Well, we hate to burst your bubble, but maybe you should explore prenups. Chances are you don’t need one, but finding out more about them might give you insight into your own relationship. And who knows — maybe you two should consider one. Read on.
WHAT’S A PRENUP?
"A prenuptial agreement is a binding contract between two individuals who are deciding, prior to their marriage, what their legal relationship will be in the event of divorce," explains Caroline Krauss-Browne, an attorney in the matrimonial department at Tenzer Greenblatt LLP in New York City. "The emphasis is on binding — the agreement will not be set aside unless a challenging party can show fraud or duress. So this is not something you enter into lightly — this is serious business."
The concept of prenuptial agreements is relatively new. Before the equitable distribution law was passed (around 1980 in New York), there were no guidelines for dividing possessions when a marriage dissolved. Wives were often left with nothing when wealthy husbands put everything in their names, says Krauss-Browne.
The new law changed that. Equitable distribution means that if and when a couple divorces, a judge will define the marital estate — all assets acquired after the marriage date and prior to the date the divorce action was filed — place a value on those assets, and divide them equitably. "That does not mean equally," notes Krauss-Browne. In long-term marriages it usually means 50-50, but not always — the ratio depends on the contributions of each spouse. For example, Krauss-Browne handled the divorce of a female fashion designer in which the husband got only 25% of the estate. "There’s definitely a revived notion of contribution to the marriage, not only by earning money but by raising children and being supportive of a spouse’s career," she says.
With a prenuptial agreement, a couple decides how their "marital" and "separate" property will be defined before they tie the knot, eliminating uncertainty. "You can be as specific as you want," says Krauss-Browne. A prenup can also help a couple avoid an expensive legal battle if they do divorce someday.
SO WHO REALLY NEEDS ONE?
Prenups aren’t just for Donald Trump — but they’re not for everyone, either. Krauss-Browne says many couples who request prenups are older, often well-off, with children from previous marriages whom they want to protect. This is one of the most significant reasons for a prenup, she points out: "In most states, your spouse can elect against your estate for up to a one-third share, and the children can say nothing about it." (A prenup cannot protect children born to a couple during their marriage, only those from previous marriages.) Younger couples who choose a prenup usually have an interest in a family business, or assets that may appreciate significantly during marriage.
Many people don’t realize that advanced degrees can justify a prenup, too. "MBAs are worth a fortune," says Krauss-Browne. "Or if you’re a doctor and you become a specialist, that has added value. In addition to your license, your practice is valuable, and it will appreciate during the marriage, which makes it marital property. If you’re planning to go to school during the marriage and your spouse will help pay for it, that counts as marital property, too."
But isn’t a prenuptial agreement almost an expectation of divorce? "Usually it’s a matter of protecting substantial assets that you already have," explains Krauss-Browne. "But it’s true, you don’t want to enter into marriage negotiating a divorce. Unless you have a really good reason, there’s no need for a prenup."
WHO DOESN’T NEED ONE?
Remember that anything you own prior to marriage is separate property — you don’t need a prenuptial agreement to keep it that way. If you have property or a bank account that you want to keep in your name, leave it as is. If it’s an account, don’t deposit anything you earn during the marriage — that’s called "commingling" funds. Also, anything you inherit before or during the marriage is separate property — and so are gifts from a third party to you as an individual while you’re married.
Joanne and Gregg considered a prenup because Joanne’s mother had passed away the year before their wedding, leaving everything to her only daughter (Joanne’s dad died when she was 16). "I wanted to make sure my inheritance wasn’t going to become a huge issue if, God forbid, there were a nasty divorce," says Joanne. But the couple found out her inheritance was not marital property, so a prenup was unnecessary. Not that the idea of one caused tension. "Gregg knows that even though these assets are legally mine, he benefits from the fact that we have them, too — he’s got a mortgage-free home! But we were glad we wouldn’t have to deal with the legal mumbo-jumbo of a prenup."
WHEN AND HOW DO YOU DRAW ONE UP?
"Ideally, you should start negotiations six to eight months before the wedding, and you should sign the agreement at least a month before," notes Krauss-Browne. "This is an emotionally charged negotiation to begin with — don’t deal with it on your wedding day!"
Bonnie, who negotiated a prenup with her husband Steven, acknowledges that the experience was stressful because the couple postponed it until a few days before the wedding, "which is definitely the worst time to do it. You’re feeling so happy and romantic, and a prenuptial agreement feels cold and harsh," she says.
Agreements should be in plain English, defining the division of assets specifically and clearly, spelling out exactly what the two of you agree is marital property and what will remain separate. You should each have separate counsel, and your lawyers should explain everything in the simplest terms.
A prenup must be signed in the presence of a notary public. Some law firms go even further. "We do an allocution on the record, where we have a court reporter sit in and the couple is asked, ‘Have you read this, do you understand it, do you each have your own counsel, were you satisfied with your counsel, do you understand that this is the division of your assets, and so on,’" Krauss-Browne says. "And it’s ideal to have full financial disclosure, specifically listing the assets and liabilities of each partner. That’s to preclude the fraud claim — a prenup can be nullified if one partner is hiding assets."
CAN A COUPLE GO TOO FAR WITH A PRENUP?
Definitely. "I’ve seen some crazy ones," observes Krauss-Browne. "I remember one where if the woman gained more than ten pounds during the marriage, her property rights would be cut back." But the woman agreed to it, and as long as you sign on the dotted line, your prenup is binding. "The courts have uniformly held that if you knowingly consenting to this you are bound by it, even if you don’t like it," Krauss-Browne says. "People have this notion that a prenup can be tossed out, but it’s very hard to get it tossed out. You have to think very carefully. A prenup should go through many drafts — it should not just be slapped together."
Bonnie, who signed her prenup a few days before she tied the knot, agrees. "A prenup can open the lines of communication about important issues that you might not discuss otherwise, but it is something the couple needs to agree on," she says.
"There needs to be a level of trust and good faith when negotiating a prenup," advises Krauss-Browne. "This is the person you’re marrying — treat each other fairly."
SOURCE: The Knot