Breaking taboos with prenuptial pacts

Weird. That's what Kelvin felt when he signed a prenuptial agreement years ago with his then girlfriend on who would be entitled to their house in case they separated. According to the agreement, the ownership of the house would go to the wife if the couple divorced, because the wife's parents had paid the down payment for the house.

"We were both fresh graduates at that time, so we couldn't afford hundreds of thousands of dollars" to purchase a house, said Kelvin, a sales manager in San Jose, California, who prefers to be identified by only his first name. The couple came to the United States from China as students and stayed in Silicon Valley after graduation. They remain married and still live in the same house, paying the mortgage together.

"My friends think it's unfair to me, but I think it's okay," Kelvin said. "I feel more comfortable now looking at a what-if scenario to save future troubles."

In China, most people are unwilling to sign a prenuptial agreement. But overseas Chinese are showing a positive attitude toward it. According to a recent survey, 70 percent of overseas Chinese respondents, mainly living in the US, said it is necessary to sign prenuptial agreements, commonly known as "prenups", before tying the knot.

The survey covering 1,084 people was conducted by a Bay Area-based dating company "2RedBeans" from July 28 to Aug 7 through the company's mobile app. The company said it has more than 1 million registered users, half of them based in the US, and the rest in Canada, Australia and other countries.

The survey also found that 82 percent of Baby Boomers (above 57 years old), 69 percent of Generation X (between 41 and 56), 63 percent of Generation Y (between 25 and 40) and 76.5 percent of Generation Z (below 25) all agreed to declare their individual finances before marriage, and said a prenup can protect their assets.

"It shows that the attitude of overseas Chinese toward marriage has...been influenced by Western values… over the past decade," said Q Zhao, co-founder of 2RedBeans. "The traditional Chinese concept of starting a family means the couple sharing the family's properties. In Chinese culture, talking about money hurts feelings," Zhao said.

But prenuptial agreements are relatively common in the West. It is used to determine how a couple will divide their assets in case of a divorce, instead of leaving it to a court to make the decision.

In China, a prenup is considered taboo, because it indicates distrust between a couple and the lack of trust in the institution of marriage. Critics of the legal agreement say it runs counter to traditional Chinese values, because in China marriage is about love, selflessness and sharing, while a prenup is seen as a step toward divorce.

But the attitude of some people in China has been changing, albeit slowly, thanks to the country's rapid economic and social development, and rising divorce rates. According to a 2011 survey by Beijing-based Horizon Research Consultancy Group, less than 5 percent of the couples in China's first-tier cities signed a prenuptial agreement, and nearly 90 percent of unmarried people disliked the idea. But according to a China Youth Daily survey in 2017, which covered 1,999 people, 57.9 percent of the respondents said a prenup was acceptable.

High-profile couples

That an increasing number of overseas Chinese consider a prenup important, if not necessary, can be attributed to the recent divorce of some high-profile couples, including Microsoft co-founder Bill Gates and Melinda Gates and Amazon founder Jeff Bezos and MacKemzie Bezos, Zhao said.

The Gates couple were reported to have a $152 billion fortune to divide when they decided to part ways after 27 years of marriage, about $50 billion of which was endowed to the Bill and Melinda Gates Foundation for charity work. And the Bezoses' divorce ended up with a settlement of at least $35 billion, making it the world's most expensive divorce.

Both Gates and Bezos didn't have prenuptial agreements, and they paid an "astronomical breakup fee "to their wives after more than 25 years of marriage, which made many people realize the importance of prenups, Zhao said.

Another factor that has made many Chinese change their attitude toward prenups is the high cost and lengthy process of a divorce in the US, she said. If a couple can't reach an agreement on the division of property, spousal support and child support, then a judge will make the decision. "Which usually incurs expensive lawyers' fees and other expenses," Zhao said.

In Silicon Valley, it's not uncommon to see divorcing couples fighting over stocks, startups and intellectual property rights－the same way that other people fight over the custody of their children.

The Chinese community in the US first realized the cost of annulling a marriage could be very high when an expensive divorce case was reported in the late 1990s. Abraham Ma, who owned a computer component distribution company in Silicon Valley, spent more than $2 million on attorneys' and experts' fees from 1995 to 1999 to divorce his then wife Judy Liu, according to local media reports.

After his divorce with Liu, Ma entered into a prenuptial agreement with his next wife Christine Rao. That marriage, too, ended in a divorce in 2014. But because of "a few wording issues" in the agreement, Ma spent about $10 million in attorney fees this time and the case lasted five years, a source familiar with the case told China Daily.

A nationwide divorce survey by Nolo, a US publisher of legal books and software, in 2019 found that on average each spouse had to spend $12,900 to get a divorce. The figure does not include the cost of dividing the assets. The survey also showed that across the US, divorce attorneys charge an average of $270 per hour and the overall average duration of a divorce case was one year. For couples with children seeking divorce, the cost was $15,500 on average and the duration 15 months.

"Despite the high cost and lengthy court process, the divorcing parties often don't accept the court's decision," Zhao said. "There's a popular saying among Chinese people that even an upright judge finds it hard to resolve family conflicts. If both parties can agree on how to divide their assets themselves, it would be the most economical and efficient way of settling a divorce case," she said.

Advantages underlined

US family law attorneys have been promoting the concept of prenups, saying they have many advantages. A prenup not only protects the assets brought into the marriage by one party but also saves the other party from debt.

An outspoken advocate of prenups and a Los Angeles-based divorce lawyer, Kelly Chang Rickert has gained popularity for sharing family court stories on TikTok. The rights and obligations associated with marriage in the US vary from state to state. "So if you get married without drawing up your own terms and conditions, you are by default submitting to your state's prenup," Chang Rickert said in a TikTok video. "Prenups are especially important in a community property state such as California, where all assets and debts acquired after marriage are the community's," she said.

One of her recent clients was lucky to have a prenup which allowed her to keep her property separate from the liability of her late husband, who had ran up "astronomical" amounts of medical bills before he died of COVID-19.Had they not had a prenup stating that the debt be attributed to the spouse who acquired it, the medical debt would have been community property and she would have had to pay it," Chang Rickert said in another video.

By contrast, one of Chang Rickert's female clients didn't want a prenup so she could get half of her husband's successful business in the case of divorce. But by the time they separated, the business had almost reached bankruptcy point, making her liable to pay half of the debt, according to Chang Rickert.

This might be one of the reasons why many overseas Chinese consider prenups necessary, Zhao said. "Overseas Chinese living in North America are generally high-income earners and come from middle-class families, so they more easily accept prenups, especially the Gen Z," Zhao said. Also, the Gen Z, is more likely to value "financial independence "than other age groups, she added.

Elaine Li, and her husband have been "going Dutch" since they started dating in college. They split the rent, utility bills and daily expenses evenly, and foot the bill in turn when they dine out. "A prenup is not necessary for us since our finances are separate," said Elaine, 33, a graphic designer at a gaming company in Mountain View, California, "But when it becomes necessary, it won't be a problem for me. I'm in favor of it, as long as it's fair."

An only child, Li enrolled in a US university after graduating from high school in China's Guangdong province. Her husband has a similar background. She said that some of her friends too "go Dutch" with their spouses. "I don't like the feeling of being dependent on someone. I don't want to lose my status in a marriage by spending his money," she said.

This group's sense of being financially independent has been influenced, to some extent, by their family origin, Zhao said. "We have noticed that many of our peers are an only child of wealthy families. They were sent to the US to attend universities or high schools. After graduation, many parents bought a house for their children or provided the down payment for a house," she said.

The recent survey findings on overseas Chinese people's attitude toward prenups are in line with a 2018 survey by the American Academy of Matrimonial Lawyers, which showed a 62 percent spike in couples signing prenups, and that it was driven by millennials.

For millennials, a factor behind the increase in prenups is that they get married relatively later in life and may have more assets than members of the past generations, according to the AAML. While recognizing the notable trend among millennials, the organization also observed an increase in the number of millennial women initiating the request for the prenuptial agreement.

"Our survey shows 71.3 percent of female respondents believe it's necessary to sign the legal agreement, compared with 64 percent of their male counterparts," Zhao said. "As for the motivation for signing a prenup, we found the older respondents tended to start their marriage by being transparent in order to avoid disputes in the future, while the younger generation prefers to not share the assets with their spouses they had acquired before marriage," she said.