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Prenuptial and Postnuptial Agreements 101
Parental permission asked and granted. Check. Engagement ring purchased. Check. Acceptance of marriage proposal. Check. Wedding date, officiant, venue, caterer, photographer and music all selected and confirmed. Check. Save the date announcements sent to invite list. Check. Prenuptial agreement drafted, negotiated and signed. What?
After all, in the midst of wedding plans, what could be more “romantic’ than making plans for the division and distribution of marital and separate assets in the event the marriage ends due to potential legal separation or divorce, or eventual death? When might you consider a postnuptial agreement? This article is not intended to be a treatise on the subject of prenuptial or postnuptial agreements, but rather an introduction to what is a complex area of law requiring the assistance of competent legal counsel.
According to the 2017 National Marriage and Divorce Rate Trends gathered by the National Center for Health Statistics at the Centers for Disease Control and Prevention (with 45 states reporting, along with the District of Columbia) there were 2,236,496 reported marriages and 787,251 divorces that year. The report notes that, out of 1,000 Americans, there were 6.9 marriages and 2.9 divorces. Given these numbers, the importance of a premarital agreement seems to be increasing.
Why Consider a Prenuptial Agreement?
No longer reserved to the province of only the “rich and famous,” everyday Americans should consider a prenuptial agreement, after taking a sober look at the reality of legal separations, divorces and even protection of inheritances. Without a prenuptial agreement between the directly affected parties, family law attorneys, judges and state laws will decide the allocation of a couple’s joint and separate assets for them.
As a wise person once noted, when contemplating marriage, remember that love may be blind, but it is prudent to proceed with both eyes open. This applies to those of all ages contemplating marriage. For example, did you know that fully two-thirds of previously married Americans who are 55 or older have remarried? When it comes to millennials, they may be the richest generation in history. Forbes magazine cited a study revealing that millennials will be five times wealthier than they are right now, as they collectively inherit more than $68 trillion from their baby boomer parents by the year 2030. That is a lot of wealth that needs protecting!
Why a Postnuptial Agreement?
Heraclitus, an ancient Greek philosopher who lived around 500 BC said, “The only thing that is constant is change.” No truer words from tongue or pen (a tip of the hat to John Greenleaf Whittier) than these for what happens in a marriage. Change.
There will be good times, bad times, happy times and sad times. There may be children born, businesses formed and even marital misconduct in the mix. Couples who never considered a prenuptial agreement, often create a postnuptial agreement, when any of the above “changes” occur while their marriage is well underway. Much like an airline pilot will make adjustments while in flight, a postnuptial agreement can provide for “course corrections” to keep a marriage together.
“Legal” Agreement Requirements
The rules for these prenuptial and postnuptial agreements vary from state to state, but in general, the parties should follow these rules:
- Both parties must disclose the full extent of their assets in detail. For example, it is not legally sufficient to note that one party owns a brokerage account. To the contrary, that party must disclose in writing that she has a brokerage account with XYZ financial institution and its value.
- Both parties must disclose the full extent of their debts in detail. Whether you are a baby boomer with a multi-million-dollar business that has a multi-million-dollar line of credit or you are a millennial with $250,000 in Ivy League student loan debt, your liabilities must be disclosed. The disclosure must include the type of debt, name of the creditor and amount. If you are in a remarriage situation after a divorce with minor children, do not forget to disclose both child support and separate maintenance (i.e., alimony).
- Especially when it comes to the prenuptial agreement, it should not be a surprise to your intended. Limit the prenuptial surprises to happy things, like jewelry and candlelight dinners. When one party presents the other with a prenuptial agreement shortly before exchanging vows, it rarely ends well. For starters, what a way to begin your marriage with an “ambush” of the lowest order. Someday, when the prenuptial agreement is challenged, a judge will suspect (rightfully so) that the person receiving the document did not have time to review it, seek independent legal counsel and think about whether to sign the agreement. It is best if the non-drafting spouse has an adequate opportunity to review it, seek legal counsel and propose any revisions prior to signing the agreement.
- The terms of the agreement should be fair to both parties. While this is obvious, if the document contains terms that are harsh, punitive, or shocking to the conscience, a judge will likely declare the agreement invalid.
- Both parties should have independent legal counsel. In other words, each spouse should have an opportunity to engage an independent attorney to review and provide advice regarding the proposed prenuptial or postnuptial agreement. Do not try to “go it on the cheap” with one attorney representing both parties. That rarely ends well. To avoid any real or perceived conflicts of interest, one attorney should not represent both parties.
State laws vary when it comes to the legal requirements for valid and binding prenuptial or postnuptial agreements. Competent legal representation can keep your agreement from being declared unenforceable. Too much is at stake.
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