Weddings have always been about family and ceremony and celebration. To keep it that way, many couples are taking steps to clarify their money matters before their big day.
Sometimes one (or both) partners who want to get married also want to avoid the risk of losing assets, income, or a family business in the event of a divorce. Others, who may be marrying for a second or third time, might wish to make sure that most of their assets or personal belongings will be passed on to the children or grand-children of their prior marriages rather than to their new spouse.
The law has developed a legal instrument to address these concerns—the premarital agreement. Also known as a prenuptial or antenuptial agreement, premarital agreements are usually in the news only when a celebrity has or (as in the case of ex-Beatle Paul McCartney) fails to have one. But premarital agreements aren’t just for the rich and famous. They are for anyone who would like to clarify his or her expectations and avoid uncertainties about how a divorce court might divide their property or decide spousal support if their new marriage fails.
In signing a premarital agreement, a spouse agrees to have his or her property rights and support obligations determined by the agreement rather than by the usual rules of law that a court otherwise would apply upon a divorce or death. The agreement can give the spouse more or less than state law would otherwise provide. In most states, courts divide property as the court considers fair, and the result is less predictable: the split could be fifty-fifty or something else. If one spouse dies, courts normally follow the instructions of that person’s will, but in most states the surviving spouse is entitled to one-third to one-half of the estate regardless of what the deceased spouse’s will says.
If the husband and wife have signed a valid premarital agreement, that agreement will supercede the usual laws for dividing property and income upon divorce or death. In many cases, the less wealthy spouse will receive less under the premarital agreement than he or she would receive under the usual laws of divorce or wills.
In general, the premarital agreement must be in writing and signed by the parties. In most states, the parties must fully and clearly disclose in writing their income and assets to each other. This way the parties will know more about what they might be giving up. In some states, it may be possible to waive a full disclosure of income and assets, but the waiver should be done knowingly, and it is still best if each party has a general idea of the other’s net worth.
Many states do not set a specific time at which a premarital agreement must be signed. Generally, however, it is better to negotiate and sign the agreement well before the wedding to show that each person has considered it thoroughly and signed it voluntarily. If the wealthier person shows the agreement to the prospective spouse only one day before the wedding, a court may later find that agreement invalid because of duress. While a last-minute premarital agreement is not automatically invalid, timing may be a significant factor in determining whether the agreement is valid.
Of course, the premarital agreement must not be the result of fraud or duress. An agreement is likely to be invalid on the basis of fraud if one person (particularly the wealthier one) deliberately misstates his or her financial condition. For example, if a man hides assets from his future wife so that she will agree to a low level of support in case of divorce, a court probably would declare the agreement invalid. Similarly, if one person exerts excessive emotional pressure on the other to sign the agreement, a court might declare the agreement to be invalid because of duress.
A lawyer can help you make sure that the agreement is drafted properly and that both parties are making informed decisions. The lawyer for the wealthier party usually prepares the initial draft of the agreement, but the less wealthy party should also ask his or her own lawyer to review the agreement. Although you do not need to have a lawyer in order to have a valid agreement, the agreement is more likely to be enforceable if each person’s interests are represented and significant back-and-forth negotiations have taken place. The agreement is more likely to be challenged if one of the parties does not have an independently chosen lawyer.
In addition to ensuring that a premarital agreement is legally valid and appropriate to your goals, your attorney can also help you assess whether other instruments such as a trust might help you carry out your wishes before your wedding day.