It is understandable why a soon-to-be married couple might believe that discussing a prenuptial agreement would be bad for their union. According to Sandy K. Roxas, Esq., a family law litigator and mediator from Torrance, California, “you’re basically negotiating what’s going to happen in the event of a divorce.” According to Roxas, some couples are afraid that discussing the prospect of divorce will cause them to split up later on, but it appears that the opposite may be true. “In my sixteen years of practice, only five percent of my premarital agreement clients have returned to file for divorce or legal separation, despite the fact that California has a divorce rate of over fifty percent.”
“Talking about a prenup compels partners to discuss their financial objectives, their overall financial attitudes, their spending and saving patterns, and any accumulated debts,” Roxas adds. “Having these discussions prior to marriage can help lay the groundwork for a stronger and longer-lasting union, as financial concerns are one of the main reasons for divorce.”
In addition to outlining a couple’s finances, the majority of experts concur that a prenuptial agreement can be a smart investment because it can prevent a costly and acrimonious divorce in the event that the marriage doesn’t work out. To help you navigate this pre-marital agreement, we have prepared a guide to address your questions. Continue reading to learn more.
A Prenuptial Agreement: What Is It?
An engaged couple’s rights and obligations with regard to premarital and marital assets and debts, as well as what would happen in the event of a divorce or death, are outlined in a prenuptial agreement, commonly referred to as a prenup. The premarital agreement is typically prepared by an attorney hired by the party with the highest income and/or assets. The other party would then hire independent legal counsel to examine and discuss the terms of the contract and offer recommendations for any necessary revisions, according to Roxas.
According to Barry Schneider, Esq., a divorce and family law lawyer in San Francisco, California, “after a draft has been approved by everyone, they and their respective attorneys would execute the agreement.” It must be demonstrated that a contract was not signed under duress, fraud, or undue influence, and that the parties were of legal age to enter into one.
The Distinction In Contrast to a Postnuptial Agreement
Similar to prenuptial agreements, postnuptial agreements (postnups) are negotiated after the parties have married. According to Atlanta, Georgia-based domestic relations and family law lawyer Elizabeth Green Lindsey, Esq., “they’re just as enforceable as prenuptial agreements.”
She goes on to say, “The reasons for getting one vary.” “Sometimes parties who were unable to finish negotiating the prenuptial agreement prior to the wedding will come back to it after the wedding; sometimes an inheritance is forthcoming and the parties want to address it; or sometimes a large liquidity event, like the sale of a company, is about to take place and the parties want to address what happens with the proceeds.”
The Prenuptial and Postnuptial Average Cost
Prenuptial agreements may cost $1,500 to $10,000, or more if the estate is extremely complex. According to Chicago, Illinois-based family law lawyer Alyease Jones, Esq., “a straightforward agreement can be drafted for a flat fee.” “However, lawyers usually bill on an hourly basis for more complex cases.”
However, because the parties are now married and must take marital property into account, postnuptial agreements may be more expensive. “A well-drafted agreement can be worth its weight in gold if there is a divorce, even though the process may seem needless, costly, and annoying,” Lindsey says.
A prenuptial agreement may be necessary in the following reasonable situations:
Either one or both of them are already married.
Former spouses might not want to get married again if they don’t know what their financial future holds, particularly if they went through a protracted and painful divorce. They don’t want a recurrence of the issues that can arise during the divorce process, according to Lois Brenner, Esq., a New York City mediator and matrimonial lawyer. “If someone believes their ex took advantage of them or got a better deal in a previous divorce, this is especially true.” Additionally, Jones points out that a prior divorce may have an impact on any future rights and responsibilities under a divorce decree or judgment.
One or both of the parties are parents.
A party will frequently wish to safeguard the financial interests of children from a prior marriage. According to Roxas, the premarital agreement can guarantee that assets stay separate property and enable the parties to establish a living trust or will to support their children in the event of their deaths. In the event that a parent passes away, having a premarital agreement may also avoid a dispute over a will. For instance, regardless of what you specify in your will, you are required to leave something to your spouse in New York State. According to Brenner, a couple may be able to circumvent this law through a prenuptial agreement.
One side has more money.
When there is a wealth gap between the two parties, prenuptial agreements are frequently used. In the absence of a prenuptial agreement, Lindsey says, “a person marrying into money may have a significantly improved lifestyle which can create rights for spousal support and property division down the road.” “Some people think that a prenuptial agreement guarantees that the parties are not getting married for financial gain.”
Although a prenuptial agreement can benefit both parties, usually the party with more property or the potential for greater income will request one. In certain cases, my clients’ wealthier fiancées have requested that they sign a premarital agreement. However, my clients end up being the wealthier party during the marriage term, and the agreement ultimately protects them as well,” Roxas says.
One side owes more money.
Typically, the person who incurred the premarital debts is responsible for paying them back. However, marital debts are frequently divided between the two spouses, which disadvantages the non-debtor spouse, according to Brenner. “A premarital agreement can help ensure that this does not happen if one party has a spending habit and the other party does not want to be responsible for debt incurred during the marriage,” Roxas adds.
According to divorce and family law lawyer Barry Schneider, Esq., the prenuptial agreement may stipulate that one spouse’s business debts cannot be settled with joint funds during the marriage or that one spouse’s premarital debts cannot be settled with the marriage’s joint community property. “If there is no prenuptial agreement, creditors can use later-acquired joint assets to collect premarital debts.”
A business is owned by one or both parties.
A prenuptial agreement may make sense if you owned a business prior to marriage because a divorce can ruin a family business. Additionally, if you co-own a business, your divorce may also affect their portion of the company. The parties may have complete control over how their business is run both now and in the future if they have a premarital agreement. According to Schneider, “if one spouse has established a business before marriage, that spouse may wish to prevent the other spouse from gaining an interest in the business during marriage.” When a business appreciates in value during a marriage and one spouse desires a portion of the increase, forensic accounting issues can arise. No matter what contributions were made during the marriage, a prenuptial agreement may allow the owning spouse to keep the business outright or it may quantify that interest.
One or both parties want to keep their personal life private.
The right to privacy is recognized in prenuptial agreements. “The parties can agree that, without the prior written consent of the other party, neither shall disclose, intentionally publish, or provide information or documentation to any other individual or entity,” says Roxas. There are often confidentiality clauses in prenuptial agreements to prevent, for example, social media exposure and tell-all books. “The parties can also contract to have any disputes handled by arbitration and therefore kept out of the public eye,” says Lindsey.
One or both parties have an inheritance to protect.
Generational wealth and future inheritance are two reasons why someone may want a premarital agreement. “If a party to the marriage receives an inheritance, it will be their non-marital property, unless they do something to make it marital—such as putting the funds in a jointly titled account or buying a piece of real estate in both names,” says Roxas. “The best way to avoid any unintentional transmutation of inheritance is to always maintain the inheritance in a separate account and only in the name of the person who inherited. That being said, a prenuptial agreement can, and often does, clarify if the inheritance of a party remains their non-marital property.”
One party plans on being a stay-at-home parent.
“If a party plans to be a stay-at-home parent, a prenuptial agreement can provide security that this spouse will be treated fairly in the event of a divorce. “A stay-at-home parent is foregoing work or career advancement to raise a child and this puts them at a disadvantage in the workplace should the marriage fail later,” says Brenner. “Couples often choose to compensate for this, if they can afford to, by providing a sufficient income stream and/or property to guarantee the homemaker a comfortable lifestyle or income after the child-rearing years are over if the marriage ends in divorce.”
Roxas agrees, saying, “A premarital agreement can protect the stay-at-home parent if the party is able to negotiate terms—such as an annual anniversary gift, an annual contribution to an IRA, a life insurance policy, or a monthly mandatory monetary contribution to a joint account by the spouse.”
How to Create Your Own Prenup
Given the advances in technology, there are several online platforms—such as Rocket Lawyer, Hello Prenup, and Prenup Planner—that now allow couples to create their own prenups. That being said, couples may not understand all of the legal ambiguities of an online prenuptial agreement. “An online form may be a useful stimulus to start you thinking about options, but if you’re going ahead with a prenuptial agreement, you’ll want to make sure it can achieve its intended goals,” says Lindsey. “The enforceability of a DIY prenuptial agreement will depend entirely on whether it meets the criteria of that state’s laws. How can you tell if it meets your state’s requirements to be enforceable? By hiring a lawyer!”
It is possible to write your own prenuptial agreement just as you can a do-it-yourself divorce. “But there are many subtle and not-so-subtle details that must be considered that a layperson may not think of or be able to figure out,” notes Brenner. “It may not be worth the risk that something will be incorrect or overlooked and come back to haunt you.” In fact, parties are usually more successful in challenging the validity of an agreement when they have drafted their own premarital agreement without legal counsel, warns Roxas.
How to Start the Prenuptial Discussion with Your Spouse
Many couples are hesitant to discuss prenuptial agreements for fear of upsetting their future spouse or damaging their relationship. However, effective communication between spouses is crucial for a successful marriage, even when discussing uncomfortable subjects. It speaks volumes about their future resilience if they can have this discussion in a healthy manner, according to psychologist Marcia Kimeldorf, Ph.D., director of clinical services at the Center for Anxiety in New York City.
“I suggest that the person who brings up the subject make it apparent that they sincerely hope the matter won’t arise and that the marriage will endure forever, and that it’s just being discussed and created as a precaution. Even if hurt feelings are evoked, it’s crucial that both parties feel heard and respected, says Kimeldorf. “The person who proposes a prenuptial agreement should do so in a loving manner, keeping each other’s best interests in mind.” When the time comes, be ready to listen and make an effort to comprehend your partner’s viewpoint without interjecting. Kimeldorf advises, “Be open to new ideas and compromises, but ask for what you want clearly.”
Before getting married, partners can better understand and support one another by talking about their financial expectations and differences. Additionally, if a financial conversation reveals a red flag or a contentious issue, it is beneficial for the couple to address it prior to marriage. Because, more often than not, a problem that one person dismisses as “not that big of a deal” can eventually grow into a larger one,” Kimeldorf continues.
Finally, keep in mind that the purpose of proposing a prenuptial agreement is to reach a consensus on how disagreements will be resolved, not to share the same opinions. Schneider adds, “Talking about these issues in therapy sessions can help some couples in premarital conflict cases.”
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