Properly drafted prenuptial agreements often alleviate financial worries or pressures, that could otherwise compromise a marital relationship. While prenuptial agreements may be viewed with skepticism by some, in the majority of cases, prenuptial agreements are fairly drafted and requested for understandable reasons. Such agreements are written codifications of what the parties believe to be a fair result in the event of death or divorce, as determined in advance of marriage. In the event of death or divorce, such agreements save the parties from the money, time and emotional energy spent on probate or divorce litigation. Prenuptial agreements can protect a party’s assets and/or income, both at present and in the future. The most common reasons that parties seek prenuptial agreements are:
- To protect children, grandchildren, parents or other dependents and loved ones in the event of death or divorce.
- To protect a closely held business from intrusion, disputes, battles over valuation and, potentially, dissolution upon death or divorce.
- To provide comfort to family members that a family asset, business or legacy will be protected.
- To protect assets, gifts, trusts, or inheritances from an undesired distribution or sale in the event of death or divorce.
- To protect present and future income from various sources.
- To define how each spouse will manage his or her separate finances during the marriage and to establish how joint investments, expenses, debts and other obligations will be handled.
- To protect substantial wealth or to protect against substantial debt.
- To provide expeditious and agreed-upon result in the event of death or divorce, negating the need to negotiate or litigate such matters under the applicable laws after a dispute arises.
- To ensure that, upon death, an estate is distributed according to the wishes of the deceased, rather than by statutory rights to property.
- To reduce a party’s fear of protracted litigation in the event of death or divorce.
In the absence of a valid prenuptial agreement, the legal definition of marital property is “all tangible and intangible property and assets, real or personal, belonging to either or both parties, whether title to the property is held in the name of either or both parties.” However, prospective spouses may enter into a prenuptial agreement to alter that definition, by limiting or excluding assets, income and expectancies. For example, a prenuptial agreement could segregate one party’s interest in family assets from distributable marital property, thereby protecting the family assets from distribution in the event of death or divorce. In the absence of such protection, a court could award marital property to either party or order the sale of any asset. Establishing expectations in advance also avoids or minimizes the intensity and length of divorce or probate litigation. Prenuptial agreements can avoid years of litigation and significant legal fees.
Postnuptial agreements have enjoyed increasing popularity throughout the country. Such agreements allow married parties to reach agreement on the distribution of their assets and liabilities upon death or divorce. This provides financial independence and security while allowing a couple to remain married. In the event of divorce, a well-drafted postnuptial agreement that follows the necessary formalities will likely be enforced by the court and greatly simplify the divorce process and division of property.
Courts examine various factors in determining the enforceability of a prenuptial or postnuptial agreement, including fairness, voluntariness, adequacy of disclosure, the ability of each party to negotiate and whether the agreement was the product of mistake, duress or misrepresentation. Each party should have counsel in the process of drafting and negotiating a prenuptial or postnuptial agreement. Although representation by an attorney is not an absolute requirement, it significantly increases the likelihood that the agreement will be enforced.