Pre-Nuptial Agreements


By Donna Marsella, CDFA
Divorce Financial Strategies, LLC

As divorce and remarriage have become more common, particularly between previously married individuals, consideration of a pre-nuptial agreement in today’s environment have become widespread and in many cases are absolutely advisable. You should have an understanding of the basics of a pre-nuptial, as you may wish to ask a future spouse to sign one some day, and just as likely, be asked to sign one yourself. While not a terribly romantic discussion, the key may be to treat this subject as an estate planning tool, rather than a hedge against divorce!

The basics of a pre-nuptial agreement, what it should cover and who should have one are just a few of the questions that will be reviewed in this segment:

  • What is a pre-nuptial agreement;
  • What details should a pre-nuptial contain;
  • What can’t be included in a pre-nuptial;
  • What are the benefits and disadvantages of a pre-nuptial;
  • Who should have one;
  • When are how do I create one;
  • Why should I have one.

What is a pre-nuptial agreement?

A “pre-nuptial agreement”(pre-nup), is also referred to as a “pre-marital agreement” and is written by prospective spouses in anticipation of a marriage. The agreement, which must be entered into voluntarily, is a legally binding contract that becomes effective upon the marriage of the parties, and must be signed by both spouses to be valid (some states may even require that the agreement be notarized). While the contract terms may be broad, it is wise to review your individual state laws to determine what conditions and content are unenforceable or invalid.

Why should I use a pre-nuptial?

While many couples have used pre-nups as a means to protect themselves in the event of a failed marriage, it can also be viewed as a means with which to foster a successful and long lasting union. Surveys indicate that one of the top reasons marriages fail is due to a lack of communication, particularly as it relates to financial matters. Therefore, an attempt to proactively resolve philosophical differences and/or potential misunderstandings in this regard, is both a healthy and prudent marital safeguard. Furthermore, it may serve to reduce costs of litigation and make the proceedings of a divorce considerably quicker and easier in the event of a contested divorce.

How and when should I prepare a pre-nuptial agreement?

You should begin the discussion of a pre-nuptial agreement with your future spouse well in advance of the wedding date, as a contract drafted or signed right before the wedding may potentially be viewed as invalid. We strongly suggest, however, that the effort be a collaborative one, so that both parties have ample time to consider the terms to be included and to agree on the details. It is also recommended that both parties be represented by separate attorneys to ensure that the contents of the pre-nup are both legal and enforceable, given that each state’s marital laws are different. Keep in mind that a pre-nup may be challenged if one party was pressured into signing it, particularly if there wasn’t sufficient time for consideration or review.

What are the benefits of a pre-nuptial agreement?

A pre-nup has considerable benefits, especially in that it can be custom designed to include the criteria that is most relevant to your individual situation. The range of acceptable content is broad and may often include the following:
• The disposition of property (both marital and pre-marital) upon separation, marital dissolution, death, or the occurrence or non-occurrence of any other events;
• Protection or limitations of liability resulting from debt obligations that the other spouse brings to the marriage;
• The financial responsibilities of each spouse regarding household bills, details of how to manage joint savings accounts, as well as decision-making criteria for future disagreements;
• Protection for one’s business or professional practice so that it doesn’t get divided or diluted in the event of a divorce;
• Preservation of the inheritance rights of ones children and grandchildren from a previous marriage;
• Protection of ones financial interests where one spouse has substantial wealth or disproportionate wealth relative to the other spouse;
• Ability (in some states) to forego or limit the amount of spousal support payable to the other spouse in a divorce settlement;
• Safekeeping of “family owned” interests, such as a share in the family business, heirlooms and even future inheritances.

What shouldn’t be included in a prenuptial agreement?

You’ll want to draft an agreement that is both equitable and ultimately enforceable. Great care should be taken that it is written in a matter that it clear and understandable, and that the information provided is correct and complete with full disclosure. The Court’s interpretations of pre-nuptials may vary widely from State to State, and are often influenced by State Marital Laws. Adopted by roughly half of the states, The Uniform Premarital Agreement Act, which endeavors to bring some level of consistent language to these agreements, sets forth the conditions under which a pre-nuptial agreement is not enforceable. While the State of Massachusetts has not formally adopted this agreement, this partial list is typical of what should not be included:
• Agreements to do anything which is illegal;
• Restrictions which restrict child support, custody or visitation rights;
• Agreements relating to having and/or raising children;
• Rules about non-financial matters, such as household chores, allowance of pets, etc.
• Terms which offer a financial incentive for divorce

What if we can’t agree on the terms of the pre-nuptial?

Openness and honesty is a prerequisite for these discussions. However, depending upon the nature of the terms, one may want to consider a graduated scale of rights and conditions pursuant to the length of the marriage in a conciliatory effort. Also, a simple matter of more time may be needed for the parties to reflect on such terms, as it is not unusual that the topic of pre-nups is accompanied by some level of stress and uncertainty. A post-nuptial (post-marital) agreement is always another option if there is total deadlock, though there are stricter legal rules and other disadvantages on writing a contract after the marriage has taken place. On the other hand, perhaps the notion of pre-marital counseling may be in order as difficult conversations are inevitable in a marriage, and it’s better that they be worked out before the wedding….or they may end up taking place in a courtroom…where privacy and confidentiality may be sacrificed.

Donna Marsella is president of Divorce Financial Strategies, LLC and a Certified Divorce Financial Analyst (CDFA) specializing in financial issues relating to divorce.

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