by Kerven M. Moon, Esquire
The term “prenuptial agreement,” often shortened to “prenup” or called a premarital agreement, often has a negative connotation. Our society is quick to associate prenuptial agreements with weak relationships and as a precursor to divorce. In reality, a prenup can strengthen a relationship by fostering open communication with your partner prior to entering into marriage—protecting assets and eliminating future misunderstandings.
Legally, a prenuptial agreement is a binding contract between a soon-to-be-married couple. As such, prenuptial agreements are governed by contract law, binding you to the terms of the arrangement. Absent fraud, misrepresentation, or duress, courts will not:
- interfere with terms outlined in a prenuptial agreement
- rescue you from an unfair agreement
- be sympathetic to a party’s misunderstanding or lack of knowledge regarding the agreed
Thus, it is highly recommended to have a family law attorney assist with drafting and reviewing your prenuptial agreement before you sign it. The money spent drafting a prenuptial agreement is well worth the investment, and far more cost-efficient than fighting about assets, debts, and income in a divorce proceeding in the future.
So why get one? Well, there are several benefits to a prenuptial agreement. It:
- protects current and future assets
- provides disclosure of finances to each spouse
- outlines a structure and road map for the marriage
In the event of a divorce, a couple with a prenuptial agreement benefits from reduced litigation expenses, a faster divorce process, and a divorce proceeding shielded from public court records.
The most common reason for a prenuptial agreement is the protection of assets. While this is especially true for wealthy individuals and celebrities, everyone has assets that should be safeguarded—a car, home, bank accounts or retirement savings. In Pennsylvania, marital property subject to equitable distribution in a divorce includes all property acquired during the parties’ marriage by either spouse, whether titled individually or jointly, or the increase in value of any separate property. In a prenuptial agreement, you can outline how you will manage properties during the marriage—as well as after the marriage—should divorce occur.
Individuals with businesses, or who have the intention to start one in the future, would particularly benefit from an agreement that outlines the business interest and ownership clearly. This situation was most recently publicized in the divorce of Jeff Bezos and his wife, MacKenzie Bezos. The couple, who married in 1993—a year prior to the founding of Amazon—ended their 25-year union last year. Amazon is now worth over $1 trillion dollars. Due to the company’s increased value, which was considered marital property, Mr. Bezos paid out a record-setting divorce settlement of $38 billion dollars to his former wife. Additionally, individuals who stand to inherit significant money or property should also consider securing a prenup to protect the inheritance asset, as well we any increases in value in that inheritance. The lesson learned here is that no one knows what the future holds, and a prenuptial agreement helps to ensure that both parties’ interests are protected.
Other than infidelity, financial and communication issues are common reasons for a deteriorating marriage. A prenuptial agreement forces couples to discuss financial issues prior to marriage, and provides each party with a full and complete disclosure of their future spouse’s financial portfolio. Just as protecting assets is important, it is equally important to protect yourself from any existing debt your partner may bring into the marriage. The reality is that marriage is not just a romantic bond, but also a financial one.
The content of a prenuptial agreement can vary greatly, and can include, among other things, terms regarding property division, spousal support/alimony, future inheritances or gifts. However, one thing that a prenuptial agreement cannot address is parental responsibilities and child support. Nevertheless, couples are free to set conditions for their marriage, outline roles and responsibilities, designate responsibility for debt and payments, or outline a succession plan in case the relationship ends. There is a wide range of flexibility that prenuptial agreement offers, and couples can customize it to meet their needs.
Many couples will face divorce. Predicting the future may not be possible, but with a prenuptial agreement, protecting it is. Taking steps before marriage to secure your future eliminates situations where anger and resentment drive decisions, and provides peace of mind that one’s best interest, and financial security, is guarded.
So what happens if you didn’t get a prenuptial agreement before saying “I, do”? Married couples can enter into a postnuptial agreement, which is based on the same principles and concepts of a prenuptial agreement. A postnuptial agreement should be considered when an event occurs that was not contemplated prior to marriage or threatens to change the relationship dynamics. This can include a change in ownership of a business, significant change in employment (i.e., one parent staying at home with the children), or an unexpected inheritance or gift. Although an agreement prior to marriage can be more effective, a “postnup” can be drafted years into the marriage to provide clarity.
No one enters into a marriage contemplating divorce. Unfortunately, it happens so frequently that nearly everyone knows someone who is already divorced, or going through the divorce process. More and more, prudent couples are working with attorneys to create prenuptial agreements that offer roadmaps for the future. These couples are not conceding defeat or weakness, but are taking proactive steps to start their relationships with their eyes wide open, acknowledging simply that no one knows what the future holds.