party paying child support to the other, but that's a
> thing that's triggered by the divorce, it's not part of the divorce itself.

In the US, child support is not automatic. If either party goes to court,
court ordered child support can be arranged, but otherwise, it is left up to
the parties involved (I could be wrong about this, and it might vary from
state to state).

> How hard can divorce paperwork be? "We're done, signed: A, B" How can you
> screw it up?

Honestly, I'm not a lawyer, and I've never been divorced, so I don't know. But
I do know that something as "simple" as a will is pretty easy to screw up. I
can't imagine other aspects of family law are any different.

> You split your assets 50/50 and then you're done? What else is there to
> argue about?

1\. Sometimes assets are not so easy to split. Partnerships in small
businesses, pensions, membership in a family business, etc.

2\. There are 2 property systems. One is "community property", where
everything is considered to be jointly owned by the couple. In the other,
people own what they own. I'm not very well versed in the difference.

3\. People generally are not expected to split property they came into the
marriage with or gained via inheritance. However, if it becomes co-mingled in
certain ways with marital property, then it becomes marital property.

4\. Sometimes people want to keep certain pieces of property (e.g. heirlooms).
Properly valuing these can be difficult.

There are probably other issues that I'm not familiar with - this is just the
stuff that comes to mind.

> Wait, what, how long does a divorce normally take in the US?

It varies from state to state. Some states require 1 year separation before a
divorce is granted. If lawyers and money are involved, it could be very long
indeed.

------
jandrewrogers
I've witnessed a couple cases where a startup founder's spouse divorced them
and it nearly destroyed the company. Having a hostile party who doesn't care
about the startup suddenly become a major shareholder is a recipe for
unpleasantness.

The blast radius and destruction of value of treating a startup as community
property affects many people not in the marriage.

~~~
nostrademons
I've also seen startups destroyed by a founder divorce, but a pre-nup
wouldn't/didn't help. The problem (in all 3 cases) was that the founder's
concentration, drive, motivation, and confidence was destroyed. Divorce is
hugely emotionally tumultuous: people going through it usually do not have the
mental bandwidth to spend on something as attention-demanding as a startup. It
also usually leads to big changes in lifestyle, goals, and motivations: many
folks I know who have gotten divorced completely reexamine what's important in
their life. (In some cases, this leads to the divorce rather than the other
way around.) Very often a startup, or the specific startup they're working on,
isn't one of those things once the dust settles.

The lesson I took from it wasn't to get a pre-nup, it was to invest time in
your relationship _even_ while doing the startup, and get your spouse on-board
with it. That's somewhat incompatible with the Silicon Valley image of a
maniacal laser-focused startup founder, but then, a large number of them have
a wreckage of a personal life that ultimately ends up costing them a lot of
what they've made in startups.

~~~
mikeg8
I agree but think that 1) there are _many_ ways a founder can lose drive,
motivation, concentration, etc. some being the death of a
friend/sibling/parent, medical diagnoses etc. While a divorce may be very
difficult for a founder to recover from, and avoiding divorce should be
prioritized, it’s not a full-proof way to safeguard a founders productivity.
2) _Without_ a pre-nup, the startup will most likely increase it’s exposure
possibly adding a toxic shareholder/board member, a situation that may be more
difficult to recover from than replacing the founder. Just my thoughts.

------
abstractbarista
Frankly, the best prenup is not getting married in the first place, and not
living in a state which may honor "common law" marriage.

You can't negotiate attraction, therefore marriage (in the legal sense) is at
best negligible, and at worst very dangerous. _Socially and spiritually, it
can still be very positive and important._

Furthermore, if we are to embrace feminism, we must cast aside the concept
that marriage helps ensure the wife is financially stable after divorce. They
are working and saving for themselves as well, right?

Ultimately, it would be neat if the government didn't recognize marriage at
all. Things like permission to make medical decisions, child care, or
immigration would be bound by specific legal documents. (This would also have
completely avoided the issue some people have with the government recognizing
non-heterosexual marriages.)

~~~
kelnos
> _Furthermore, if we are to embrace feminism, we must cast aside the concept
> that marriage helps ensure the wife is financially stable after divorce.
> They are working and saving for themselves as well, right?_

A quick search seems to indicate that more and more men are suing for and
receiving alimony[0]. The reason it's still not super common is probably due
to traditional notions of masculinity being pervasive; men think "it's for
women" or have too much masculine pride to ask for it[1].

[0] [https://www.williamstrachanfamilylaw.com/2012/11/alimony-
men...](https://www.williamstrachanfamilylaw.com/2012/11/alimony-men-common/)

[1] [https://www.huffpost.com/entry/why-dont-more-men-ask-
for_b_3...](https://www.huffpost.com/entry/why-dont-more-men-ask-
for_b_3503742)

~~~
kentrado
Or maybe it is because in spite of earning a salary, women generally choose
men with higher earning potential than them.

------
nullc
Not getting married or having an overly aggressive lopsided prenup can result
in enormous power imbalances that inhibit having the true partnership which is
necessary for a successful relationship.

Unless your relationship never was and never is intended to be a partnership
between equals. But if so you owe it to yourself and your partner to be clear
about that.

By all means, set things up so that an acrimonious divorce won't require
selling an illiquid business or whatnot. But if you go into thing with
entirely a whats-mine-is-mine then there are real questions as to the purpose
of your relationship in the first place.

~~~
david38
Power imbalance is the consequence of marrying up/down economically.

Are you saying she should be able to control the fate of his company just
because she’s married to him? You think this remotely makes her qualified?

Attitudes like this are what force people to marry within their class which is
bad for society in the long run. By being able to marry outside your class
without fear of being wiped out, a (usually) woman can move up (in addition to
all the other ways available to her) and likely her family gets access to some
of that.

To see what happens when people must marry within their class, look no further
than European nobility.

Seriously, say I am building a company worth 100m on paper. You think if I
marry someone she should be entitled to a large fraction of that? Why? Let’s
assume she doesn’t do anything with the business. Say she was an accountant
when we met and continues to be one after. Sure, she can’t tell me what
mansion to buy, etc, but those are things to work out. Am I a guy to totally
ignore her desires? If so, she shouldn’t marry me.

Flip this around. Suppose I’m a lowly programmer. I marry a super rich
supermodel. Am I entitled to her money just because?

~~~
alehul
> Seriously, say I am building a company worth 100m on paper. You think if I
> marry someone she should be entitled to a large fraction of that? Why? Let’s
> assume she doesn’t do anything with the business. Say she was an accountant
> when we met and continues to be one after. Sure, she can’t tell me what
> mansion to buy, etc, but those are things to work out. Am I a guy to totally
> ignore her desires? If so, she shouldn’t marry me.

Alternatively, say you are building a company worth 100m on paper, and as a
result, when she ends up pregnant with kids, you insist that she should work
less hours, or maybe stop working altogether, in order to take care of them.
(After all, you are busy building a company worth 100m on paper).

You don't think she is entitled to a large fraction of that? Why not?

Marriage isn't meant for you to protect your winnings from the Silicon Valley
startup lottery; it's meant to allow for partnership, which includes earning
your way in the world together and making choices together, to benefit the
family, with security for both partners in the worst-case event of a divorce.

~~~
scarejunba
Wouldn't homo economicus hire a stay at home nanny in that situation? Seems
like a situation incompatible with the wealth optimizer who would worry about
these things.

~~~
celticninja
No, because the economic return on the child would be better with a committed
parental unit, rather than a temporary paid associate, whose concern starts
and ends with the pay checks.

------
throwaway72873
Prenups do not work. Often it is ignored by court. Or wife can move (and
divorce) to UK where prenups are not enforceable.

~~~
gamblor956
I only know of a handful of prenups that didn't work, and in every case where
the prenup was pierced, it was due to one of the parties not satisfying the
conditions required for a valid prenup.

The number one failure? Not properly disclosing premarital assets. Disclose
everything, and let the lawyer decide if it's immaterial (and as a side
benefit, if they strike something from disclosure which is later found to be
material in a divorce proceeding that results in the prenup being pierced,
then generally your lawyer's malpractice insurance will make you whole).

How should stock be disclosed? If it's publicly traded, you disclose the
stock, type of shares, stock owned, and value at the time the disclosure was
compiled. If it's not publicly traded, you list the type of stock restrictions
on trading/owning if any, and estimated valuation based on the most recent one
conducted by the company. If you're a C-suite officer of a VC-funded company,
you generally also need to get an updated valuation, and if the company won't
do one you may need a third-party valuation. (If you're not an executive, or
it's a privately-owned traditionally financed company, no additional valuation
needed.)

------
accountDEADBEEF
A bit off-topic but has anyone else noticed a trend in the webpage title not
matching the article title? Eg in this case, the page title is "Broke and in
Love, More Tech Entrepreneurs Demanding Prenups" vs the article heading of "A
Prenup Is the Latest Must-Have for Tech Startup Founders in Love".

Is this just some old version of the title cached?

The weird thing is that the _URL_ matches _article heading_.

~~~
alexpetralia
I wouldn't be surprised if the page title is set initially, but the final
title is updated and set based on A/B tests.

------
motohagiography
The clause about voting rights of shares not transferring to an ex-spouse in a
VC agreement is pragmatic. Money and share value you can manage and negotiate
equivalent value, but a material change in control is way more complex.

Marriage is incidental to that, and there isn't much of a future for it
outside religious societies anyway. The good news is the trend creates lots of
opportunities for luxury products and consumption as the millennial generation
ages out of prime child raising age and finds the hole in their lives money
just can't fill, but that won't stop them from trying.

If you have ideas for what these people will want in 2025-2030, might as well
start your financial plan now. Whether it's money or share votes, plan to
maintain control.

------
jelliclesfarm
It’s not the ‘latest’. It has always been that way and there are Post-nups
too.

------
capableweb
It's a shame that many countries in the world, you have to get married if
you're not from the same country. Married people have different rights to stay
together compared to people who spend many years living together.

If it wasn't for some immigration laws and other areas where you're not equal
unless you're married, there is little point in getting married at the present
time.

~~~
BrandonM
To me, the main point of marriage in the present day is to have all your
friends and family sign off on your mutual declaration, “This person is now
the most important person in my life.” Your parents, best friends, siblings no
longer have any standing to complain when you favor your spouse over
themselves. More even than the legal differences, I think that’s really the
purpose of marriage, and the ceremony itself is a reflection of that reality.

~~~
capableweb
I feel you should be able to make that decision yourself and you have no
obligation to make anyone else but you, to sign off on what you feel is
important.

If I now feel that a another person is the most important person, that's it.
Now it's so, for me.

------
heelix
Sharing a checkbook is one of those fundamental things with marriage. Both
parties need to be aligned - even when one makes substantially more than the
other. If someone thinks they need a pre-nup, they should still be in that
dating phase. Yes, the other could get half if things go tango uniform... and
if one just prices their partner as a chief cook and bottle washer at market
prices... can't say that is going to last.

(Will be 26 years with my Bride now... so still rookie numbers)

~~~
kelnos
This may surprise you, but relationship types run the gamut, and just because
something has worked well for you, it doesn't mean it's ideal (or even
functional) for everyone else.

------
simonebrunozzi
I've sometimes wondered: what about "postnups" (post nuptial agreements)? Are
there a thing? Do they exist? Can they fully substitute the lack of a prenup?

~~~
erikpukinskis
Sure, you can sign a similar document after getting married.

------
ykevinator
Why get married if you're not doing it for better or for worse. I'm not asking
sanctimoniously, I'm actually asking. Literally just date, it's fine.

~~~
jdminhbg
You can be as into for better or for worse as you want, but it doesn't matter
if your spouse isn't.

------
cascom
Seems like all a pre-nup is, is an amendment to the "standard marriage
contract" (using that as a short hand for all the facets of marriage/divorce).
If you don't know what the "standard marriage contract" is in your state then
that's on you - but if you do learn what it is, my guess is there are a number
of those items that don't/apply or you [both] may desire to amend/change them.

~~~
sib
I think it's true that it is largely an amendment to the "standard marriage
contract" as reflected by the state's laws (I have one and spent a lot of time
in researching it). _But_ , that amendment, just as any contractual amendment,
can change the original agreement dramatically and across many, many key
terms.

As my attorney in the matter said to me, "You can let the state decide in the
future what happens if you get divorced, or you and your partner can decide it
now."

------
rolltiide
Don't sleep on Foundations and Trusts.

You can contribute to them even during a marriage and you could be trustee and
your ex-spouse would not be a creditor.

In this topic of shares in your startup though, it is more likely that your
Foundation cannot be an owner of it (or maybe a percentage limitation of
ownership if you are actively involved in the company), so don't donate shares
of that company to that foundation. But for the fiat money earned you can
donate unlimited amounts to that, with a 30% annual tax deduction against your
annual gross income.

This may not be obvious, but its correct that you can't get money out of a
foundation aside from 'reasonable salary' which will then be taxed as ordinary
income, but you can use the foundation's nest egg to pump the value of other
assets you own, as long as you aren't buying and selling direct to the
foundation. Ideally an invigorated market will purchase from your personal
orders above the price the foundation has pumped the market to with its tax
free money. foundation just ends up owning a bunch of the asset from the pump,
you personally just have a bunch of short or long term capital gains, which
you can again offset by donating to the foundation or offset from prior
donations above that prior year's AGI limit. illiquid markets are always ripe
for this behavior.

Foundations can also support other causes you have in mind, as they were
designed for.

------
neonate
[https://web.archive.org/web/20191011183634/https://www.bloom...](https://web.archive.org/web/20191011183634/https://www.bloomberg.com/news/articles/2019-10-11/prenup-
is-latest-must-have-for-tech-startup-founders-in-love)

------
baron816
Better to have and not need than need and not have.

~~~
kelnos
Unless there's lingering resentment and trust issues stemming from the fact
that you pushed hard for a pre-nup, which leads to a divorce that otherwise
wouldn't've happened.

------
jressey
> Latest

Rich dudes have been getting prenups for like at least half a century.

~~~
gwern
Yes... when they are already rich. Not before.

------
m0zg
I think it's a must have for their spouses-to-be. The probability of "startup
founders" striking it rich is infinitesimally small, so in a community
property state (which California is), the down on luck "founder" could claim
half of his/her spouse's property and wring out alimony as well, if they're
female. Seems like a much more likely outcome.

~~~
syedkarim
I don't believe gender matters. Alimony (which is called "maintenance" in some
states) flows from high-income spouse to lower-income spouse, in order to
maintain a standard of living. It's possible for a female to pay a male
maintenance/alimony.

~~~
m0zg
It's certainly possible. The court is just _much_ more likely to require
alimony for you if you're female. Same with custody. Where's that gender
equality when you need it?

[https://www.divorcemag.com/articles/percentage-of-men-
awarde...](https://www.divorcemag.com/articles/percentage-of-men-awarded-
spousal-support-increasing)

Quote: "The [2010] census found that about 12,000 men receive spousal support,
and 380,000 women receive it."

~~~
kelnos
That statistic can be (and more plausibly is) explained by other factors:

* Men still are more often the bread-winner in heterosexual marriages.

* Often men and women have comparable income upon divorce, so there wouldn't be any alimony anyway.

* Men don't realize they can get it.

* Men realize they can get it, but think "that's just for women, right?" and have a masculine pride aversion toward it.

... and so on.

~~~
m0zg
And this, in your honest opinion, explains 32x the difference in alimony
awards? Please.

~~~
kelnos
Yes, I think it can. There's nothing that stops a man from suing for alimony.
Apparently even in places like Nebraska (which I would expect are
"traditional" and conservative), men are awarded alimony when they ask for it.

And I think that's a big part of it, too: judges will often just award alimony
to a woman as a matter of course; men have to ask for it.

------
notadoc
Why not for everyone? What's yours is yours, what's shared is shared. Seems
simple enough?

The legal entanglement is perhaps the strangest part of marriage, and divorce.

~~~
ar_lan
I don't understand why marriage is a legal thing. Why is the government
involved?

~~~
kraig911
Well first things first kids need legal protection and a system needs
something in place to account for them.

~~~
epicureanideal
How does marriage protect the children?

~~~
kraig911
Not marriage per se but mutual union of people ordained by the court system
protects children. Truly single parents have the hardest time. Help a woman
have a pregnancy with no father on the birth cerficate you'll understand what
I mean.

