The Law, Decoded

Why Founders Need Prenups

If you hold equity in a startup — as a founder, early employee, or investor — a prenup is not about distrust. It is about clarity. Startup equity is unlike any other asset class: it is illiquid, speculative, contingent on future events, and its value can swing from zero to billions on a single phone call.

Default matrimonial law was written for W-2 employees with 401(k)s and a house. It was not written for people whose primary "wealth" is a stack of SAFEs, a convertible note, and 4 million shares that vest over 4 years with a 1-year cliff. Without a prenup, a judge will apply rules designed for pensions to your cap table, and the results will not make sense.

A prenup lets you define, in advance and by mutual agreement, how these non-standard instruments will be treated. You are not taking anything away from your partner — you are removing ambiguity so that neither of you has to litigate the nature of a SAFE in family court.

A SAFE Is Not Equity — It Is a Promise

The Y Combinator SAFE (Simple Agreement for Future Equity) is the most widely used startup investment instrument. Over 100,000 SAFEs have been issued since its creation in 2013. And yet, no major appellate court has definitively ruled on how SAFEs should be treated in divorce.

Here is what a SAFE actually is: a CONTRACT. It says, "If a qualifying event happens in the future (like a Series A), you get shares at a predetermined price." Until that event happens, you have no shares. You have no voting rights. You receive no dividends. You cannot sell the SAFE on a secondary market (in most cases). You have a PROMISE, contingent on a FUTURE EVENT that MAY NEVER OCCUR.

This is fundamentally different from owning stock. If you own 10,000 shares of Apple, you own property — real, liquid, tradeable. If you hold a SAFE in a pre-revenue startup, you own a piece of paper that might convert into equity in 2 years, or might be worth zero if the company folds next month.

The prenup generated here establishes, by agreement of both parties, that an unconverted SAFE is valued at $0 for equitable distribution. Why? Because you cannot divide what does not yet exist. The SAFE is Schrödinger's equity: it is simultaneously worth everything and nothing, and it collapses to a definite value only upon observation (conversion).

If the SAFE converts during the marriage, THEN it becomes real property. And at that point, its classification depends on whether it was purchased with pre-marital or marital funds. This is a fair, principled framework that no reasonable court should object to.

Unvested Options Are Not Property

Stock options are a right to BUY shares at a fixed price. Until you exercise them (write a check and buy the shares), you don't own anything. And before they vest, you can't even exercise them. So unvested stock options are: a right you don't yet have, to buy something you don't yet own, at a price that may or may not be favorable, contingent on you continuing to work at a company that may or may not exist.

New York law has grappled with this since DeJesus v. DeJesus (1997), where the Court of Appeals held that stock options are subject to equitable distribution — but acknowledged the difficulty of valuing them. The court adopted the "coverture fraction" from pension law: the marital portion equals (months of vesting during marriage) / (total vesting months).

What the law has NOT addressed well is the situation common in startups: options that were discussed, promised, contemplated, or even included in a term sheet — but never formally granted. A board resolution approving a grant is not the same as a signed stock option agreement. A CEO's verbal promise of "standard equity" is not a grant. Until you have a piece of paper with a grant date, exercise price, and vesting schedule, you have nothing but an expectation.

This prenup draws a hard line: if it wasn't formally granted in writing, it is not property and it does not exist for purposes of this agreement. And if it was granted but hasn't vested, it is valued at $0. Only vested, exercisable options have value — and even then, they're only "marital" to the extent they vested during the marriage.

Papers About Papers About People Who Run on Papers

You said it perfectly: startup instruments are "papers about papers about people that run on papers." Let's break that down.

Layer 1 — The People: A founder has an idea. They incorporate a company (paper #1 — the certificate of incorporation). They issue themselves shares (paper #2 — the stock certificate). They appoint a board (paper #3 — the board consent).

Layer 2 — The Papers About People: An investor signs a SAFE (paper #4). This is a contract that says, "When the people running this company raise money (paper #5 — the term sheet), the SAFE converts into shares (paper #6 — the conversion agreement), which are documented in the cap table (paper #7 — the stock ledger)."

Layer 3 — The Papers About Papers: The SAFE references a valuation cap, which is based on the company's projected worth, which is based on revenue projections (paper #8 — the financial model), which feed into the pitch deck (paper #9), which convinces a VC to sign a term sheet (back to paper #5).

Every layer is contingent on the layer below it. Remove any layer and the whole structure collapses. The founder quits? Shares may be worthless. The company fails to raise? The SAFE never converts. The market shifts? The valuation cap is meaningless.

A prenup that treats all these layers the same — as if a SAFE were identical to a share of Apple stock — is a prenup that does not understand the reality of startup finance. This generator creates a prenup that respects the hierarchy: real equity is property, conversion rights are contingent interests, and expectations are nothing.

New York Matrimonial Law: A Crash Course

New York is an "equitable distribution" state, governed by Domestic Relations Law §236. This means marital property is divided "equitably" (fairly), not necessarily equally. A judge considers 15 statutory factors, including the duration of the marriage, each spouse's income and property, contributions to the marriage, and the "wasteful dissipation" of assets.

SEPARATE PROPERTY includes: (1) what you owned before marriage, (2) gifts and inheritances received during marriage, (3) personal injury compensation, and (4) anything traceable to the above. Everything else acquired during the marriage is MARITAL PROPERTY, regardless of whose name is on it.

The critical case for founders is Price v. Price (1986). The Court of Appeals held that the ACTIVE APPRECIATION of a spouse's separate property business can be marital property. Meaning: if you started a company before marriage and it grew because of your LABOR during the marriage, your spouse may have a claim to a share of that growth. The prenup generated here overrides this default by mutual agreement.

For stock options, the key case is DeJesus v. DeJesus (1997), which adopted the coverture fraction. For pensions, it's Majauskas v. Majauskas (1984). For prenup enforceability, it's Bloomfield v. Bloomfield (2001), which listed factors courts consider: was there full disclosure? independent counsel? was the agreement unconscionable? was there coercion?

The single most important thing: a prenup is PRESUMED VALID in New York. The burden is on the person challenging it to prove it should be set aside. That is a high bar, especially when the agreement includes financial disclosure, independent counsel provisions, and a notarization. This generator builds all of those in.

How to Make a Prenup Bulletproof

Courts throw out prenups for five reasons. Avoid all five and your agreement is essentially unassailable.

REASON 1: No financial disclosure. Both parties must know what the other has. Hiding assets = voided prenup. This generator includes Exhibit A and B for full disclosure.

REASON 2: No independent counsel. While New York doesn't legally require independent lawyers, the absence of counsel is the #1 argument used to challenge prenups. The agreement includes checkboxes for each party to confirm they either retained counsel or voluntarily chose not to. Get. Your. Own. Lawyer.

REASON 3: Signed under duress. "He shoved the papers at me the night before the wedding." Classic. Solution: sign well in advance (at least 30 days before the wedding). The further from the wedding date, the harder it is to claim pressure.

REASON 4: Unconscionability. A prenup so one-sided it "shocks the conscience" can be voided. Solution: include marital property provisions (the home, joint accounts), a sunset clause, and make sure the non-monied spouse isn't left destitute. The agreement generated here does all of this.

REASON 5: Lack of formality. In New York, the agreement MUST be in writing, signed by both parties, and notarized (acknowledged before a notary public, same as a deed). No exceptions. The PDF generated here includes the full notary acknowledgment block.