Well, first of all, congratulations! Preparing to get married is very exciting. Understandably, most couples do not want to think about the potential of a divorce down the road during these happy times, especially when this is their second go at it. Unfortunately, sometimes things just don’t work out as planned and divorce becomes inescapable (as we know all too well). Creating a plan with your fiancé now for a potential divorce in the future, while the two of you are happy and in love, can potentially save you a significant amount of stress, time, and money down the road in the event that you do eventually divorce.
A prenuptial agreement, commonly called a “prenup,” is a powerful document which may be executed prior to marriage as a means to dictate what will happen to property and money in the event that the parties separate and divorce. So what are the issues that may be addressed in a Premarital Agreement?
Many states allow parties to contract with respect to the following issues in Premarital Agreements:
1. The rights and obligations of each of the parties in any of the property of either or both of them whenever and wherever acquired or located;
2. The right to buy, sell, use, transfer, exchange, abandon, lease, consume, expend, assign, create a security interest in, mortgage, encumber, dispose of, or otherwise manage and control property;
3. The disposition of property upon separation, marital dissolution, death, or the occurrence or nonoccurrence of any other event;
4. The modification or elimination of spousal support;
5. The making of a will, trust, or other arrangements to carry out the provisions of the agreement;
6. The ownership rights in and disposition of the death benefit from a life insurance policy;
7. The choice of law governing the construction of the agreement; and
8. Any other matter, including their personal rights and obligations, not in violation of public policy or a statute imposing a criminal penalty.
There are also a few limitations, however, so let’s walk through a few issues you should be aware of when considering executing a premarital agreement. First, the right of a child to support may not be adversely affected by a premarital agreement. This means that a Premarital Agreement cannot eliminate the requirement that one party pay child support upon separation/divorce. This limitation is indicative of public policy concerns. Although many issues may be contracted in premarital agreements, the courts will not allow parties to eliminate child support since both parents, regardless of their marital relationship, have a responsibility to care and provide for their child(ren).
Another limitation on premarital agreements deals with the elimination of spousal support and alimony. Although parties to a premarital agreement may contract to eliminate or modify spousal support and alimony, this provision may be overturned if such an elimination or modification causes one party to the agreement to be eligible for support under a program of public assistance at the time of separation or divorce. If this is the case, a court may order the other party to provide support to the extent necessary to avoid that eligibility. A court may also order one party to pay support if there is such a gross difference in the incomes of the parties such that a lack of payment to the dependent spouse would be unfair.
There are also certain requirements which, if not met, may invalidate a premarital agreement. One such requirement is a fair and reasonable disclosure of the property or financial obligations of each party to the other. This ensures that both parties understand the financial position of the other party upon execution of the agreement. Both spouses must also voluntarily and expressly waive, in writing, any right to disclosure of the property or financial obligations of the other party beyond the disclosure provided, and declare that each had, or reasonably could have had, an adequate knowledge of the property or financial obligations of the other.
Also, as with any contract, a premarital agreement must be entered into voluntarily by both parties. Each party should certify in the agreement that they entered into the agreement free from all duress, coercion, threats and other overreaching and free from the influence of any intoxicating drugs or alcohol which would inhibit their understanding of the agreement. Along these lines, the parties should be aware of the timeframe during which a Premarital Agreement should be executed. It should not be executed too early, as the parties’ financial situation may change between execution of the agreement and the marriage. However, it is also important that the agreement not be executed too late, as a last-minute prenup may give the impression that one party may have felt pressured into signing it because of a quickly approaching wedding date.
All of this being said the underlying question a court will consider when the validity of a premarital agreement has been challenged is: “Is the agreement unconscionable?” (In other words, “Is it unfair?”). The provisions included in a premarital agreement depend on what you and your future spouse are hoping to accomplish by the execution of the agreement, and your particular circumstances and situation. It is important to talk to an attorney when considering executing a premarital agreement to ensure it is tailored to your particular needs and circumstances and in line with the laws of your state.