According to Brides.com, December is the most popular month to get engaged. While few proposals include a request to sign a prenuptial agreement, perhaps considering it should follow soon after the proposal. What do you need to know about prenuptial agreements? Check out this installment of 1st Fives:
1. Prenuptial agreements actually honor your love and create certainty. Fewer people are getting married today. For some, the horror show that can be divorce is just too scary. A prenupt is actually an attempt to create certainty about assets and finances in the event the marriage does not survive. Let’s be real. Divorce happens even following the best of hopes and intentions. Entering into a prenuptial agreement does not increase the chances for divorce! In fact, it can help ward off money and communication problems–the top contributors to our high rate of divorce. The goal is to answer unspoken, underground questions and address unexpressed fears so that the business of creating a happy event and future can be the focus.
2. A prenuptial agreement is a contract–Do It Right. I once advised a close friend who was getting remarried and had adult children to have a prenuptial agreement. The friend followed my advice–by handwriting on a legal pad what should happen if the marriage didn’t endure. Both signed it. Unfortunately, the requirements to uphold a valid prenuptial agreement were abysmally absent. It is questionable whether agreements which don’t meet those requirement will be upheld by the court if either attempt to contest it in the future. So, this is a place where obtaining a standard boiler plate form could cause more problems than it avoids. For example, to the degree a prenupt does not meet a “reasonable” standard, it is subject to being struck down by a court. A complete list of assets and debts owed is critical, including their values. While every item in the home does not need to be listed, a general category for personal possessions should be included with an estimate of their total value. Homes, vehicles, bank accounts, credit card and other debts, and retirement plans belong on the list as well. In addition, a prenuptial can create problems if spousal support/alimony provisions are not carefully drafted. In a 25-year marriage, lots of things can happen, including disability, loss of employment, staying home with children or other circumstances which would affect one’s ability to earn. Rather than a blanket statement that no spousal support will be paid, you may provide that spousal support will only be considered after x number of years of marriage (10 perhaps?) with a formula for how spousal support is calculated based on income at the time of divorce. These are just a couple examples of the importance of doing it right. You could save a couple hundred here and pay dearly in the future.
3. A prenuptial is not limited to divorce. Marriages also end by death. A prenupt typically defines the distribution of assets at death. It’s important to ensure, after the premarital agreement is signed, that estate planning documents are drafted in line with the premarital agreement. If you have already done your will, I often consult with the estate planning lawyer as we work through the terms of the premarital agreement.
4. Timing matters. A prenuptial agreement is more likely to be upheld by a court if there was sufficient time for both parties to consider, negotiate and agree upon its terms. Handing your intended a prenuptial agreement at the rehearsal dinner is decidedly poor timing. I appreciate when clients plan ahead and provide 3-6 months for preparing and discussing the terms of a prenuptial agreement.
5. Both parties should be represented by an attorney. If only one party works with a lawyer who drafts the agreement, then the other party could later maintain that they didn’t understand what they were signing. This potential danger is eliminated if experienced family lawyers work individually with both future spouses. You each deserve to know what would happen if you did not have a prenuptial agreement so you understand what you gain and what you lose by having a prenupt.
A prenuptial agreement can be a fairly simple, straight forward matter. And the consequences of doing it poorly can be enormous. My preference is to work with people on a collaborative basis so that the terms of the prenuptial agreement are worked through together in meetings with both future spouses and their collaborative attorneys. There is nothing about a prenuptial agreement that needs to be approached in an adversarial manner. It’s intended to preserve and nurture the love that you have for each other. Do it. Then forget it. And have a happy future. Let us know if you have questions.
Wishing you wisdom,