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AgreementsPost Nuptial Agreements Gain Popularity

May 31, 2007

The Financial Times reports that there is a growing trend for post nuptial agreements.   Like the pre-nuptial agreement, the post-nuptial agreement sets out the parties’ rights, obligations and liabilities upon the termination of marriage by either death or divorce. The only difference between the two marital agreements is that the post-nuptial agreement is executed sometime after the parties are wed.

According to the Financial Times, post-nups are particularly popular with hedge fund managers.   This, however, makes perfect sense.   The financial tycoons are merely seeking to limit their downside risk in the event that their marriages become, to use the street slang, “bearish” (or in the event they want to seek other opportunities.)

The article notes that at least one hedge fund requires its new partners to have a marital agreement in which the partner’s spouse waives his/her claims against the fund.   The hedge fund firms are looking to protect themselves since the partnership interest is a marital asset and is subject to equitable distribution.   In order to ascertain the value of the partnership interest, the partnership needs to be appraised opening the door to an inspection of the hedge funds books and records.

So why would a spouse waive his or her claim against partnership interest in the hedge fund? The spouse is probably banking that the marriage will continue and he/she will continue to enjoy the lifestyle afforded by interest in the hedge fund. But, in the event the marriage ends in divorce, the consideration for the waiver is probably a generous distributive award.

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