Premarital Agreements – not just for the rich and famous
When many people think about “pre-nups” or premarital agreements, the conventional wisdom is that they are really only necessary when one has a significant fortune to protect. This is not necessarily the case. Many everyday people can benefit from the protection afforded by a premarital agreement. But to understand how a premarital agreement can help you, it is first important to understand what it does.
When a divorce is filed without a premarital agreement, essentially everything is on the table. And if the parties can’t reach an agreement, they must have a judge make the decisions about how to divide property, award support, etc. With a premarital agreement, you can avoid this uncertainty. With a premarital agreement, most, if not all, issues arising in the divorce are already resolved – so the need to enter into contested litigation and have a judge make decisions can be unnecessary. Premarital agreements can accomplish this by doing things like the following:
A premarital agreement can designate certain specific assets to be solely the property of one party (e.g. “Wife’s 401(k) plan shall be her sole and separate property, free from any claim by Husband…”).
Premarital agreements can waive or otherwise deal with spousal support.
Premarital agreements can designate which property shall be considered separate, and what property will be marital. Parties to agreement can then designate how the marital property shall be divided.
With a premarital agreement, the parties can designate the living arrangements of the parties once they are separated, and how bills like mortgage payments, utilities, etc. shall be paid.
While premarital agreements can be useful, because they deal with important rights and obligations, it is important to ensure that they are prepared and executed properly. Poorly drafted premarital agreements (e.g. form agreements pulled off the internet) can present a number of problems. For example:
It is important that premarital agreements are executed properly. Was the agreement prepared and reviewed sufficiently in advance of the wedding? Or was it hastily entered into at the last minute before the ceremony?
Do the parties understand what the agreement does? Often times the agreement sets forth rules for how the parties are to handle separate property and marital property in the future. If the parties are not clear on exactly what those rules are, or best practices for complying with these rules, the protection provided by the agreement can be negated. Having an experienced attorney educate parties about the terms of the agreement, and how to comply with those terms can be an important party of putting a premarital agreement in place.
Access to individual counsel and opportunity to seek independent legal advice can also impact how a premarital agreement is viewed down the road. It can often be a good practice to ensure that each spouse has the ability to seek assistance with questions about his or her rights and legal obligations.
Poorly executed or drafted premarital agreements can actually create more problems than they solve by potentially adding disputes about the validity of the agreement to the issues that must be addressed in litigation. This can greatly increase the cost and stress of divorce for all involved. Because of this, seeking out experienced legal advice before entering into a premarital agreement can potentially save parties significant expense at a later date.