-
Premarital Agreements
What is a premarital agreement?
A premarital or antenuptial agreement is a contract entered into by a man and woman before
they marry. The agreement usually describes what each party's rights will be if they divorce or
when one of them dies. Premarital agreements most commonly deal with issues of property and
support--who is entitled to what property and how much support, if any, will be paid in the
event of divorce.
Why do people enter into premarital agreements?
Sometimes persons intending to marry use premarital agreements as a way of clarifying their
expectations and rights for the future. Another reason for making such agreements is to try to
avoid uncertainties about how a divorce court might divide property and decide spousal support
if the marriage fails. A man or woman who wants a future spouse to enter into a premarital
agreement often has something he or she wants to protect, usually money. One or both partners
may want to avoid the risk of a major loss of assets, income, or a family business in the event of
a divorce. For people marrying for a second or third time, there might be a desire to make sure
that a majority of assets or personal belongings are passed on to the children or grandchildren of
prior marriages rather than a current spouse.
What does the less wealthy spouse give up by signing a premarital agreement?
The less wealthy spouse is agreeing to have his or her property rights determined by the
agreement rather than by the usual rules of law that a court would apply on divorce or the death
of the wealthier spouse. As will be discussed later, courts have certain rules for dividing
property when a couple divorce. In some states (such as California), courts automatically divide
equally the property acquired by the husband and wife during the marriage. In more states,
courts divide property as the court considers fair, and the result is less predictable; the split
could be fifty-fifty or something else. If one spouse dies, courts normally follow the instructions
of that person's will, but the surviving spouse usually is entitled to one-third to one-half of the
estate regardless of what the deceased spouse's will says. If the husband and wife have signed a
valid premarital agreement, that agreement will supersede the usual laws for dividing property
and income upon divorce or death. In many cases, the less wealthy spouse will receive less
under the premarital agreement than he or she would receive under the usual laws of divorce or
wills.
Why would the less wealthy spouse sign a premarital agreement if he or she would
receive less under the agreement than under other laws?
The answer to that question depends on the individual. Some people prefer to control their
fiscal relationship rather than to leave it to state regulation. They may want to avoid uncertainty
about what a court might decide if the marriage ends in divorce. For some, the answer may be
"love conquers all"--the less wealthy person may just want to marry the other party and not care
much about the financial details. For others, the agreement may provide ample security, even if it
is not as generous as a judge might be. Still others may not like the agreement, but they are
willing to take their chances and hope the relationship and the financial arrangements work out
for the best.
What is necessary to make a valid premarital agreement?
Laws vary from state to state. In general, the agreements must be in writing and signed by
the parties. In most states, the parties (particularly the wealthier one) must disclose their income
and assets to each other. This way the parties will know more about what they might be giving
up. In some states, it may be possible to waive a full disclosure of income and assets, but the
waiver should be done knowingly and it is best if each party has a general idea of the other's net
worth.
The agreements also must not be the result of fraud or duress. An agreement is likely to
be invalid on the basis of fraud if one person (particularly the wealthier one) deliberately
misstates his or her financial condition. For example, if a man hides assets from his future wife so
that she will agree to a low level of support in case of divorce, a court probably would declare
the agreement invalid. Similarly, if one person exerts excessive emotional pressure on the other
to sign the agreement, a court also might declare the agreement to be invalid because of duress.
When should the agreement be signed?
Most states do not set a specific time at which premarital agreements must be signed.
Generally, it is better to negotiate and sign the agreement well before the wedding, to show that
each person has considered it thoroughly and signed it voluntarily. If the wealthier person shows
the agreement to the prospective spouse only one day before the wedding, a court may later
find that agreement invalid because of duress. While a last-minute premarital agreement is not
automatically invalid, timing may be a significant factor in determining whether the agreement is
valid.
Must the parties to a premarital agreement be represented by lawyers?
No, but lawyers can help make sure that the agreement is drafted properly and that both
parties are making informed decisions. The lawyer for the wealthier party usually prepares the
initial draft of the agreement. The less wealthy party does not need to have a lawyer in order to
have a valid agreement, but the agreement is more likely to be enforceable if that person's
interests are represented and some back-and-forth negotiations take place.
Do premarital agreements need to provide for a certain amount of support?
No, the law does not set a specific amount. In some cases, a court may decide that an
agreement is enforceable even if it leaves one spouse with no property and no support from the
other party. If, when the marriage ends, the less wealthy party does not have marketable job
skills or is not able to work, a court would be likely to refuse to enforce an agreement denying
support. Some states will enforce an agreement to provide no spousal support, so long as
waiver of support does not leave the less wealthy party so poor that she or he is eligible for
welfare.
Many courts will apply broader notions of fairness and require support at a level higher
than subsistence. Some states provide that the support cannot be "unconscionably" low. That is
a vague term that means different things to different courts.
Many lawyers think it is a good idea for premarital agreements to contain an "escalator
clause" or a "phase-in provision" that will increase the amount of assets or support given to the
less wealthy spouse based on the length of the marriage or an increase in the wealthier party's
assets or income after the agreement is made.
May premarital agreements decide future issues of custody and child support?
No. A court may consider a premarital agreement the parties have reached regarding child
custody or support, but the court is not bound by it. Broadly speaking, courts do not want
parties to bargain away rights of children, particularly before children are even born. (A later
section of this chapter on child support will discuss child support guidelines.)
0 comments: