Prenuptial Agreements: Why You Need One.
What’s a Prenup?
For decades, prenuptial agreements (or more commonly referred to as “prenups”) have been regarded by many as disrespectful to the other spouse and have a notion of being generally disfavored by Courts, even though they will be upheld if the prenuptial agreement is valid.
Prenups serve many purposes, such as financial planning, wealth protection, protection of family assets, preservation of the parties’ intent as to their finances and final wishes in the event of a divorce or death, and to avoid the unpleasant intrusion of the courts into the parties’ private lives in the event of a divorce.
Today, many couples enter into a prenup before their marriage, not as a sign of disrespect, but to ensure that their future will be without complication if they decide they end their marriage and go on their own separate ways.
As this was once seen as a topic that no one wanted to discuss, many see this as a sign of maturity and respect in a parties’ relationship where they can discuss their financial expectations and other post-dissolution conditions between each other if their marriage does not work out.
What is a Prenup?
A “prenup,” also referred to as antenuptial agreement or premarital agreement, is a contract between prospective spouses that is signed before their wedding takes place. Typically, this agreement addresses the parties’ understandings as to their alimony and equitable distribution rights in the event of separation, divorce, or death of either party.
What to Put in a Prenuptial Agreement
The prenuptial agreement can address some or all of the issues which may come up after the parties’ marriage. In the event, that the parties’ agreement does not address a marital right or issue, then the state law applying to the marital or support right or issue shall govern as to the marital rights of the parties as if there is was no prenup.
In Florida, a prospective spouse can include anything relevant to their potential dissolution in their prenup, so long as it is not contrary to public policy. For instance, under Florida law, you cannot waive your right to temporary support (i.e. alimony or attorney’s fees) before the entry of a final judgment of dissolution (also known as a divorce decree).
Usually, a prenuptial agreement contains provisions that cover how to split finances, personal properties, marital homes, and how to split marital assets and/or liabilities (such as debt), retirement plans, pensions, and life insurance policies. A prenup can also include waivers of certain types of alimony or limitations and specific instructions as to how the parties intend to deal with the commingling of any marital and non-marital assets during the marriage.
With the boom of technology, many prenups now include confidentiality clauses and provisions for ownership and the storage of embryos. These clauses can help ensure that neither party distributes private information (such as pictures) to the public (i.e. via specific social media websites) and determines the property rights between the parties of any embryos the parties choose to store during their marriage.
In most states, however, a prenuptial agreement cannot determine or affect child custody or child support.
If the agreement does set forth parental responsibility, decision making and/or child support rights in the event of the birth of a child, then the agreement is likely to be heavily scrutinized and/or subject to modification based on the circumstances that exist at the time of adjudication of the parties’ child support and parental responsibility by a court if it is determined that the provisions are not in the children’s best interest.
When to Complete a Prenup
Ideally, your prospective spouse should receive the prenup well in advance of the wedding. Your prospective spouse needs time to review the prenup and seek their own personal counsel if they need to. If there are many assets involved, it is always best to give the prospective spouse a greater amount of time to review and consider your draft of the prenup.
One year before the wedding may be too early for this, but exchanging a prenup a couple of months before the wedding is more reasonable provided your prospective spouse has sufficient time to review the agreement with an attorney of his/her choice and the attorney and your prospective spouse has received full disclosure of financial circumstances from you, which is a typical requirement to have the agreement enforced.
Further, the prenup agreement must be in writing and signed by both parties. If the prenup agreement waives any rights that either party may have in the event of the death of the other spouse, then the prenup agreement should also be signed by the parties with the same formality as a last will and testament in your state.
Why Get a Prenup?
Prenups are not just for the rich and famous like Jeff and Mackenzie Bezos, even though I think that right about now, Jeff wishes he had one, and Mackenzie may be glad that they do not. Prenups can also help the average person avoid a messy, lengthy, and expensive divorce. For example, consider the advantages of a prenuptial agreement in the following situations:
- If you own assets and/or property before your marriage.
- This may include inheritance, property co-owned with a parent, joint bank accounts with a parent or friend, a property you acquired before marriage (like a home, car, or boat), a trust fund, stocks, investments, and retirement accounts.
- If your partner has a lot of debt.
- With the rise in student loans and the number of people in credit card debt, it is essential to protect yourself from creditors. A prenup can ensure that your partner’s debt stays theirs.
- You are starting your business.
- Your business has the potential to grow and, down the line, might prove to be very profitable. A prenup can protect your business and the investments that you have made. You may prefer to keep your business separate from your spouse and/or limit your spouse’s rights in the business in the event of a divorce or your death.
- Stay at home partner/Change in careers to stay home.
- If one party plans on not working during the marriage, a prenup will set a financial plan in case of a divorce. This is particularly important for the partners that will be contributing the wealth during the marriage. Alimony can be pre-determined. This can also be helpful to the non or lesser-monied spouse to know what his or her choice in deciding to stay home or continue with their career will leave them in the event of a divorce.
- Prior Marriage.
- A prior divorce can come to a prior mess. A prenup can help ensure that your finances don’t get tangled in any prior divorce actions. If your partner has children from a prior marriage, you may also want to protect your children’s inheritance from the subsequent marriage in the event of the subsequent marriage ends in divorce.
- Public Figure.
- Much like a non-disclosure agreement (NDA), a prenup can limit what the ex-spouse can say to the public about you, the marriage, and the divorce.
- Though prenup agreements can be challenged, in general, they provide the parties with certainty or at least an expectation of what will happen in the event of a divorce or death of the other spouse. This tends to greatly reduce litigation costs and expenses, and preserve marital assets.
Issues Prenups may bring
Prenups are not “airtight”. There are many requirements that Courts have to render a prenup valid and enforceable. Florida follows the Uniform Prenuptial Agreement Act (UPAA), which has a set of guidelines that help the courts determine whether prenups are enforceable.
Prenups are frequently fought by parties in court, especially if there are many assets involved or questionable circumstances were surrounding the execution of the prenup agreement. Some of the most common arguments and/or basis by which to attack the validity of a prenup agreement are as follows:
- If a spouse signed the agreement involuntarily or under duress.
- For example, there have been situations where a spouse was unaware that they were signing a prenup. Conversely, under duress, it is not enough for the party to simply refuse to marry the other if they don’t sign the prenup. There must have been a threat of physical or psychological harm for duress to be considered.
- Illegally unfair and Lack of Disclosure.
- Overturning the validity of a prenup on the grounds of unfairness is rarely granted by the court. Just because the prenup leaves one spouse with more money than the other, does not mean the court will throw out the prenup. There must have been a lack of disclosure like the other spouse hid their assets and/or financial information at the time in which the prenup agreement was executed. Full and transparent disclosure of all assets is very important to find the validity of a prenup agreement. Often, I am asked, what should I disclose? My answer is always everything and anything. Err on the side of caution, even if there is some question surrounding whether an asset may or may not be yours in the future. If you are unsure, it may be better to disclose an asset, then to be faced with one of the more formidable and valid defenses to a prenup agreement after expending the resources and time to prepare and enter into the agreement.
- Time and Attorneys.
- Some courts focus on the ability the other party had to understand and receive separate legal advice. Therefore, it is highly recommended that if the other party lacks the financial resources to hire an independent attorney, to once again err on the side of caution and provide your prospective spouse with attorney’s fees so that he or she to choose an attorney of their own selection which can perform a proper and thorough review of the agreement and your finances. Withholding this support, in certain scenarios, could work against you and open your prenup up to modifications that you did not intend.
The drafting, negotiation, and execution of a prenup agreement, like most things in law, is not “one size fits all”. You and your prospective spouse must consult a family law attorney to avoid some of the pitfalls mentioned above and to ensure that your prenup agreement is drafted for you and your prospective spouse’s specific needs.