When Kemp Klein began counseling businesses, families and individuals nearly 40 years ago, prenuptial agreements were considered to be against public policy if they addressed divorce. Today, prenuptial agreements are recognized in all fifty states, yet misconceptions remain.
If you, a friend or family member is planning to get married, what are the benefits – and pitfalls – of deciding to use a pre-nuptial agreement?
Why have a prenuptial agreement?
Prenuptial agreements, also known as antenuptial agreements, are an important planning tool for many couples who are about to be married. They can be particularly useful if you:
- have accumulated significant assets prior to your marriage;
- have children from a prior relationship and wish to protect their inheritance rights;
- want predictability regarding what you will receive in the event of a divorce or the death of your spouse; or
- want predictability regarding how an asset you bring to the marriage (for example, a family business) will be treated in the event of a divorce or the death of your spouse.
If you are thinking about a prenuptial agreement, here are four important things to consider:
1. Allow time to discuss. Allowing for time to understand each other’s needs and expectations will make the process less stressful and help you avoid unnecessary mistakes. Early preparation will also give your attorney more time to understand your requests, advise you, and negotiate the agreement on your behalf.
“Springing” the idea of a prenuptial agreement could create problems. The closer it is to the wedding date, the more likely it is that the person being requested to sign the agreement will feel pressured. In the event of a later divorce, the court could interpret the agreement as not truly voluntary and may invalidate it.
2. Seek independent counsel. You and your future spouse should each have your own attorney. One attorney or firm cannot represent both parties due to the conflict of interest that such a situation would create. In addition, in the event of a divorce years later, having independent counsel for both parties prevents claims that one party did not actually understand the terms of the agreement. It also weakens any potential claims that the agreement was signed under duress.
3. Share all financial information. Each of you must provide a complete disclosure of your assets and liabilities, which will be attached to the agreement. If the value of any asset is unknown, it is wise to get an appraisal. However, if you and your future spouse decide not to obtain an appraisal, the prenuptial agreement should state that both of you are waiving any right to an appraisal and the failure to obtain one will not be raised later in an attempt to invalidate the agreement.
4. Be reasonable. An agreement that is one-sided as to what is received in the event of divorce will be subject to possible later attack on the grounds of unreasonableness. Even if your future spouse agrees to the one-sided contract, this does not mean that the agreement cannot later be challenged as unenforceable. Making sure that the agreement is fair and equitable for each of you actually strengthens its validity.
What circumstances can invalidate a prenuptial agreement?
Upon the death of a spouse or a divorce, challenges to the validity of a prenuptial agreement sometimes occur if doing so would be financially advantageous to one of the spouses. If that happens, a court must determine whether:
- agreement was obtained through fraud, duress, mistake, or misrepresentation or nondisclosure of an important fact;
- agreement was unreasonable when executed; and
- facts and circumstances have changed since the agreement was executed such as unforeseen disability or even a terminal illness. Even less serious situations which exist at the date of the spouse’s death or the divorce that did not exist at the time of the marriage may engender challenges to the prenuptial agreement’s validity.
Preparing for the future
While it is not possible to plan for every situation which arises during your marriage, having your prenuptial agreement properly prepared will help you and your future spouse protect your assets and your family in the event of a death or a divorce. A prenuptial agreement can help foster communication and create a strong, honest framework for your life together by addressing difficult issues before you “tie the knot.”
For further information regarding these matters, please contact Ms. Stawski at 248.619.2590 or via email.