Each year in the spring, existing and prospective clients considering a summer wedding will contact the office to schedule a time to discuss a prenuptial agreement either for themselves of for their young adult children. More and more common these days, prenuptial agreements are part of a typical estate plan for moderately wealthy individuals who want to avoid a potential dispute with a prospective spouse. A Prenuptial Agreement (sometimes referred to as an antenuptial agreement or a premarital agreement) is a written contract which specifies prospective spouses= rights to, and obligations regarding, property division and support in the event of a divorce or the death of one of the parties during the marriage. Prenuptial Agreements are most often used in the context of a second marriage. Prospective spouses may wish to preserve their assets for their children from a first marriage, in the event of their death, or for themselves, in the event of divorce. It has been said that a Prenuptial Agreement is like getting divorced before the wedding. While a Prenuptial Agreement by necessity involves some negotiation between prospective spouses, it need not be a negative experience. If the parties are matter-of-fact in their approach to such an agreement, it is possible that the process can be less emotionally charged.
To be considered a valid, binding contract, a Prenuptial Agreement must be fair when it is entered into and fair when it is enforced. It must be procedurally fair and substantively fair. In order to be procedurally fair, certain formalities are required in the way the parties enter into the Agreement. Specifically, each party must have the opportunity to be represented by an attorney. In our office, we strongly recommend that each party have their own attorney. In addition, all assets of both parties must be disclosed to the prospective spouse. The Agreement cannot be signed under duress. To ensure that there is no pressure on a party to sign the Prenuptial Agreement, it is recommended that the Agreement be signed at least 30 days before the wedding and before the invitations are mailed out. The wedding must occur within one year after the date on which the Agreement is signed. Substantive fairness is also required. It is not necessarily going to be considered fair for a spouse to give up all his or her rights to the other spouse=s property in the event of divorce or death, if that spouse would be impoverished as a result. If one party gives up all his or her rights to property and support from the other spouse and if circumstances change between the time when the Agreement is entered into and the time when the Agreement is to be enforced such that the Agreement would be unfair, a Court may not enforce the Agreement. For example, if both spouses are employed with high incomes when the Agreement is entered into, and the Agreement states that no alimony is to be paid by either party, but at the time of a divorce, one party is disabled and will go on welfare if the other party does not contribute to his or her support, then the Court may order that the wealthier spouse pay alimony or property settlement to the disabled spouse. To ensure that an Agreement is later enforced, a property settlement paid by the more wealthy spouse to the less wealthy spouse should be considered.
The second most common circumstance under which Prenuptial Agreements occur are when parents encourage their adult children to have a Prenuptial Agreement to protect the future inheritance of their children and to protect the assets that have already been given to their adult children. While it is true that parents can modify the provisions of their estate planning documents to limit an adult child=s access to his or her inheritance, many want the added protection of a Prenuptial Agreement. In this situation, it is not unusual for the Prenuptial Agreement to address only the separate assets of the parties prior to the marriage and assets given or inherited in the future. This type of Prenuptial Agreement may specifically indicate that property earned and acquired (other than by gift or inheritance) by the parties during the marriage will be considered marital property to pass to the surviving spouse on death or to be divided equally in the event of a divorce. In this context, alimony may even be left open for a court to decide, in the event of a divorce.
After the parties are married, it is critical that they follow up with respect to retirement account beneficiary designations and spousal waivers, consistent with the terms of the Prenuptial Agreement. Furthermore, estate plans should be reviewed and possibly modified to ensure they are consistent with the deal struck by the parties.
If you are considering a Prenuptial Agreement for yourself or your adult child, we would be happy to work with you to help plan for an event that you do not look forward to happening (death or divorce) so that you can turn your energy and attention to planning for the event that you do look forward to happening (the wedding day).