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Prenuptial Agreements Ease Financial Pain
While we don’t marry someone with the idea of splitting up later, the truth is that every year about half of the marriages in the US end in divorce and only about 5% of them every go to trial. This is because we would prefer a friendly separation and an out-of-court settlement because divorce is painful.
A prenuptial agreement can help to save you from a court fight if you and your partner decide to divorce. While easing the pain of divorce, it can also preserve family ties and even make your marriage less stressful because of the certainty of your intentions.
Before discussing a prenuptial agreement with your intended, be very clear in your own mind why you want to have it. Then be honest. If you want your children from a previous marriage to know that you have provided for them financially, say so. If you want to protect your intended from any possible argument from the first family, say so. If you want to assure your parents that your business will stay in your family if you are divorced or deceased, say so.
A contract signed by both parties and notarized, the prenuptial agreement in most states is acknowledged as if it were a deed. While prenuptial agreements need not be filed with the court or reviewed before signing, they can be set aside for fraud, duress, failure to provide information, unfairness, and failure to be adequately represented.
All states require that there be full disclosure of assets and liabilities, and that each spouse be fully aware of what they are getting and giving up by signing the agreement.
Prenuptial agreements were popularized in the 19th century, mostly to protect heiresses from marrying men who were "out for their money." Prior to the Married Women's Property Act of 1848, a woman's property, upon marriage, was transferred to her husband. When they married, her money became his and any business that she managed became his, too. If she inherited money during the marriage, that, too, was his.
In the prenuptial agreement, either party can waive any rights given by law. Yet one spouse can voluntarily give to the other as much as either wishes. If there is a lucrative business, the agreement can state who will manage the business, handle the investments and receive the income or proceeds from it. The agreement can state the proportion of funds from a certain source that will belong to each party. The parties can even agree on how they will spend certain sums throughout the course of the marriage.
With a prenuptial agreement, a person can disinherit a spouse, settle property rights or exempt a major asset like the family business from the marital estate. Without such a signed agreement, most states give a surviving spouse a minimum of one-third of the total assets.
If there are children from a previous marriage, this is important because the childeren of that marriage may lose one-third of their inheritances, even assets that were accumulated during a first marriage and the new marriage lasted for only a few weeks. In some states, the heirs to an estate can continue a divorce proceeding that began before the deceased died as a tool to prevent the surviving spouse from receiving any of the inheritance. A prenuptial agreement prevents such bloody battles.
So long as the agreement is voluntary, it can be tailored to meet any special need. Estate provisions in prenuptial agreements may also be useful in first marriages, or where one of the parties previously was married. Such agreements can require that insurance policies be purchased to insure an inheritance, or to exempt cherished family property from the spouse or to protect a trust fund that was set up for another family member.
Only in the past three decades have states upheld prenuptial agreements as a basis for financial settlements in the event of divorce. While prenuptial agreements are not very romantic, it can be a positive thing in a marriage to document what the spouse receives vs. what members from the first family can expect in the event of death or divorce.
The prenuptial agreement could cover basic financial matters important in divorce, like a major business, a particular trust fund, a future inheritance, a waiver of financial support, Couples can agree to waive their rights to financial support. This means that both parties will have an incentive throughout the marriage to accumulate their own wealth and to pursue their own careers because if the marriage fails, they can only look to themselves for financial support. These waivers must be reasonable, and neither party must be in danger of going on assistance. Further, the rights of a child, born or unborn, cannot be waived.
Without such agreements, a community property state can grant the spouses one-half of the marital wealth. In other states, the assets are divided based on an “equitable distribution.”
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