I am asked often, how and when to begin the “Prenup Conversation.” The advice I give to my clients is always to do this early, which is a difficult pill to swallow for many people because of the taboo image we have of prenuptial agreements in our culture.
As a Family Lawyer for more than 20 years, it is evident to me that now is the time to bring the philosophy used by me in my private practice and our firm to a greater population of individuals. This is one of the primary reasons I created It’s Over Easy, the online divorce service. People can use the site to get divorced and to educate themselves about the process. The more people know the better prepared they are for what lies ahead in their next chapters.
Think about it this way—if people were more accustomed to the idea that marriage is a contract between themselves in conjunction with the state, that governs financial expectations during and after a marriage, they might not be so disturbed by the suggestion of altering that contract in a manner which benefits each of them, and makes things easier to understand.
There is actually nothing more romantic or loving or trusting than the ability to be honest and communicate about the expectations each party has when entering into a marriage.
Couples are often more focused on the contract with their caterer, or the florist than they are on the one they enter into upon marriage. Until, perhaps it is too late. Not everyone needs a prenuptial agreement. But everyone ought to have the kind of conversations they would have prior to entering into any contract.
Each state has its own rules for the creation of an enforceable prenuptial agreement. The statutory laws can be determined by going online, and/or by calling an attorney.
A valid prenuptial agreement enables you and your future spouse to decide how your affairs and assets would be settled and divided in the event of a separation or divorce. Your lawyers will work with you both to draft a custom prenuptial agreement for your unique situation—notice, the word “lawyers” is plural; in most states both soon-to-be-spouses must have their own separate representation.
There is actually nothing more romantic or loving or trusting than the ability to be honest and communicate about the expectations each party has when entering into a marriage.
Educate yourself about the laws in your state. In a community property state like California, where I live for example, from the day you get married everything you earn, create, receive in consideration for services rendered during the marriage is characterized as community property. If you write a script, paint a painting, win the lottery or perform at a kid’s birthday party as the magician and receive payment that script, painting, lotto winnings or magic money belong one half to you and one half your spouse. Monies earned and deposited into bank accounts, investments and retirement plans are also jointly owned.
Individuals can agree to change the nature of separate or community property. For example, if one spouse owned a house separately before marriage, that house would ordinarily remain the spouse’s separate property in the event of divorce, but the couple can agree to make it community property instead.
There are nine states that follow the community property model; Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin; in Alaska spouses can “opt-in” to make their assets community property. Spouses can also agree in these nine states that community property, or earnings during marriage, which would ordinarily be divided equally in the event of divorce, remains separate property.
Every other state in the country follows the Equitable Distribution model for marital assets. In these states the characterization of property is less clear, so prenuptial agreements can make things simpler by allowing couples to decide how they want property held or owned at the outset.
Prenuptial agreements can make things simpler by allowing couples to decide how they want property held or owned at the outset.
Let’s consider the second marriage of an executive who has a long a profitable career launching internet startups. This may be an opportunity for her to opt out of the community property structure. She already divided 20 years of her earned savings and retirement when she split from her first husband.
Alternatively, the heir to a wealthy family need not worry about having to give his or her inheritance to an ex as it is characterized as separate property. However, if the couple is living a lifestyle which is sustained by that inheritance this will be taken into account in calculating the support payments which are sure to be requested. A prenuptial agreement can limit the amount and duration of that support to something reasonable.
If you are the more monied spouse or person who earns more in your marriage, you will likely have to pay or supplement the other person’s earning as spousal support or alimony if you separate. While you may be fine paying for vacations, spin classes and car insurance for your spouse when you are happily together, will you still be comfortable supporting that lifestyle if and when the two of you are apart?
Having a discussion about the possibility of a prenuptial agreement makes a great deal of sense then if, for no other reason, both parties can usually benefit from a crash course in the law which governs them. It gets you talking about what is admittedly not the sexiest part of a relationship. However, these conversations could very well give each of you a better understanding of what is expected of you in this partnership, which I’m guessing you both hope will last until death do you part.
The time to approach the discussions which will involve a prenuptial agreement is early. In addition to statutory restrictions which provide that an agreement presented and signed too close in time to the wedding date may not be valid, there is a real benefit to broaching the subject either before or at the time of the engagement. Nobody wants to be wedding planning, having their final dress fittings and cake tastings and arguing the terms of a prenuptial agreement. Get it done ahead of time. This way nobody is surprised or offended. Both parties have time to find counsel and consider the terms and options and you can finalize the agreement well beyond the wedding date, put it away and hopefully, not think about it again for a while, or at all.
There are also requirements that neither party be under duress at the time a prenuptial agreement is executed. Duress is a threat of harm made to compel someone to do something against their will; especially a wrongful threat made by one person to compel a manifestation of seeming assent by another person to a transaction without real volition. In other words, signing after the dress is fitted, the venue rented, the guests have all flown in from out of town and the refundable period for contracts for flowers, band and caterer lapsed, a party to a prenuptial agreement could argue that he or she was under duress at the time the contract was signed.
READ ALSO: 5 Reasons Why People Over 50 Should Have A Prenuptial Agreement
As mentioned above, both parties in most states must have counsel (attorneys) to review and sign off on the agreement. They also must have an understanding of what they signed which includes a grasp of the English language or a certified translation of the agreement into the party’s native tongue.
Most states have strict statutory disclosure requirements for prenuptial agreements to be rendered enforceable. This means that each party must receive complete information about the other spouse’s property and finances prior to signing the agreement
Provided that the above requirements are met, the couple can agree to limit, or even completely give up, rights to spousal support in the event of divorce, as long as the result is not “unconscionable”—meaning super unfair. It isn’t clear exactly how unfair the results would need to be, but if a situation is extreme—for example, if one spouse would be living in a refrigerator box under a freeway overpass or forced to turn to welfare while the other still had ample means to provide support—the court would be unlikely to uphold that provision in the agreement.
Spouses can also agree to waive or limit inheritance rights and include certain provisions in a will or trust, provided that such agreements don’t negatively impact the support rights of any minor children. Parents with children from previous marriages often want a new spouse to waive or limit inheritance rights to make sure that assets will be passed on to their children from their earlier marriages or relationships.
Whichever way you approach a prenuptial agreement, the point is to openly communicate before entering into the marriage contract. This increases the understanding each of you will have during your marriage and reduces the emotional agony and financial devastation in the event of a divorce.
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