These days, Hollywood is buzzing from some high-profile divorces. [Last November], Britney Spears filed for divorce from her two-year marriage to Kevin Federline, whose nickname has gone from "K-Fed" to "Fed-Ex." On the heels of that news, a day later, actors Reese Witherspoon and Ryan Phillippe also filed for divorce.
The difference between the two: Witherspoon did not have a prenuptial agreement, and Phillippe will likely have a claim to a substantial portion of her $60 million estimated net worth. The estimated $29 million in earnings from her next film may also be at stake — her ex could get half.
But Spears did have a prenuptial agreement. In fact, it was a 60-page agreement that protects most of her estimated $100 million fortune. Britney could get away with paying Federline a measly $300,000, which he says he is owed, plus $30,000 a month for half the number of years they were married, which would amount to one year. That’s pocket change for Britney. He is also contesting "communal property," but Britney and her lawyers are claiming that there isn’t any.
The lesson: After deciding to wed, if you have assets or children, you should consider asking your fiancée to sign a prenuptial agreement. A prenup can not only record the intentions of the husband and wife-to-be concerning money and assets in the event their union dissolves by divorce; it can also determine what happens to an estate should the marriage end the other way, by the death of one of the spouses.
For a prenup to be worth the paper it’s written on, the parties involved must sign it voluntarily (free from undue influence, coercion, or duress), with full financial disclosure and with the assistance of — or opportunity for — attorney review and advice.
Though prenups are famous for directing how money and assets will be distributed upon divorce or death, some couples use them to outline day-to-day marital expectations. For instance, there are prenups that spell out the minimum number of intimate encounters per month, the high range of weight for a spouse, or even how many children the couple plan to have — or not. While the enforceability of these lifestyle clauses is suspect, the real value of a prenup is when the marriage ends.
As divorce and probate matters are squarely left to the states, local law will govern what you can and cannot accomplish with your prenup. So, while in California your spouse will need at least seven days’ review and an attorney if she’s waiving her right to receive alimony, some states will not permit spousal support waivers under any circumstances. What’s more, some states, such as Florida, require formal acknowledgments and witnesses for a prenup to be enforceable, while other states are more lax about form. Since you won’t know which states require what (unless you’re an attorney), it makes sense to see an experienced domestic relations lawyer whenever you are dealing with a prenup — or any other local document.
Still, there are some things that cannot be accomplished via a prenuptial agreement. The best interests of the children at the time of marital dissolution will always trump whatever you and your betrothed might have intended to do with your kids, so don’t even think about trying to limit your exposure to child support or affecting parenting rights in a prenup. Instead, stick to the finances.
Finally, whether you intend to limit your love’s claim to your estate upon death or divorce — or both — in your prenup, you have to be mindful of each state’s requirements for waiving interests in traditional spousal privileges. For instance, in most states, a spouse acquires special homestead rights to live in the marital house — even if he or she never owned it and never will. Other typical spousal benefits include elective shares and pension rights.
To deal with probate matters, many attorneys will insist that a couple execute new wills along with the prenup. Addressing pension waivers takes additional action as well. Under federal law (the Employee Retirement Income Security Act, the Retirement Equity Act and the Pension Protection Act), a prenup is not sufficient to effect your fiancé’s waiver to the spousal interests in your qualified pension plans, such as employee stock ownership/option plans, savings plans and all manner of defined-benefit plans or any other plan that offers a joint and survivor annuity. For a person to waive spousal interests in those plans, he or she must sign the proper waiver forms after the wedding. That’s right — under federal law, only a spouse can waive his or her special rights to a married mate’s qualified retirement and savings plans.
If your employee assets are not governed by federal law — perhaps you are a teacher or policeman — and your plan is a state-administered retirement system, you must check with your plan administrator to learn what is required to effect a legal spousal waiver in your retirement assets. By asking these questions and getting the proper forms ready to sign before or perhaps after the wedding, you will gain the benefit of the bargain contained in your prenup.
And of course, don’t forget to pick out the china pattern.