When most people think of prenuptial agreements (aka premarital agreements and/or “prenups”), they envision an onerous, one-sided contract. “Prenups” are seen by many as a form of “legal handcuffs” insisted upon by a wealthy person to prevent his or her future spouse from getting anything in the event of a divorce. However, experienced Family Law attorneys will tell you that usually is not the case, nor should it be.
A premarital agreement should be comprehensive, fair, and clear. Each party should receive some tangible benefit(s) or protection(s). There should be no surprises and both sides should fully disclose their financial information to one another. Each party should have his/her own attorney who can ensure that the legal implications and effects of the agreement are fully understood. And, the document should be discussed, drafted, and finalized long before the wedding takes place (ideally even before the invitations go out or deposits are put down).
A premarital agreement can be a great tool to allow a couple to come together, have a realistic conversation about their financial future, and plan accordingly. The situation provides engaged couples with a chance to figure out how life is going to be after the honeymoon is over. Participating in such an exercise can go a long way towards creating an atmosphere of open communication regarding issues that often lead to the demise of a relationship or marriage.
Bearing all of this in mind, a premarital agreement should address the following 3 important questions:
1. What happens while we are happily married?
2. What happens if one of us dies while we are happily married?
3. What happens if we get divorced?
Question #1 should delve into the following: How will our living expenses be paid? Will we have a joint bank account and/or credit cards? What happens to the income that we earn? How are we going to file taxes? If we acquire property, how do we take title/finance the mortgage/pay the down payment? If one of us owns a business, what happens if it increases in value? What if the business gets sued?
Question #2 should address: How should our estate be divided in the event one of us passes away during the marriage? Do we need to create or amend an estate plan/trust/will? Should we obtain life insurance policies?
Finally, the inquiries related to Question #3 (which is often the toughest of the 3) must establish a “plan of action” for the following: How do we divide our property in the event of a divorce? What about spousal support? Who stays in the house and for how long if we separate? If we can’t agree on something, should we try mediation or some other form of Alternative Dispute Resolution before going to Court? If one of us challenges or has to enforce the agreement, who should pay for the attorney’s fees?
If you are considering a premarital agreement or you have been presented with one by your spouse-to-be, you should consult an experienced Family Law attorney immediately.