While those who are ready to say “I do” undoubtedly dream of a long and happy marriage, surveys show that 50% of people who say “I do” later say “I shouldn’t have.” Which is why the one document that all married couples should have, aside from a marriage license, is a prenuptial agreement.
Prenuptial agreements have long been derided as the ultimate unromantic gesture, the proverbial “kiss of death” to a marriage before it’s even begun. But prenups are not only a necessity in this day and age, where nearly half of marriages end in divorce, but an opportunity to make an incredible overture of love to a future spouse.
For in a properly negotiated prenup, each party says to the other, “Even if our best intentions for the future never come to be and our marriage becomes untenable, we will still treat each other fairly, no matter what.”
What Is a Prenup?
A prenup is a contract signed before the marriage in which each party discloses their assets and agrees how these assets, and all assets acquired during the marriage, will be distributed in the event of divorce or death – yes, death. One important feature of prenuptial agreements that many people overlook is that they are not limited to the division of assets upon divorce; they also spell out how assets should be distributed upon the death of one spouse.
Specifically, with respect to the prospect of divorce, a prenup details which assets will be deemed to be the separate property of each party and which assets will be deemed to be marital property subject to division. It sets forth a specific scheme for distributing marital assets and will set forth the terms for the payment of debts acquired during the marriage. It may direct the sale of jointly held property, or provide that property shall be held jointly for a certain period of time. A prenup also determines whether either spouse will receive spousal support, or possibly a lump sum payment in exchange for spousal support.
With respect to the prospect of the death of a spouse, a prenup sets a “floor” for the inheritance rights of each spouse. Under New York law, a spouse is entitled to at least 1/3 of their deceased spouse’s estate. However, spouses may waive this right in the prenup, or they may add to it. For example, the prenup could require each spouse to leave ½ of their estates to the other, or to leave their entire estate to the other, but in trust, with their children to inherit the remainder upon the death of the surviving spouse. Thus, a prenup sets a “floor” for inheritance rights in that it sets forth the minimum that each spouse must bequeath to the other – spouses are always free to execute last wills and testaments which leave a greater amount to their spouse.
What cannot be included in a prenup? Determinations relating to child custody and child support. As a matter of public policy, these are issues that must be finally decided by the court at the time of the divorce.
Why You Need a Prenup
So why is it important for couples to have a prenup? For lots of reasons.
1. Managing expectations. Do you and your spouse-to-be intend to comingle your assets after you marry? Do you intend to acquire assets jointly? Will either of you stop working when you have children? What do you think is a fair division of assets in the event of divorce? Do you expect that, upon a divorce, you would pay or receive spousal support? What do you think is a fair division of assets upon death?
These are all important questions that every couple should discuss before they get married so that they can enter the marriage with a clear understanding of their rights vis-à-vis each other, and their collective expectations vis-à-vis their assets. This clarity provides both parties with security – if the marriage ever becomes unsustainable, each spouse knows in advance what they could expect from a divorce, and they can make an educated decision about how to proceed. Moreover, each spouse knows what he or she will be entitled to upon the death of the other, and can plan ahead for their own financial futures knowing what they will or will not inherit.
2. Avoid protracted litigation. Divorcing couples who have forgone a prenuptial agreement often find themselves negotiating their finances with a spouse they no longer like, and who no longer likes them. This can make agreeing upon the division of assets and the payment of spousal support incredibly difficult, if not impossible. If a couple cannot agree on these issues, then the court will hold a trial and make a determination. But the process of negotiating a settlement or even getting to trial often takes several years and hundreds of thousands of dollars. It is not uncommon for particularly hostile spouses to spend more money on attorneys’ fees than they ultimately recoup after trial.
In contrast, even the most litigious of spouses are limited to what they can do in court if there is a valid prenuptial agreement in place – the terms of the agreement, no matter how old and no matter how circumstances may have changed, will be enforced and the court will be involved only in the matter of child custody and child support.
3. Protecting your rights and interests. Spouses have lots of rights to each other’s assets under the law, and a prenup can help to maximize these rights. For example, instead of being entitled to 1/3 of your spouse’s estate, as discussed above, you can negotiate a larger portion. A prenup can also protect the interests that are important to you. For example, if there are items of personal property acquired jointly but that have special sentimental value to you, you can negotiate in the prenup that those items will be yours in the event of divorce or death. Or, for example, if you and your spouse-to-be adopted a dog together before the marriage, the prenup could even determine who would get custody of the dog.
Why You Need a Lawyer to Draft Your Prenup
When it comes to prenups, DIY is not an option. Prenuptial agreements are complex documents that involve the interplay of several areas of law: matrimonial, contracts, trusts and estates, real estate, to name just a few. You need a lawyer who is experienced in drafting these documents so that you can be sure that they are done correctly and will work the way they are intended to. The only thing worse than not having a prenup is having a prenup has not been competently drafted.
Furthermore, a prenup is a powerful document, and the court will not enforce it unless it is convinced that both parties fully understood the terms at the time they signed it. If the prenup was drafted by a lawyer, and if both parties were represented by independent legal counsel who advised them as to the terms thereof, then the prenup is more likely to withstand judicial scrutiny. Steven Spielberg’s divorce is a excellent example of why you need a lawyer to draft your prenup: when the director proposed to his first wife, they infamously scrawled their prenup on a bar napkin. Years later when they sought a divorce, the judge refused to enforce the napkin agreement and awarded the wife $100 million.
What You Can Do If You Married Without a Prenup
Get a postnup! Postnuptial agreements are becoming more and more common as couples come to realize the importance and utility of prenups. Postnups make the same provisions as prenups, but are signed after the marriage. Postnups are particularly useful for couples who may be on shaky ground but are not yet ready to throw in the towel – it can provide a sense of security in that they know what their divorce would look like in the event that they truly cannot make their marriage work.
While the conversation about prenups can be difficult for many couples, it is a necessity. But, after you have that conversation – or even before! – make sure that you call the lawyer.