Pre-nuptual Agreement – A contract that can save you lots of time and money - Click on the Link to Watch Our Law Video
A prenuptial agreement, sometimes called a premarital agreement, is a contract between people who intend to marry which governs what will happen to their assets in the event of divorce. Historically, courts viewed prenuptial agreements with suspicion, believing that they discouraged people from getting married. Today, most jurisdictions permit prenuptial agreements, taking the opposite perspective that they can actually help facilitate marriage.
“Prenuptial” or “Prenuptual”?
The word “prenuptial” is one of the most frequently misspelled words in legal parlance. The term is derived from the word “nuptial”, which means “of or relating to marriage or the wedding ceremony”. While a hyphenated reference to a “pre-nuptial agreement”, or the short-hand reference to a “prenup”, can be acceptable, the misspelling “prenuptual” is not. If you see a website advertising “prenuptual agreements”, the author of the page probably doesn’t know anything about the subject.
Who Needs A Prenuptial Agreement?
Prenuptial agreements are perhaps most common in situations where one person has considerable assets or earning capacity, or owns a business, and is marrying a person who has significantly fewer assets. An agreement as to a future property settlement or spousal support (alimony) payments can provide the wealthier spouse with financial protection, and at the same time with some assurance that the marriage is about love and not money.
Premarital agreements can also be beneficial for second marriages, particularly when the couple is older and both partners are financially established. People who are financially independent, have accrued significant retirement savings, and have children from prior marriages may wish to provide that their assets and retirement accounts remain separate, and that certain property, such as family heirlooms, remain outside of the marital estate.
A prenuptial agreement can also cover assets which have not yet come into the marital estate, for example by clarifying how inheritances will be treated in the event of divorce.
If you are pursuing a professional degree at the time of marriage, such as a law degree or medical degree, you may wish to obtain a prenuptial agreement which will prevent that degree from being considered a marital asset.
Considerations for Drafting An Agreement
If you are exploring the possibility of a premarital agreement, you should consult with an attorney in your state who has experience drafting prenuptial agreements. The requirements for drafting a valid prenuptial agreement vary significantly from state to state. Further, if you have sufficient assets to require a prenuptial agreement, the cost of having an attorney draft the agreement will probably seem quite reasonable, and the attorney fee can be viewed as a form of insurance in the event that the agreement is subsequently held invalid – the attorney will likely carry malpractice insurance which could provide some recompense in the event that the agreement fails due to the attorney’s negligence. While for a multi-million dollar estate, a prenuptial agreement may cost thousands of dollars to prepare, that is a small amount in proportion to the estate.
You may wish to consider increasing the benefits provided to the less wealthy spouse in the event of major life events such as the birth of children, or in the event that the marriage persists. Depending upon the circumstances, you may also wish to set an expiration date for the prenuptial agreement, such that if the marriage lasts for a certain amount of time the agreement is no longer effective, or that the parties must agree at that time to renew it.
You should note up front that you cannot cover every contingency in a prenuptial agreement. Nothing you declare in a premarital agreement about child custody or child support for children born during the marriage would be enforceable.
If you wish to utilize a prenuptial agreement, please be aware that you will have to provide an honest recitation of your assets as part of that process. If it is discovered that you have hidden assets or misrepresented the size of your estate, you may not be able to enforce the contract.
You should seek to offer a fair prenuptial agreement, as a premarital agreement that would leave the less wealthy spouse destititute would probably not be enforced by a court. Some states look at fairness not only when the agreement is signed, but also when it is enforced. In those jurisdictions, changes in a spouse’s health, financial status, or employability may render invalid a previously enforceable agreement. A lawyer experienced with prenuptial agreements can guide you through these issues.
Considerations for Executing An Agreement
To be most effective, a prenuptial agreement should be drafted and signed well in advance of the wedding – ideally not less than a month in advance. The less wealthy spouse should have an independent attorney review the prenuptial agreement, and if appropriate to negotiate changes. While the less wealthy spouse should select that independent attorney, and the wealthier spouse should not try to influence that choice or interfere with the attorney’s independence, in some situations the wealthier spouse may wish to offer reimbursement of that attorney’s fee. If the agreement is signed on the eve of the wedding, it may be challenged on the basis that it was signed under coercive circumstances.
Post-Nuptial Agreements and Endorsements
If you have not signed a prenuptial agreement, you probably still have the option of negotiating for a similar “post-nuptial” agreement after you have married. Absent a threat of divorce, there is less of a chance that a post-marital agreement could be viewed as coerced. You may wish to check with an attorney if you feel this type of agreement would benefit you and your family.
Similarly, you may wish to endorse a prenuptial agreement after the wedding, so as to reflect that you and your spouse entered into the agreement voluntarily and intend it to be binding now that you are married. This will diminish the possibility that the agreement will be challenged in the future on the basis of coercion. While it can be extremely coercive to be presented with a prenuptial agreement shortly before a wedding with an ultimatim (express or implied), “Sign this, or the wedding is off”, that pressure is gone once the wedding is over.
Who Benefits?
The knee-jerk assumption with prenuptial agreements is that they always benefit the wealthier spouse. In actuality, due to the requirement that prenuptial agreements be fair, they can provide significant protection and assurance to the less wealthy spouse. The less wealthy spouse will often get a relatively clear picture of what life will be like after the marriage in terms of assets and spousal support, and will also be relieved of some of the concern that a divorce would be nasty or contentious, or that a judge might offer less than is provided for by the prenuptial agreement. While premarital agreements cannot assure that a divorce will not be contentious, they often help.