Prenuptial Agreements
If you own your own home or business, have stock or retirement assets, or expect an inheritance in the future you need to give some serious thought to having a Prenuptial Agreement. Even if you don’t have any significant assets now but intend to give up your career to raise a family, or you plan to support your future spouse while he or she goes to college or graduate school, a Prenuptial Agreement can be one of the best ways to protect yourself, just in case.
There are other situations that warrant having a Prenuptial Agreement. For instance, if you want to leave most or all of your assets to your children or grandchildren from a previous marriage or relationship, you will need to have a Prenuptial Agreement drawn up before you remarry so that your estate planning documents cannot be challenged. Otherwise, your future spouse could contest your wishes if you should pass away before him/her.
As to divorce, a properly drafted Prenuptial Agreement creates a binding contract between you and your soon-to-be spouse. It spells out what will happen financially upon dissolution of the marriage. Without a Prenuptial Agreement, you will be at the mercy of a divorce court judge who can rule on everything from what alimony will be paid to how you will split assets – even those assets that you owned before the wedding and brought into the marriage.
People are often shocked to learn that their spouse can potentially get half of what they owned before the marriage, even if they were only married a very short time. That’s why coming to an agreement on key issues before you ever get married can be a financial life-saver (and can save you money in future legal fees). It is important to note, though, that while most issues can be agreed to ahead of time and covered in a Prenuptial Agreement, certain things can’t be and must be left to a later time for future agreement and/or judicial determination. For instance, you can’t waive rights to child support payments. If you try to do so, a judge will overrule that provision in your agreement. Also beware that if your Prenuptial Agreement isn’t drafted with all the necessary legalese, just one faulty provision could invalidate the whole agreement.
Additionally, Prenuptial Agreements address issues such as whether alimony will be paid, and if so, how much and for how long. Many people agree to a flat dollar amount for each year married in lieu of weekly or monthly support that could go on for a long period of time or even indefinitely. Some people waive alimony altogether. Prenuptial Agreements define what is considered individual property and what is considered marital property, and how both these classifications of assets will be split should the marriage end in divorce. A Prenuptial Agreement allows you to control the outcome and not leave the decision in a judge’s hands. Many couples agree that what they brought into the marriage should stay with them in the case of divorce, but what about the appreciation of those assets? In other words, if you own a house before you get married, put your spouse’s name on the deed and then get divorced years later when the house is worth more money, how will you split the equity? Same goes for business interests, other real estate, investment assets and retirement accounts. These plus other issues must be considered carefully and the language in an agreement must be drafted correctly.
It is very important to make sure you do everything you can to insure your Prenuptial Agreement is considered valid and binding. First, make sure your Prenuptial Agreement is a formal written contract that is notarized. The reason Steven Spielberg ended up paying his ex-wife $100 million dollars after a 4-year marriage (half his earnings during that time) was because their prenup was scribbled on a napkin! Second, both you and your fiancé need to fully disclose all your assets and liabilities. And third, you each need to each have your own attorney advising you. Many couples think they can save money by hiring one attorney but that raises a conflict of interest. One person can hire an attorney to draft the Prenuptial Agreement, but the other person should have his/her own lawyer review it and explain all legal ramifications. Courts are very strict about making sure each person has had adequate legal representation. If one person didn’t have legal counsel or the court finds someone was coerced into signing, the entire agreement could be deemed null and void. Plan ahead – do not hand your fiancé a Prenuptial Agreement a few days before the wedding!
Remember, the key is fair and reasonable. It may not seem romantic, but working out a Prenuptial Agreement can be a great way to know you and your fiancé are on the same financial page – something that will bring you that much closer to living happily ever after!