As we head into the season of wedding bells and happy couples tying the knot, nobody likes to think about the grim statistic that 50% of today’s marriages will end in divorce.
Without wanting to be a “downer” or add another “to do” to the already lengthy list of future brides and grooms, I do suggest that you consider early on in the planning process whether a prenuptial agreement might be prudent or necessary in your situation. This is not an item you want to be thinking about at the last minute, as it can take careful preparation and some amount of time to develop. Ideally, a prenuptial agreement should be done several months before the wedding date. This allows enough time to gather the required information and gives attorneys the opportunity to review everything.
Limitations of Prenuptial Agreements
This type of premarital agreement (often abbreviated to prenup) is a contract entered into by a couple prior to marriage that includes provisions for division of property and spousal support in the event of divorce, death, or breakup of the marriage. While it is impossible to know at the outset how successful the union will be, one thing is absolutely certain: 100% of marriages will end at some point, either through death or divorce. A prenup can spell out what each partner will get when the marriage does end. In most situations there will be different provisions if the marriage ends due to death, compared to if the union ends due to divorce.
While a prenuptial agreement can protect the rights or property of both intended spouses, it cannot contract away the rights of children (both living and future). The contract cannot waive or preset child support, nor discuss parenting plans or custody issues.
Adult rights (such as alimony or possession of property) can be waived in a prenup, but only through informed consent and after full disclosure.
In the past, a prenup could only be enforced if, at both the time it was signed and executed, as well as at the time it was being enforced, full disclosure had been made and the arrangement was considered fair and equitable. Today, however, the law has evolved. Prenups are routinely upheld, except in certain extreme circumstances such as fraud, deception, or undue influence. This is a good incentive to pay careful attention and go slowly through the process to make sure you are fully protecting yourself.
Reasons Behind Prenuptial Agreements
Only a small number of engaged couples actually do a prenuptial agreement. From this, we can deduce that most must figure they either do not have enough assets to worry about it, they do not see a need to protect themselves in the event the relationship takes an unexpected turn for the worse down the road, or they do not believe “it could happen to them”.
Ironically, though, it is usually not a large fortune or a great deal of property that motivates a couple to go through with a prenup. Instead, factors such as existing children, prior financial commitments (such as alimony), or parental influence are more often the cause. Here are several common scenarios I see played out from time to time:
- A new bride wants her financial resources to be separate due to her fiancé’s support obligations to his ex-wife.
- One partner has a child or children that s/he wants to protect financially.
- Wealthy parents of the future bride or groom want to be sure their money stays in the family in the unfortunate event of a divorce, rather than landing the ex-spouse a large windfall.
- One or both partners have been burned financially in a previous relationship that did not work out, and do not want to make the same mistake again.
It is important to recognize that an interest in forming a prenuptial agreement does not signify that one or both partners are having doubts about the relationship, or that the marriage is starting off on a bad foundation. Most engaged couples never dream that their marriage might end up in divorce someday. In fact, it is often unpleasant for a professional such as myself to have to bring up certain topics that need to be considered in a prenup when I see the happy couple ready to embark on a new season of such wedded bliss.
Components of Prenuptial Agreements
The objective of the legal document is to determine what will happen to all assets and liabilities in the event of divorce or death, and whether alimony will be provided. Assets and liabilities are broken down into two categories: those acquired before marriage, and those that will be acquired during the marriage. Determining which assets fall into what category can be slightly tricky. For example, if you bring a large bank account into the marriage which then produces a significant amount of interest, the interest is connected to the asset you had prior to the marriage. Similarly, if you use those funds to purchase a car during marriage, the car is traced to a pre-marriage asset. Any assets that you receive through a gift or inheritance during marriage are considered marital property that may be jointly shared, unless the prenup states otherwise. As monies are moved from one account to another or applied toward common household expenses, the status of funds can get murky. The process of thinking about this in advance for purposes of the prenup (and organizing your finances as a result) can help to avoid future problems.
Personal property without a title can be controversial. If a wife wants to buy an expensive piece of art and the husband puts it on his credit card, it would likely be considered his property in the event of a dispute. A marital home may pose a challenge if, for example, it was the wife’s prior to the marriage, but the husband lives there now, helps pay the mortgage, and does repairs. Perhaps a prenuptial agreement could stipulate that he will own a percentage of the home, or perhaps he will be allowed to live in the home in the event of the wife’s death but her children from an earlier marriage would actually inherit it.
Existing liabilities generally stay with the asset. For example, whomever keeps the house would also need to pay off the mortgage. Credit card debt, student debt, or a car loan would stay with the person who brought them into the marriage in the event of a divorce, but may be paid for out of the estate in the event of a death.
Alimony is a very important part of a prenup. One or both parties can waive it, or put a cap on it (such as $1000/month for 10 years or for perpetuity, or a one-time pay-off of $50,000). But once alimony is waived, Massachusetts courts make it very tough to override or reverse this choice in the future.
Get Professional Help
Occasionally couples will bring me a prenup they wrote together and ask me to review it. I do not recommend this course of action. While prenuptial agreements are much less complicated than they used to be, there are still many important elements you are likely to overlook if you do it yourself. If a professional is not involved, your document will also be much harder to enforce down the road.
Incredibly, many couples ready to walk down the aisle have never had important financial talks with each other, and often do not realize the condition of their intended’s finances. Objective parties such as attorneys, Mediators, or Collaborative Practice professionals can bring up touchy topics up that might be more difficult to discuss alone and help dissipate some of the emotion.
Engaged couples also do not always understand the legal aspects of alimony, inheritance, divorce, or distribution of assets. A professional will be able to educate them about what the law currently says, and explain that it may change in the future.