Pre-Nuptial Agreements - Not Just for the Rich

Pre-Nuptial Agreements - Not Just for the Rich

Pre-Nuptial Agreements - Not Just for the Rich
by Sharon L. Dyer, Esq.

When we think of Pre-Nuptial Agreements or read about them in the news, we generally think of movie stars, the rich and famous. However, even the less affluent should consider having a Pre-Nuptial Agreement before marriage.

Having a Pre-Nuptial Agreement, if drawn properly, can save a lot of uncertainty, aggravation and legal costs in the event couples ultimately divorce. Many marrying couples do not realize that once they marry they are in effect forming an economic partnership. Property acquired by either party after marriage, regardless of in whose name it is held, will be deemed marital property and subject to division upon divorce. This can include an interest in a family business, appreciation in prior owned assets such as homes, retirement accounts or other assets. If it is not your intention to share everything with your future spouse on such a partnership basis, you need the protection of a Pre-Nuptial Agreement.

One of the most common times a Pre-Nuptial Agreement should be considered is when one spouse is involved in a family business. Another situation where parties really need to consider a Pre-Nuptial Agreement is where one wants to protect assets held by him or her prior to marriage, such as a home. If your new spouse moves into your house and contributes to an increase in value in that home, such as helping to pay for an addition or paying down a mortgage, your new spouse will be entitled to a percentage of the appreciation in value. Upon divorce it will be necessary to prove the value of the house at the time of marriage in addition to the appreciated value, and the litigation costs can be very high. A properly drawn Pre-Nuptial can restrict, limit or determine how those claims will be resolved.

Sometimes parties want to enter into Pre-Nuptial Agreements not just for divorce planning but for estate planning. A common example is when parties are entering into a second marriage and they have children from a first marriage. They are sometimes shocked to learn of the inheritance rights of their new spouse. In order to protect certain assets for the children, parties can voluntarily enter into a Pre-Nuptial Agreement to preserve those assets.

Finally and perhaps the most difficult topic that Pre-Nuptial can address is the issue of maintenance or spousal support. If carefully drawn a Pre-Nuptial Agreement can set or restrict the maintenance rights of one party as opposed to the other in the event of a divorce. However, such provisions can be reviewed by the divorce court and cannot be patently unfair.

For any Pre-Nuptial Agreement the Court can assess if it was fair and reasonable when made and not unconscionable at the time of divorce. In order for the Pre-Nuptial Agreement to be deemed fair and reasonable when made, there must be full financial disclosure between the parties. It is also important for both parties to be represented by independent counsel and have had an adequate time to reflect and negotiate the Agreement before marriage. It is important that there not be any substantiated claim of fraud or “duress” in entering into a Pre-Nuptial Agreement. For example, it is not a good idea to present a Pre-Nuptial Agreement to your fiancé on the eve of a wedding, with that fiancé not being represented by counsel and two hundred fifty guests expected for a gala wedding! A prudent person would be wise to consult with an attorney regarding a potential Pre-Nuptial Agreement months in advance of the wedding to insure that the Agreement is properly drawn and presented so as to preserve its validity. Although Pre-Nuptial Agreements may not seem romantic, the better course is to discuss financial obligations and issues before marriage for a stronger marriage that will endure.

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