Dreamstime_1985327 Why is a prenuptial agreement a good idea?
One in three of all first marriages end in divorce, as well as 50 percent of second or third ones. A prenuptial agreement is smart financial planning, since marriage is not just an emotional and physical union – it’s also a financial union. A prenup and the discussions that go with it can help ensure the financial well-being of the marriage. It is like an insurance policy you hope you wont need it, but in a divorce it may help eliminate some of the emotion that’s naturally involved.

A fairly negotiated prenuptial agreement can provide some reassurance to the wealthier spouse as to the extent of the financial impact of a divorce; at the same time it gives the less wealthy spouse some guarantee of his or her entitlement to a property distribution and/or maintenance upon a divorce.

Couples without a prenuptial agreement will have their assets distributed for them by the state if the marriage ends and they disagree about who should get what. Without a prenuptial agreement, assets could end up in the hands of your spouse’s children from a previous marriage instead of your own kids, or they could go to a lazy mate who did nothing while you worked hard at a business or profession that eventually became a big success.

Who uses prenuptial agreements?
The prenuptial agreement is used largely by individuals who are marrying for the second time and have assets from a previous marriage which they want to preserve for their children from that marriage. The other large category, probably because many people are marrying later for the first time, includes individuals marrying for the first time who have been in the work force for a period of time and have built up assets that they do not want to lose in the event of a divorce. In addition, some individuals may want prenuptial agreements to limit not only the distribution of assets, but also the amount and duration of support that one party can receive from the other.

  • High net worth individuals Persons with considerable cash, stocks, bonds, mutual funds certificates of deposit or other investments.
  • Property or business owners – Persons with significant real property such as rental income property, or persons who own sole proprietorships, partnerships, small businesses, corporations or professional associations.
  • Professionals – Persons with professional degrees or licenses, because these are considered assets that produce income.
  • Investors – Persons with sizeable savings in 401(k) plans, defined benefit retirement plans and profit-sharing plans, or who want to safeguard inheritances and gifts.
  • Persons with children of a former marriage – Persons marrying for the second or third time may want to guarantee that most of their assets are passed on to their children of a former marriage in case of divorce or death.

How much does a lawyer-prepared prenuptial agreement cost?
Depending on your locale, you may expect to pay $700-800 for an attorney-prepared prenuptial agreement. The cost of a prenuptial agreement is also based upon the complexity of the couples’ finances and the amount of negotiation necessary to reach an agreement. There may be additional costs if it is necessary to hire an appraiser to value a business, collectible property (such as art), or real estate property.

If there is a time pressure to complete and sign the prenuptial agreement (such as a wedding date) your lawyer may charge a higher hourly rate because more of the day-to-day resources of the law firm will be devoted to your prenuptial agreement. Attorneys who draft and/or evaluate prenuptial (prenuptial) agreements typically request an initial retainer and charge an hourly rate for their services.

What is a good way to approach the subject of the Prenuptial Agreement?
First, do it as early as possible. The mention of a prenup shouldn’t come as a surprise if you and your sweetheart have been open with each other as the relationship became serious. Let your intended know you believe these agreements are important and that you’d like to go over the topic."

What is a prenuptial or Prenuptial Agreement?
A Prenuptial Agreement, also known as a Prenuptial or Ante-Nuptial Agreement, is a contract that two people sign prior to getting married. Its purpose is to define their rights and benefits and to settle questions of property division, alimony, and/or inheritance if the marriage ends because of death, separation, or divorce. It allows the signers to protect assets that they had acquired prior to the marriage. Without such an agreement, current state law requirements will determine these matters. An agreement simply allows the couple to follow their own rules, in as much detail as they wish.

Who pays for the prenuptial agreement?
It is common for the wealthier person to pay the legal fees of both parties. Even if your lawyer is paid for by your partner, your lawyer is legally and ethically obligated to represent your interests. And the wealthier person, who wants the prenuptial agreement to be enforceable in the future, will want you to be represented by your own counsel

What can be agreed to in a Prenuptial Agreement?
prenuptial agreements deal with property. Under a prenuptial agreement, the engaged couple decides their individual ownership rights to certain property and the distribution of that property during their marriage and upon their separation, divorce or death. Parties to a prenuptial agreement may contract with respect to:

  • The rights and obligations of each of the parties in any of the property of either or both of them whenever and wherever acquired or located;
  • Day-to-day practical matters like whether an automobile is jointly owned or establishment of a joint account for living expenses;
  • The right to buy, sell, use, transfer, exchange, abandon, lease, consume, expend, assign, create a security interest in, mortgage, encumber, dispose of, or otherwise manage and control property;
  • The disposition of property upon separation, marital dissolution, death, or the occurrence or nonoccurrence of any other event;
  • The modification or elimination of spousal support;
  • The making of a will, trust, or other arrangement to carry out the provisions of the agreement;
  • The ownership rights and disposition of the death benefit from a life insurance policy;
  • The choice of law governing the construction of the agreement; and
  • Any other matter, including their personal rights and obligations, not in violation of public polity or a statute imposing a criminal penalty.

How common is divorce?
Divorce is common in the United States. In 1997, one out of every two married couples got divorced. Divorce affects more than 3 million husbands, wives and children every year. Thats nearly the same number of people that are born annually. One in three of all first marriages end in divorce along with 50 percent of second or third marriages.

Can I protect my children, or my future children, in a prenuptial agreement?
You cannot waive rights to child support payments. Children, or future children, cannot have their rights protected by a prenuptial agreement. The Court will always make a decision concerning support, custody, and visitation, depending on the best interests of the child at the time of the divorce. Their parents, therefore, do not have the right to change that by a contract such as a prenuptial agreement. There are other ways to protect the rights of children, or of future children, such as through inter vivos trusts, but these are not prenuptial agreements and are not addressed here.

How does a judge decide whether to uphold the prenuptial agreement?
A judge may conduct a trial on the issue, or may read sworn statements concerning the agreement. Decisions are based on which side the judge believes, as well as a consideration of the law.

Is prenuptial agreement under states divorce law?
Yes. When you sign a prenuptial agreement, you are giving up rights you would normally have under your states divorce law.

When is a prenuptial agreement enforceable?
The validity and enforceability of Prenuptial Agreements will be governed by state law, and thus will vary from state to state.

A prenuptial agreement will generally be considered enforceable if:

  • The rights and obligations of each of the parties in any of the property of either or both of them whenever and wherever acquired or located;
  • it is in writing and signed by both parties before marriage;
  • it is voluntary and not unconscionable (generally defined as one that is so one-sided and oppressive that no person in his or her right mind would sign it without duress, coercion, or fraud;
  • there was an adequate disclosure of each person’s financial information, or that disclosure was waived;
  • the enforcement of the agreement would not essentially eliminate all of one party’s marital rights;
  • to avoid the appearance of coercion, the agreement was signed as early before the wedding as possible (a month or two);
  • the agreement is "fair" and does not leave one of the parties destitute.

Avoid making demands that might seem frivolous, like requiring that your spouse keep their hair cut a certain length dress a certain way. Frivolous demands can lead to revocation of the entire agreement. Furthermore, a few states such as California do not allow prenuptial agreements to modify or eliminate the right of a spouse to receive court-ordered alimony at divorce.

How long does it take to draft and sign a prenuptial agreement?
The time needed to draft and sign a prenuptial agreement depends on the complexity of the couples’ finances and the amount of negotiation necessary for agreement.

Does my prenuptial agreement need to address "commingling" of separate and joint property?
Yes. In most marriages commingling of assets occurs, muddying the water between his, hers and theirs. For example, if a person sells some of his/her assets and uses the proceeds to help purchase community property such as a home, dissecting ownership can be difficult and should be addressed in the prenuptial (prenuptial) agreement.

What is considered "separate" assets vs. "marital" assets?
When a couple divorces in some states, each party keeps his or her separate property (so long as it was maintained separately during the marriage and not commingled with marital funds). If the parties have not reached an agreement, the court divides the marital property in the proportion that it deems "just" after considering all relevant factors. If you entered the marriage with a house or investment portfolio or an inheritance, and kept title to those assets separate during the marriage, these assets will be considered your separate assets and not subject to division. HOWEVER, the increase in value in those assets during the marriage, as well as any assets purchased with income from your original assets, will be considered marital property and subject to division upon divorce.

Keep in mind as well, that income contributed during the marriage to a retirement plan (such as a 401(k)) would be considered marital property. Further, the increase in value of your retirement account during the marriage is marital property. Consequently, upon divorce, the court could grant your spouse certain rights to your retirement plan account.

A prenuptial agreement allows the engaged couple to alter the definitions of separate and marital assets in order to protect their assets and control distribution of assets upon death or divorce.

Does my prenup need to address liability for debts incurred in connection with the ownership of separate property before or after the marriage?

Could a prenuptial agreement mean the parties don’t trust each other?
Maybe, but a prenuptial agreement usually is grounded in realism rather than a lack of trust. For older couples who are marrying a second time, the parties simply want to protect their children. Younger couples may simply feel that a prenuptial will save expense later if the marriage does not work out.

SOURCE: LegalHelpMate.com