Prenuptial Agreement

Do not wait until the marriage is coming to an end to negotiate the division of assets. Instead, before you say ‘I do’, have a formal and legal document such as a prenuptial agreement drawn up legally. A prenuptial agreement specifies such matters as how assets will be distributed in the event of death or divorce. (p.197, Marriage & Family) As long as the prenuptial is fair to both sides and processed through a lawyer, the prenuptial will hold up in court. Prenuptials are valid in all 50 states and the District of Columbia. (p.197, Marriage & Family) A prenuptial reflects the way you both feel at a point in time.

What would Ariel have done if before her royal wedding, Prince Eric had asked for a prenuptial? Would the marriage have ended happily ever after or not? Now with about one out of three first-time marriages ending in divorce and fifty percent of second or third marriages hitting the skids, a prenuptial has become smart financial planning. Legal and financial experts say:

“Think of it as a business arrangement or as an insurance policy to help remove some of the emotion that’s naturally involved,” says Nancy Dunnan, a New York City financial adviser and author. “Marriage is not just an emotional and physical union — it’s also a financial union. A prenuptial and the discussions that go with it can help ensure the financial well-being of the marriage.” (http://www.bankrate.com)

A prenuptial agreement is sometimes also referred to as a premarital agreement. The word “prenuptial” is one of the most frequently misspelled words in legal jargon. 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 “prenuptial”, can be acceptable, the misspelling “prenuptual” is not. (http://www.expertlaw.com) A prenuptial accord is a contract between two people about to wed that spells out how assets will be distributed in the event of divorce or death. Such agreements have existed for thousands of years in some form or another, particularly in European and Far Eastern cultures, where royal families have always made provisions for protecting their wealth. (http://www.bankrate.com) The content of a prenuptial agreement can vary widely, but commonly includes provisions for the division of property should the couple divorce and any rights to spousal support during or after the dissolution of marriage. (http://en.wikipedia.org)

Do not fall under the false pretense that you have to be a Rockefeller or a Trump to consider needing a premarital agreement. A person who has managed to save $30,000 may be more protective of their little nest egg than someone who has millions.” Those are sometimes the most jealously guarded assets because it has taken a lot of hard work to accumulate a small amount,” says Joseph P. Zwack, an Iowa lawyer and author of a best-selling handbook “Premarital Agreements: When, Why and How to Write Them.” You most definitely should consider having a prenuptial if you fall into any of the following categories:

• • You have assets such as a home, stock or retirement funds

• • Own all or part of a business

• • You may be receiving an inheritance

• • You have children and/or grandchildren from a previous marriage

• • One of you is much wealthier than the other

• • One of you will be supporting the other through college

• • You have loved ones who need to be taken care of, such as elderly parents

• • You have or are pursuing a degree or license in a potentially lucrative profession such as medicine

• • You could see a big increase in income because your business is taking off, or that garage band you play in has just gotten a contract with a big record company.

(http://www.bankrate.com)

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. (http://www.expertlaw.com) Premarital agreements can also be beneficial for second marriages, particularly when the couple is older and both partners are financially established prior to entering the marriage. (http://www.expertlaw.com) People who are financially independent, or have accrued significant retirement savings, and have children from prior marriages may wish to establish a provision in which either the whole or a designated portion of their assets and retirement accounts remain separate. This could also include 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. (http://www.expertlaw.com) Some of us bring debts, as well as assets, to a marriage. If there is no prenuptial agreement, creditors can sometimes turn to marital or community property to satisfy the debts of just one spouse. If you want to make sure saying “I do” does not mean saying “I owe,” you can use a prenuptial agreement in order to limit your liability for each other’s debts. (http://www.nolo.com/resource.cfm)

Perhaps the most important ingredient of a solid prenuptial agreement is honesty. Both parties must completely and fully disclose their assets. (http://www.bankrate.com) If it turns out either person has hidden something, a judge can toss out the contract. An ironclad agreement also must be signed well in advance of the wedding. You can not present your spouse-to-be with a prenuptial two days prior to the big day and say, “Uh, by the way, I need your signature on this.” (http://www.bankrate.com) The document should be signed as early before the nuptials as possible to avoid the appearance of coercion, which is another key reason why some agreements are rendered null and void. (http://www.bankrate.com)

“I recommend at least one month before the wedding and preferably before the invitations have been sent out,” says Dunnan. “Then you both have time to back out if you’re uncomfortable with the terms. If the discussion revealed such deep and basic differences between two people that they decide not to marry, it’s obviously best if all the talks took place well in advance… You don’t want to have to send back presents!” (http://www.bankrate.com) A valid prenuptial also is fair and will not leave one of the parties destitute. “No matter what state you’re in, the state will look for equity to make sure one spouse is not being taken advantage of,” says Zwack. (http://www.bankrate.com)

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. (http://www.expertlaw.com)

Lincoln wrote the Gettysburg Address on the back of an envelope, but if you want that prenuptial to have legal force, it is best to do things with a little more formality. Without a formal contract, you could end up a lot less rich — like director Steven Spielberg. His ex-wife, Amy Irving, received half of what he had earned during their four-year marriage because their prenuptial was scribbled on a napkin and she did not have a lawyer. Her take: $100 million dollars. (http://www.bankrate.com)

Here are a few more tips:

• • Use only matrimonial lawyers who are familiar with prenups and the laws of the state in which you will be living.

• • Know that you cannot waive rights to child support payments.

• • Understand that your spouse’s cannot supersede the prenuptial if the will is stingier. But a will can be more generous than a prenuptial and leave the widow or widower more than what they agreed to prior to the marriage.

• • Finally, and although it seems obvious, make sure the agreement is in writing and the signing is witnessed by a lawyer. It is recommended the contract be signed in triplicate with the groom and bride-to-be each obtaining an original copy, and a third being kept with an independent lawyer, CPA or in a safety deposit box. (http://www.bankrate.com)

Laws around the world vary in their recognition of such agreements. Historically, judges in the United States frowned upon prenuptial agreements as corrupting what marriage was supposed to stand for, and often they would not recognize them. Nowadays they are recognized, although they may not always be enforced. It is common to have legal advice to the effect that both parties should have lawyers present during the signing, for a judge to ensure that neither party has been coerced into the agreement. Prenuptial agreements are, at best, a partial solution to avoiding some of the risks of marital property disputes in times of divorce. They most assuredly are not the final word.

In the United States, prenuptial agreements are recognized in all fifty states and the District of Columbia. (http://en.wikipedia.org) Likewise, in all jurisdictions, five elements are required for a valid prenuptial agreement:

• • agreement must be in writing (oral prenups are always prohibited);

• • must be executed voluntarily;

• • full disclosure and/or fair at the time of execution;

• • the agreement can’t be unconscionable;

• • It must be executed by both parties (not their attorneys) “in the manner required for a deed to be recorded”, known as an acknowledgement, before a notary public. (http://en.wikipedia.org)

Of note, unlike all other contract law, consideration is not required, although a minority of courts point to the marriage itself as the consideration. Through a prenuptial agreement, a spouse can completely waive rights to property, alimony or inheritance as well as the elective share and receive nothing in return. A sunset provision may be inserted into a prenuptial agreement, specifying that after a certain amount of time, the agreement will expire. In a few states, such as Maine, the agreement will automatically lapse after the birth of a child, unless the parties renew the agreement. In other states, a certain number of years of marriage will cause a prenuptial agreement to lapse. In states that have adopted the UPAA (Uniform Prenuptial Agreement Act), no sunset provision is provided by statute, but one could be privately contracted for. (http://en.wikipedia.org)

There are two types of prenuptial agreements: cohabitation agreement for unmarried couples and a variation for people who are already married is a postnuptial agreement. (http://en.wikipedia.org) A cohabitation agreement is a form of legal agreement reached between couples who have chosen to live together whether they are heterosexual or of the same sex. In some ways, such a couple may be treated like a married couple, such as when applying for a mortgage or working out child support. (http://en.wikipedia.org)

However, in some other areas, such as property rights, pensions and inheritance, they are treated differently. A cohabitation agreement contains documentation for a couple who want to live together, in order to protect themselves from unnecessary costs and litigation should their cohabitation break down. They can regulate clearly their property rights and what arrangements might be made for mutual financial support, dealing with debts, looking after children, etc. The agreement allows the individuals concerned to determine in advance who will keep specific assets and what will happen to assets that have been purchased jointly if they separate. (http://en.wikipedia.org) This agreement is intended to bind both parties. A cohabitation contract helps clarify financial commitments. Working out who pays what and how responsibilities are shared in running the home need sorting out for a harmonious home life. (http://en.wikipedia.org)

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. (http://www.expertlaw.com) 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. (http://www.expertlaw.com) 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 ultimatum (express or implied), “Sign this, or the wedding is off”, that pressure is gone once the wedding is over. (http://www.expertlaw.com) In 2002, the Law Commission recommended that cohabiting partners who lived together for two years should get the right to a share of their home if they separate, regardless of who paid for the property or its maintenance. (http://en.wikipedia.org)

In the end, after all the logistics and logic of having a prenuptial agreement, if Prince Eric did not ask Ariel for a prenuptial it may have proven to be devastating for him if a divorce had occurred. To ask for a prenuptial does not always mean you have to be a prince need one. Guard what you have worked for, and just maybe you could both part as friends instead of nasty divorce enemies in an asset war.

Works Cited

• • “Everything you need to know about prenuptial agreements.” Bank Rate.” 10 May 2006. Bank Rate. 13 March 2007. .
  • Jeanette C. Lauer, Robert H. Lauer. Marriage & Family. New York: The McGraw-Hill Companies, 2007.
  • “Prenuptial agreement.” Wikipedia: The Free Encyclopedia. 12 March 2007. Wikipedia Foundation. 13 March 2007. < http://en.wikipedia.org>.
  • “The Prenuptial Agreement.” Aaron Larson Law. 01 August 2003. Offices of Aaron
  • Larson. 13 March 2007 < http://www.expertlaw.com >.
  • “What You Can (and Can’t) Do With a Prenuptial Agreement.” Prenuptial Agreements. 09 September 2002. Shae Irving, J.D. & Katherine E. Stoner, Attorney-Mediator. 13 March 2007. < http://www.nolo.com>.