Protecting the Spouse Who Steps Away: Career Sacrifice Clauses in Prenuptial Agreements

David Bulitt: [00:00:00] Welcome to JGL Law for You. JGL Law for You is a podcast by lawyers but not for lawyers only. On JGL Law for You, we will be discussing a wide array of topics to help you navigate the many legal process, developments in the law, other current events, and how they may affect you, your family, or your business.

David Bulitt: Welcome back to JGL Law for You, and I’m back with my good friend, my law partner, Chris Castellano, who focuses his practice on all areas of family law and knows exactly what he’s doing, knows exactly what he’s talking about, and this morning just left the courthouse. So, we’re glad to have you back, Chris.

Thanks for joining us.

Chris Castellano: Thank you as always for having me, dude.

David Bulitt: So, Chris, this is the time of year; it’s wedding season, both in June and then we see it again in fall. And what happens before wedding season? People want to talk about prenuptial agreements, right?

Chris Castellano: Oh, absolutely.

David Bulitt: So, we’re not going to talk in detail about prenuptial agreements.

I do want to talk to you about something that has grown in terms of what lawyers consider [00:01:00] ought to be included in a prenup and what clients ought to consider ought to be included in a prenup, and that’s what we call these sort of leaving the workforce or career sacrifice triggers, provisions in an agreement that talk about what would happen if one of the spouses down the road stops working, right?

Chris Castellano: Yeah, that’s absolutely right. You know, a lot of couples when they get together and they envision what their life is going to look like as a married couple, and of course, that usually involves children in that picture. And then that next natural question is, okay, well, who’s going to stay home and watch the kids, right?

And it has become more and more prevalent to ask that question before the marriage to try to plan out kind of what they’re going to do, what that scenario is going to look like. Because if one parent is going to put their career on hold and leave the workforce, what does that look like for the family, but also what does that look like [00:02:00] in the event of a breakdown of that marriage?

So that’s what we’re looking at today.

David Bulitt: I mean, people go into marriages thinking they may have children, go into marriages thinking that for one reason or another, one parent may decide to stay home completely or cut back on their work schedule or change what their career path might be.

Chris Castellano: Oh, absolutely, and there’s a myriad of different reasons for that, right?

One spouse gets a job that would take them to different areas, and so they could relocate. There’s a desire for different types of living circumstances. There are all different sorts of scenarios that could play out, and so I think that what is becoming more prevalent and, if you will, not to overuse the word, but trending in this world is to look at what type of measures we can put in place from a legal standpoint to help these people navigate that.

Let’s say a client comes to me and they say, “Okay, I want to get married. I want to do a prenup.” I think that that’s a good idea. I think that’s a smart [00:03:00] idea. And yeah, my job is solid, but I know my spouse-to-be’s job has the potential to take us elsewhere, to take us out west or down south.

And us being located in the Atlantic, all those references make sense to us, right? But to move elsewhere in the country. And so, then you have to look at, I sit down and say, “Listen, there’s consequences in the event that you make that decision to leave the workforce. What’s that going to look like? There are consequences, real consequences that we can look to limit.”

That includes your loss of income, retirement benefit entitlements, and the contributions that you’re making, and therefore the compound market gains on that retirement. Reduced Social Security earnings. And from your career perspective, right, you’re losing out on promotions, other professional advancement, earning capacity, and your overall financial [00:04:00] independence, right?

And so, some of those are those costs, and you and I have talked about costs of different things before, and this is yet another one, right, of if you leave the workforce, that’s essentially a hidden cost of that decision.

David Bulitt: And also, the fact that people have children, the needs of the family change, right?

And if in fact they end up in two separate households, the change of those needs gets multiplied.

Chris Castellano: Oh, absolutely. I mean, having a child exacerbates all of these issues or realities, and the more children you have, the more exponentially that increases, right?

David Bulitt: I think back, Chris, when I first started doing this work in prenuptial agreements, you started seeing more of them, and that goes back several years.

I won’t count. I don’t want to put my age in here. But in those days it was a discussion about, okay, are we going to agree to waive alimony? It’s either a black-or-white sort of decision. This is a nuance that is, particularly as families have become [00:05:00] more two-wage-earner based, really important for people to consider.

So, tell me a little bit about income, how the party’s income changes might affect what you advise your client. Let’s talk about the economic costs, the potential economic costs or losses that a spouse may see if he or she is the one who’s not going to be working.

Chris Castellano: Well, that’s right.

For the spouse that is leaving the workforce, we’ll call it, right? Because of all the different reasons we’ve previewed, for whatever those reasons are, they are taking that hit, as I referenced, right? The hit on future earning capacity, retirement, overall financial independence.

And so, when that potentiality is hanging out there, and they come to us looking for a prenup, as you said, right, the focus on prenups used to be something somewhat different, right? Limiting alimony or, hey, one spouse has a business that’s worth who knows how much money, and so we just want to limit that one particular [00:06:00] issue.

But the focus on prenups has changed. It’s expanded, and one of those realities is, listen, I don’t want to go into a marriage where the very foreseeable reality is that I’m going to be leaving the workforce to care for the kids, to accommodate a job move, to do this, to do that, etc., so I want that security.

So, what this looks like is really locking down security. Just like it used to be, where it’s locking down a waiver of alimony or locking down a waiver of a business interest or whatever it may have been. Now it’s the same concept.

It is locking down certainty in a concept, and that concept here is financial security for the person that’s giving up their financial independence.

David Bulitt: And people have to keep in mind, we’re getting ready to get married. I’ve got a law degree, but I’m going to stay home and take care of our children. But I’ve got a law degree, so I can always get another job.

But the reality is very different from that. Isn’t that right?

Chris Castellano: Well, yeah, because the person that continues to work, right, they’re still going in for meetings.

They’re interacting with partners or managers or what have you, supervisors. And so, their chance for promotions, their chance for bonuses, their chance for continuing education, advancements, and gaining just basic experience and increasing their Rolodex of contacts, going to various different company events to rub shoulders with people, all of that means something in the workforce.

And when you are at home, you don’t have those opportunities, right? You’re not involved in that world, and so your options become limited, which means that inherently the earning capacity is limited.

 

 

David Bulitt: And the environment changes, right? I mean, just think about what’s going on now. So, if I was a lawyer back in the 1980s or 1990s, for example, and I’m used to doing research by going online, shepherding through the old books.

Sorry if anybody doesn’t know what [00:08:00] that is but looking at old law books to try to find out what cases might support a position, sitting in the library and doing that. Now I want to get back in the workplace 30 or 40 years later, whatever it may be. There are no law libraries anymore, right? Everything is now done a different way, and I’m not used to that.

So, I might not be as employable as I think I am when I’m embarking on this marriage.

Chris Castellano: No, absolutely. And so, when you have somebody that has stepped back from the workforce that is less ingratiated with the current working climate, then what you’re really looking for is to build in that protection for the individual, right?

Build in that protection that says, “You know what? There’s a safety net here.” And yes, you know, we can look to, well, hey, isn’t that what alimony is designed for? That’s the whole point of alimony, right?

David Bulitt: Isn’t that what it is?

Chris Castellano: Except here’s a problem with that, right? Is that when, just like when we did an alimony waiver, just like when we did a business waiver, why do you do those?

You do those in a prenup [00:09:00] because in the event, and we hope the unlikely event, but in the event that the marriage falls apart, then if you didn’t have those waivers with a prenup, then you’re going through the rigmarole of a contested case, contested litigation, and you’re having to rip each other to shreds and pay tens of thousands of dollars to either achieve a number of alimony or an interest in the business or defeat those claims for it, right?

So, the same concept applies, right? You’ve got a person that has a foreseeable potentiality in however many years, and what you’re trying to do is avoid the back-end guarantee that you’re going to be spending $50,000 just to ensure that you get some type of financial security.

David Bulitt: Let’s now talk about the practical way of handling this.

You know, what is it? What’s a career sacrifice trigger? What is that in terms of a provision that you would want to put in a prenuptial agreement?

Chris Castellano: Yeah, so a career sacrifice [00:10:00] trigger is essentially a clause in your prenuptial agreement that identifies specific rights, entitlements, and requirements of both spouses and outlines obligations as long as particular objectives or specific terms are met, right?

And so, let’s first look at what the triggering events could be, right? The career sacrifice triggers. It could be, as we referenced, the birth or adoption, certainly, of a child to the marriage, right? It could be leaving full-time employment for the care of that child, reduction of hours to care for the child.

Doesn’t have to necessarily be leaving the workforce, but leaving the workforce in the same capacity could also qualify, right? And as I say these different options, I want the listeners to know that this is not a one-size-fits-all or mandatory, right? You can mix and match. The wonderful thing about prenups, David, and I’m sure that you have this experience with your clients as well as I do, is that prenups offer the ability to be very creative with your clients’ very specific circumstances, right?

As long as it’s within the boundaries of the law, yes, but you’re allowed to be very creative. And so, you know, you look at the foreseeable triggers, as I’ve outlined, but you can also expand upon that, right?

David Bulitt: For example, like, you may have… We talked about having children, but you may have a client who says, “You know, I’m 37 or 38 years old. It’s our second marriage,” whatever the case may be.

“We’re not going to have children, so I don’t need that built in. But I do need something different because there’s a good chance we’re going to have to relocate to Billings, Montana because my husband is doing, or my husband-to-be may be getting a job to do X, Y, or Z.”

Chris Castellano: Right? And so, when you have those foreseeability issues, it becomes a little bit cleaner to envision doing one of these career sacrifice trigger [00:12:00] clauses, right? And quite frankly, recommend it because if you know an eventuality’s going to come to pass, why wouldn’t you put it in?

If you’re already inclined for a prenup, why wouldn’t you put in this type of protection, right?

So, at its core, there has to be a reason why these are becoming more popular, and it’s only logical that they’re becoming more popular because people want to ensure that there’s a level of protection, right?

And so, you know, when you look at what these different clauses could require, right? And these are ideas for when you’re drafting, certainly.

But they could look like both parties mutually are agreeing to the decision, right? So, if a client’s sitting down and saying that, “Listen, I know that I’m going to have to move with my spouse-to-be to Billings, Montana, and I’m going to have to leave my job,” well, if the other spouse is over there in the other room thinking, “Well, you’ve got a portable job.

The anticipation is that we’re moving out to the mountains, [00:13:00] but you’re going to get another job out there, right? Because you’re working for a defense contractor, they’ve got a unit down there about 35 minutes away,” right?

So, people have to be on the same page for a clause like this to work. And one of those requirements could be that, listen, there’s a mutual written understanding or acknowledgement that I’m going to leave the workforce.

And it could be for a minimum period of time. It could be that you have to be out of the workforce that is mutually understood and agreed upon for a certain amount of time, like six months, nine months, 12 months, whatever it may be.

Or it could look like that plus a reduction of hours, reduction of income. Any of these different aspects of what the career sacrifice looks like could be that which you write into the clause as a requirement slash, I guess, triggering effect.

David Bulitt: What I find really interesting about all of this, and as someone who has represented clients who come to me and say, “All right, my fiancé’s lawyers [00:14:00] prepared this prenuptial agreement.

I want you to take a look at it and let me know what you think,” right? And oftentimes, I know, Chris, you probably see the same thing: they’re sort of vanilla, “I keep what I have, you keep what you have. You know, if I get an inheritance, it’s mine. If I get a gift, it’s mine. You know, if there’s growth of my asset, it’s mine. You keep this,” and that’s it.

And people, potential clients, don’t know what questions to ask, and many clients wouldn’t know to ask this question. That’s what makes you, I think, very unique in our field, which is that these are questions you’re going to ask your client whether they know whether to ask them or not.

And what I have found, and I think you have, too, is that people don’t really know or think about these types of things. So, isn’t it, really it’s a requirement for you, the lawyer representing a client in this prenup, to at least have this discussion?

Chris Castellano: Oh, without a doubt. I think, you know, it’s no different in my view when I’m drafting a marital separation agreement, absent the existence of a prenup.

Just like when you’re drafting one of those, or you’re drafting a custody agreement, there are the bucket of foreseeable circumstances or outcomes and the bucket of unforeseeable. As lawyers, we can never draft clauses that deal with the unforeseeable consequences. Why? Because, well, they’re unforeseeable.

That’s the whole… That’s why the word exists, right?

But it is our job to draft clauses that deal with the foreseeabilities, right? And so, when I have a client come to me that wants to do a prenup, you know, there’s a lot of preconceived notions around prenups. I think media does a good job of driving a lot of those preconceived notions, and frankly, I think that AI is picking up the mantle of doing that.

But it’s our job to tell them, you know, you ask those questions. Oh, what are your circumstances? What’s your job looking like? What do you think your job’s going to be in five years? You know, are you going to have kids?

All of these are natural questions. Why? Because all of them have implications for the clauses that you’re going to draft in the prenup. And frankly, [00:16:00] anyone that’s not asking those questions or engaged in those conversations is doing the client a disservice because you’re not drafting an agreement to divide people and let them go their separate ways.

You’re drafting an agreement to ensure that a partnership that should last 70 years or so, ideally, right, can survive. I don’t draft agreements for when people divorce. I draft agreements to have them be secure in the marriage that they’re entering into. It’s a paradigm change.

David Bulitt: So, let’s talk about the drafting piece for a second, and it’s sort of the same question but from two different angles, and that is, what are the risks, the concerns, the potential minefields in drafting this type of provision?

And from the client’s perspective, what should they be looking for in terms of what the provision looks like?

Chris Castellano: There’s, just like any contractual claim or clause that you’re drafting, you know, the lawyer has to be careful [00:17:00] about this, right?

We all know in Maryland you can’t have agreements to agree. You can’t make unenforceable clauses. You have to watch out for unconscionability-type clauses. And that’s, listen, almost every one of those points could be a full podcast discussion.

But there are big red flags that you have to stay away from, whether you’re being too specific, too vague, or you’re being too one-sided. You have to be careful.

When you draft these clauses, it’s no different than any other clause you’re drafting insofar as what you have to be careful of, and that is being clean, concise, specific, and understanding what is and what is not an enforceable claim.

David Bulitt: And as the client, as the person who’s having you draft this agreement for them, what should I be asking you and what should I be looking for in terms of this provision?

Chris Castellano: Yeah, so it boils down to [00:18:00] if you’re going to leave the workforce and you’re going to have this career sacrifice decision that you make, what do you feel would be, and that could be informed by conversations with counsel, but what do you feel would make you whole following that decision, right?

So that could take the form of, listen, my spouse, I’m leaving the workforce, so my spouse is going to contribute to a separate IRA for me, right?

Okay, it could look like that. It could look like an investment account, a brokerage account with the same concept. It could look like gaining a, I don’t want to say disproportionate, but a larger share of various different property rights, whether that is real property or the personal property existing between the parties, bank accounts, et cetera, or even just alimony, right?

The longer you’re out of the workforce and the reduction of income, you could have that correlate directly to some level of alimony protection or provision.

And so again, it comes down to this idea that you can be creative because it’s your life, it’s your circumstances, and it’s about building protection for you in those specific circumstances.

David Bulitt: So, give us a few examples of those protective type provisions that you might consider including in this section of a prenuptial agreement.

Chris Castellano: Yeah. So, one of them is very similar to the alimony protection that’s in a lot of agreements, right, in separation agreements, is life insurance. So, you build in a life insurance protection for the spouse that has given up their career because it’s not cheap, right?

And so, there’s consideration there as far as the money that the earning spouse, the financially dominant spouse, is putting into this protection, and it provides that level of security, financial security to the financially dependent spouse.

One of the other [00:20:00] protections, let’s look at what the whole point of rehabilitative alimony was from a litigation standpoint, right? That’s to provide for the circumstances of career re-entry for the spouse that was financially dependent, right?

And so that looks like over a certain period of time, I’m going to pay for trainings and re-educations and networking events, and then there’s going to be a ramp-up. So, some of those ideas are what I look for and what I will be talking to clients about as far as possible solutions to incorporate into these types of clauses.

David Bulitt: Let me finish here. So, I’m getting ready to get married, and my fiancée and I have discussed probably the necessity of having a prenuptial agreement. What are the- let’s call it a checklist- what type of things should people talk about before they sit down with you?

Chris Castellano: So, I think that there needs to be an understanding [00:21:00] of is either spouse-to-be is anticipated to leave the workforce?

That’s number one. That’s the core of this whole issue, right? And number two, is that leaving of the workforce temporary or indefinite? And those two questions and concepts will inform everything else.

And from there, you start to look at, all right, what circumstances will justify leaving the workforce? And we talked about that at the beginning of this recording, right?

And so, if that’s the case, the person’s leaving the workforce, then you have to talk about how are we managing the household income? Is there going to be equal access to financial information? And will there be maintenance of individual accounts between the parties or contributions to individual accounts?

There’s obviously a myriad of additional considerations, but I would sit down. If you’re having that coffee table conversation, that’s what we’re looking at.

David Bulitt: We could probably dig a hell of a lot deeper on this topic because it’s [00:22:00] really, really important for folks to understand these types of issues.

We don’t, unfortunately, have several hours to talk about it, but folks, you have the opportunity to reach out to Chris Castellano and have your questions answered before you sit down and sign off on a prenuptial agreement.

How would folks reach out to you, Chris?

Chris Castellano: Yeah, absolutely. Give me a call at Joseph Greenwald and Lake, 240-399-7900.

You can find us on the web, www.jgllaw.com and schedule a call to talk about the concerns because these are important.

David Bulitt: Chris, as always, just a plethora or a treasure trove of information, and I’m sure that the folks listening really appreciate it.

Folks, reach out to Chris. Contact him if you have questions.

It’s been great having you. Always great having Chris Castellano. We will hear from you and see you next time on JGL Law For You.