Most state laws regarding the distribution of property after death or in the event of divorce leave plenty of room for a judge’ s interpretation. Therefore, you can never be sure what a judge will decide is really your property after a marriage. The only way to possibly avoid this is with pre-nuptial agreements.
The need to have pre-nuptial agreements often does not become apparent until there is a divorce or a death, which is when problems you never thought of tend to emerge. Divorce is more common than most want to believe. Some statistics suggest the divorce rate is even higher in second marriages than in first marriages. Do not forget that prenuptial agreements can be useful in the event of death, which is a subject even fewer people seem comfortable thinking about.
Most people think that pre-nuptial agreements are what rich people use to protect their property in the event of divorce from their less wealthy spouse. Actually, there are many more reasons to use a pre-nuptial agreement.
First Marriages
Even if you and your partner are a young couple with no significant property and typical jobs, and this is the first marriage for both of you, there is some evidence to indicate that pre-nuptial agreements actually promote stability in a marriage. This is because preparing one gives you a chance to carefully think about the significance of marriage, to clearly understand each other’s financial situation, and to consider how you see your financial futures (individually and together). Discussing a pre-nuptial agreement, even if one is never finalized, will make you realize that by getting married, you are entering into a legally binding contract with financial rights and obligations. This side of marriage is usually totally overshadowed by the romantic and religious aspects, and by the ceremony and honeymoon planning.
Many spouses do not know any of the details of the other’s finances. Since one of the requirements of a prenuptial agreement is fully disclosing each party’s financial situation, preparing one will help the couple get a clearer understanding of their total financial health. This can be very helpful in making financial decisions.
It is also good for a couple to share common dreams and goals. Focusing on a prenuptial agreement can help the couple discuss their career and economic goals in life. Especially with the common two-career couple, it is important to share thoughts on where each person intends his or her career to head. If each person is intent on developing his or her career, it might be a good idea for the couple to sign a prenuptial agreement giving up rights in each other’s income or business (especially if they have a fairly equivalent earning potential and they are just starting out in their careers). On the other hand, if they are in business together, a prenuptial agreement could outline how the business will be divided in the event of divorce. This document could avoid expensive attorneys’ fees later, and prevent a fight over the business in the divorce proceeding.
Children of Prior Marriages
One of the main circumstances for a pre-nuptial agreement is when one or both of the parties have children from a prior marriage or relationship. In such cases, a prenuptial agreement may be the one way to assure that the children are protected in the event of divorce or death. Otherwise, all of your property may go to your second spouse, with your children getting nothing.
Example: Rob and Rita are married and have no children together, but Rob has two adult children from his former marriage. If Rob dies without leaving a will, under the laws of their state, all of Rob’s property goes to Rita. Rob’s children will receive nothing.
A pre-nuptial agreement can help assure that children from a prior marriage will be provided for as intended by their parent. Your future spouse should have no objection to you wanting to take care of your children.
Business or Investment Partners
If you have business partners, you should have a prenuptial agreement to prevent disruption of the business in the event of divorce or death. Otherwise, you or your partners may end up with your spouse as a business partner, and that can cause all kinds of problems.
This caution also applies if the business is a privately held corporation. Many problems have occurred when a spouse inherits stock as part of a divorce judgment.
Example: Mark and his brother Jim each hold 50% of the stock in a small restaurant business started by their father. Mark married Jane, and several years later Mark died, leaving Jane his half of the stock. Jane was then the business partner of her brother-in-law. Jane then married Fred. When she and Fred divorced two years later, she gave Fred the stock in the restaurant as part of the property settlement. Now Jim has Fred for a partner. Is this what Mark would have wanted? Is this what Mark and Jim’s father intended to happen to his family business?
Suppose Mark and Jane had divorced. A judge might have divided the stock between them. Now Jim would have 50%, and Mark and Jane would each have 25% percent. Now Mark has his ex-wife as a business partner.
Deciding on a Pre-nuptial Agreement
Your state government has created a plan for how your property will be divided in the event of divorce or death. Ask yourself if you are satisfied with the state’s plan or if you want your own plan. Think about all of the laws your state legislature has passed. Then, ask yourself if you like any plan the legislature came up with on any subject.
Most state laws regarding the distribution of property after death or in the event of divorce leave plenty of room for a judge’ s interpretation. Therefore, you can never be sure what a judge will decide is really your property after a marriage. The only way to possibly avoid this is with a prenuptial agreement.
The need to have a pre-nuptial agreement often does not become apparent until there is a divorce or a death, which is when problems you never thought of tend to emerge. Divorce is more common than most want to believe. Some statistics suggest the divorce rate is even higher in second marriages than in first marriages. Do not forget that prenuptial agreements can be useful in the event of death, which is a subject even fewer people seem comfortable thinking about.
Most people think that a pre-nuptial agreement is what rich people use to protect their property in the event of divorce from their less wealthy spouse. Actually, there are many more reasons to use a prenuptial agreement.
A pre-nuptial agreement is entered into before marriage. This agreement can set forth what will happen to your and your spouse’s assets and income in the unfortunate event of divorce, separation or death. Most importantly, a prenuptial agreement can preserve the nature of property in the event the marriage ends. In other words, separate property can remain separate, instead of being subject to community property or equitable distribution laws.
Pre-nuptial agreements are gaining in popularity for a variety of reasons. One reason is that people today are focusing on their careers and delaying marriage. By the time they do marry, both partners have property and financial worth to protect. Prenuptial agreements make this easy to do. Pre-nuptial agreements are also common when one partner has children from a former marriage. Such an agreement makes sure a spouse’s separate property goes to their own children.
The greatest problem in most divorces is deciding how to divide property and money. Many prenuptial agreements are entered into simply because couples do not want the courts to decide on asset distribution should the marriage end. A few minutes of upfront planning have the potential to save headaches and tremendous financial hardships in the long run.
Whatever the reason, we can help you create a personalized prenuptial agreement. Simply answer a few questions online from the comfort of your home, and we will assemble the necessary documents for you.
Benefits of Pre-nuptial Agreements
The benefits of pre-nuptial agreements cannot be overstated. Although many divorces do not end up in court, they can still be extremely costly. Most people overlook the fact that marriage is a communion of property.
Deciding who receives what property can be a painstaking process requiring a lot of time and money. Lawyers can charge an average of $200 an hour to solve these problems for you. The minimal time investment of a prenuptial now can save you the potential cost and hassle of a difficult divorce later.
Pre-nuptial agreements primarily deal with couples who want to keep property separate and avoid court distribution in the event of divorce. Any kind of property can be included in the agreement, such as homes, automobiles, stocks, checking accounts, business interests and personal belongings. Debts can also be categorized as separate property. This prevents one spouse from being liable for the debts of the other should the marriage dissolve.
Validity of Pre-nuptial Agreements
The courts typically uphold pre-nuptial agreements unless one person shows:
- The agreement is likely to promote divorce
- The agreement was written and signed with the intention of divorcing
- One party was forced into signing
- The agreement was created unfairly
In addition, all pre-nuptial agreements should be based on the full disclosure of assets and debts by both parties. If you do not fully disclose your financial position, the prenuptial will be vulnerable in court. In addition, while you do not need an attorney to create a prenuptial agreement, it may be a good idea to retain one if the other spouse does so.
To understand what a pre-nuptial agreement can do, it is important to understand community and separate property. Community property is observed in the following states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. All other states follow equitable distribution laws.
In a community property state, the husband and wife equally own all income and assets earned or acquired during the marriage. This means the husband and wife equally own all money earned by either one of them during the marriage, even if only one spouse works. In addition, all property gained during the marriage with “community” money is deemed to be owned equally by both the wife and husband, regardless of who purchased it.
In a community property state, all debts contracted from the beginning of the marriage until the date of separation are community debts. This means both spouses are equally liable for these debts. In most cases, this includes unpaid balances on credit cards, home mortgages and car loan balances.
In equitable distribution states, property acquired during the marriage belongs to the spouse who earned it. In a divorce, the property will be divided between the spouses in a fair and equitable manner. There is no set rule for determining who receives what or how much, but a variety of factors are considered. For example, the court may look to the relative earnings contribution of the spouses, the value of one spouse staying at home or raising the children, and the earning potential of each. Often, each spouse will receive one-third to two-thirds of the marital property.
Regardless of your state’s property division laws, a prenuptial agreement lets you decide how marital property will be divided in the event of a divorce. For example, a prenuptial agreement can state that income earned during the marriage will belong to the spouse who earned it. In this sense, a prenuptial agreement can “override” community property or equitable distribution laws.
Separate Property in Pre-nuptial Agreements
The rules of community property and equitable distribution only apply to income and assets earned or acquired during the marriage. Separate property is everything a husband and wife own separately. In most cases, separate property includes:
- Anything owned prior to the marriage
- Anything inherited or received as a gift during the marriage
- Anything either spouse earned after the date of separation
In the event of a divorce, separate property will not be divided.
Similar to separate property, separate debts belong to one spouse. All debts incurred before marriage are separate debts. Educational or job training loans acquired before marriage are examples of separate debts.
One of the main benefits of pre-nuptial agreements is that separate property can be prevented from being accidentally re-classified as joint property. This can happen when funds are co-mingled or payments are made out of joint funds. For instance, if one spouse owes a large student loan, both may agree to keep that loan as a separate debt. Then, only one spouse would be liable for the debt in case of divorce.
No state allows limitations on child support payment amounts in a prenuptial agreement. Child support payments are defined by state guidelines.
On the other hand, spousal support waivers vary from state to state. States which follow the Uniform Pre-Marital Agreement Act permit the waiver of spousal support. However, the laws on this topic are constantly changing. For example, the California Supreme Court ruled that these types of waivers are enforceable. The state legislature amended the statutes to require legal counsel for spouses who plan to sign a waiver.
In general, a blanket waiver is acceptable in many states. Specific spousal support agreements (for instance, that a spouse will receive $2,000 per month in the event of divorce) are more problematic and can be difficult to uphold.
A pre-nuptial agreement is a contract between two persons planning to marry that determines the rights they have to each other’s property. You may also see them called antenuptial agreements, or pre-marital agreements. Prenuptial agreements are used to control how property will be divided in the event of divorce or the death of one of the spouses.
Most people do not fully appreciate the legal rights and obligations that are created when they marry. The legal aspects are often overlooked until it comes time for divorce. Then they find out that marriage is easy to get into, but difficult to get out of. The death of a spouse can also cause various problems with the couple’s property.
When you get married, the law gives you and your spouse certain rights in each other’s property. This includes property you acquire during your marriage, and may include property you acquired before you got married. The law also has provisions for how this property is handled in the event of divorce or death.
A pre-nuptial agreement might be considered a will for the death of a marriage (either due to actual death or to divorce). Just as a will can be used to avoid some of the hassles of probate, a prenuptial agreement can be used to avoid some of the hassles of divorce (and probate). Actually, everyone already has a will and a prenuptial agreement through the law. These are the probate and divorce laws, which can be viewed as the will and prenuptial agreement the state writes for you if you do not write your own. The divorce laws and the probate laws of your state give guidelines for the judge to follow in determining how property should be divided or distributed. By using a prenuptial agreement, you and your spouse can write your own guidelines to be used instead of your state’s laws.
For a long time, many courts would not enforce pre-nuptial agreements. The law has traditionally favored marriage. In the minds of lawmakers and judges, a prenuptial agreement seemed to encourage divorce, so the lawmakers would not approve them and the judges would not enforce them. However, with the simplified divorce procedures and high divorce rate in more modern times, lawmakers and judges finally came to accept reality. Every state’s laws now allow for prenuptial agreements.
Some people even include non-financial rights and responsibilities, as specific as who takes out the garbage and who does the dishes. However, since these types of agreements will not usually be enforced by the courts, they are better left out of the prenuptial agreement. If desired, these types of provisions should be part of a separate agreement that is just used to remind the husband and wife of their rights and responsibilities when disagreements arise.