Premarital agreements, also referred to as Prenuptial Agreements, often address substantial rights and waivers on the part of both parties. It is an agreement that should be carefully negotiated and reviewed well in advance of the marriage. Too many people treat the prenuptial agreement as a last minute detail to complete prior to the Big Day. Weeks away from the wedding is not the ideal time to be negotiating a premarital agreement.
Premarital agreements, like just about any other legal matter, are much more involved and require much more time than most people anticipate. Full disclosure of all financial information is required. Premarital agreements address not only alimony, but assets and debts. Provisions detail certain outcomes that will occur if the marriage fails and any contingencies that may apply. Other provisions may also address outcomes in the event of the death of either party.
It is very important to take your time and understand all of the options and legal consequences of the various available provisions. Rushing through this process is not in anyone’s best interests.
If you or someone you know is getting married and considering a prenuptial agreement, they should contact an attorney sooner rather than later.
Is a Prenup right for me?
Many people question why they would want or need a Premarital Agreement. There are many reasons for having a Premarital Agreement. The reasons that are most important or relevant will vary from person to person or couple to couple. Most people think Premarital Agreements are only for the wealthy. Many people think if a Premarital Agreement is involved than that means the couple is anticipating their marriage won’t last. Even if a person or couple sees value in or is interested in learning more about a Premarital Agreement, it is not a comfortable subject to bring up or discuss. The following information will dispel some of the myths and help one decide if a Premarital Agreement is something that should be explored.
- Premarital Agreements protect assets brought into marriage by each party (solely acquired or obtained from a prior marriage). These can be significant and include a house, retirement funds or other investments.
- Example: Woman obtained cash buyout of prior husband’s business as a result of their divorce. She promptly invested the funds with an intent save for her retirement. She had previously been a stay at home mom and did not have any other savings. She remarries which ends her alimony payments from her ex-husband. She does not obtain a Premarital Agreement. After several years the second marriage fails. There is a good chance that her investment fund will be divided or used to offset other assets of the second marriage during the divorce. Either way, the second husband is getting value from assets the Wife came into marriage with. A Premarital Agreement could have prevented that.
- Premarital Agreements prevent sharing of debt brought into the marriage by the other spouse. Again, this can be significant and include credit card debt, divorce debt, and taxes.
- Example: Wife has huge credit card debt from prior divorce/marriage. She remarries. There is no Premarital Agreement. The couple’s plan is to pay down the debt with the Wife’s income and establish a budget. New expenses of the second marriage go on Wife’s credit card and the balance is eventually transferred to a joint, lower rate card. Or maybe the parties refinance all debt into a joint mortgage. Either step commingles the debt making it likely that the Husband is going to have to own some of Wife’s prior debt if they divorce because the court not going to want, or be able, to figure out how to separate. A Premarital Agreement could have prevented that.
- Premarital Agreements can prevent or limit a future alimony obligation in case the marriage fails. Some have had to pay alimony in the past and never want to go down that path again. In situations where one party is much wealthier than the other, the wealthier party may question whether or not the other’s love is true or not. A complete waiver (no alimony) can be negotiated but that’s not the only option. A conditional waiver is sometimes agreed to where alimony is phased out after a number of years or is waived only if the payor does not commit adultery. Waivers of future alimony are sometimes “purchased” for a present lump sum payments or future lump sum payments only if the marriage fails. Other scenarios can be agreed to, the goal being to minimize and quantify the risk.
- Premarital Agreements give rise to protections beyond marriage failure. Clients are surprised when I broach the subject of death. Many don’t realize that there are many decisions they need to make – or at least start thinking about – in the event one of them dies. This is especially true if they have children from a previous marriage/relationship.
- The first thing we discuss is titled property (real estate, bank accounts, investments). Whose name is on the property? How is the property held? Is it joint with right of survivorship? Is it tenants in common? How it is titled will determine how it will be distributed upon your death and even if it will pass through your Will. Most people don’t know the answers to these questions and don’t know the consequences of how title is held.
- If they have Wills, they are often old and outdated. If you get married and don’t update your Will, the State will decide how your assets are divided upon your death. If you update your will to include your children but not your new spouse, your new spouse may be able to challenge your will in Probate Court. This will tie up your estate, cost your estate more and also result in distribution other than your wishes. If you have children from a prior marriage/relationship, they may not be as protected as you desire. We can address these issues to ensure your wishes are met by using a combination of products such as Premarital Agreements, wills, trusts, life insurance, etc.
As you can see, there is a lot more to Premarital Agreements than protecting a wealthy individual. Are they foolproof? No; any contract can be contested. The Court will need to determine, among other things, if there was full disclosure, if the parties entered the agreement voluntarily and knowingly, if the agreement was fair at the time it was entered into and if the agreement is unconscionable at the time it is enforced. All or part of the Agreement may be held invalid. Regardless, there is no doubt that one is more protected and more certain of outcomes in the event of dissolution or death with a Premarital Agreement than without one.