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Fiancé Has $2M in Unvested Startup Equity — How to Handle in Prenup?

Started by prenup_startup_equity_q · Mar 8, 2023 · 10 replies
For informational purposes only. This is not legal advice.
PS
prenup_startup_equity_qOP

Looking for advice on this situation. Fiancé Has $2M in Unvested Startup Equity - How to Handle in Prenup? Any guidance would be greatly appreciated.

Details: I'm in a situation where I need to understand my legal options. Has anyone dealt with something similar?

AN
AttorneyRachelS_NYCAttorney

Family law is one of the most state-specific areas of law. What works in California won't work in Texas. Make sure you're getting advice from an attorney licensed in your state.

ST
StartupSam

Family law is one of the most state-specific areas of law. What works in California won't work in Texas. Make sure you're getting advice from an attorney licensed in your state.

ES
EstatePlannerNYC

Family law is one of the most state-specific areas of law. What works in California won't work in Texas. Make sure you're getting advice from an attorney licensed in your state.

HA
HarveyLitigationAttorney

Documentation is everything in family law. Keep a journal, save all communications, and don't put anything in writing that you wouldn't want a judge to read.

ES
EstatePlannerNYC

Documentation is everything in family law. Keep a journal, save all communications, and don't put anything in writing that you wouldn't want a judge to read.

CM
CondoHost_Miami

Documentation is everything in family law. Keep a journal, save all communications, and don't put anything in writing that you wouldn't want a judge to read.

AN
AttorneyRachelS_NYCAttorney

Documentation is everything in family law. Keep a journal, save all communications, and don't put anything in writing that you wouldn't want a judge to read.

ST
StartupSam

Family law is one of the most state-specific areas of law. What works in California won't work in Texas. Make sure you're getting advice from an attorney licensed in your state.

ES
EstatePlannerNYC

Mediation is almost always cheaper and faster than litigation for family disputes. Most courts require it before trial anyway. Go in with realistic expectations and a willingness to compromise.

PS
prenup_startup_equity_qOP

Update: Thanks everyone for the guidance. I consulted with an attorney and we're moving forward. The advice here helped me understand what questions to ask and what to expect. Will update when there's a resolution.

FO
FounderGettingMarried

Getting married in 4 months. I have 30% equity in my startup (Series A stage, ~$8M valuation on paper). About half is vested. My fiancée is supportive of a prenup but we disagree on how to treat the equity.

She thinks any equity that vests during the marriage should be community property. I think all the equity should be separate property since I founded the company before we met. What's fair/standard?

FT
FamilyLaw_Tech_Atty

Both positions have legal support depending on jurisdiction. In community property states (California, etc.), the default rule without a prenup is:

  • Equity vested before marriage = separate property
  • Equity vesting during marriage = community property (because your labor during marriage caused the vesting)
  • Appreciation of pre-marital equity due to your labor during marriage = community property to the extent attributable to community effort

Common prenup approaches for startup founders:

  1. All equity stays separate: Simple but your fiancée gives up potentially significant value if the startup succeeds during the marriage.
  2. Pre-marital equity = separate; marriage-period vesting = community: This is closest to default law and often feels fairest.
  3. Sliding scale: Your fiancée gets an increasing percentage of marriage-period equity based on length of marriage (e.g., 10% after year 1, up to 50% after year 10).

Whatever you agree to, BOTH parties need independent counsel for the prenup to be enforceable. Budget $5K-$10K total for both attorneys. Worth every penny to protect an $8M+ interest.