The Pros of the Prenup
The Pros of the Prenup
Scrolling through the news items of today, I could not get off my mind, “How did Jeff Bezos, of all people, not have a prenup?” As it turns out, he married his current spouse before he created Amazon, and now she stands to be the richest woman in the world. We live in a turbulent world, and this current event still brings up the subject of a pre-marital agreements for many people who are considering marriage – even if they don’t have billions of dollars.
Currently, divorce statistics are declining, and the married population is getting older and more educated. These changing demographic trends seem to indicate that matrimony is becoming more exclusive in terms of socio-economics, particularly amongst “Millennials”.
Furthermore, studies suggest that marriage is becoming more and more of an achievement of status, rather than something people wanted to do, like in the “old days.” Couples are waiting to marry until they are more economically stable, with some poorer Americans not marrying at all. In my day, we had kids first and then realized we couldn’t afford them…
There are probably many reasons for this trend. For the Millennials, perhaps they witnessed their parents’ divorce and remember how terrible it was for them. Coincidentally, now they want to be more financially secure before they marry, and in case they get divorced. Undoubtedly, financial disputes are the number one reason for divorces in America. Without a pre-marital agreement, these divorces can be messy, long, and very expensive.
I try to tell clients a pre-marital agreement is not a sign of distrust or a document only the elite can afford. On the contract, most pre-marital agreements are designed to identify financial concerns and establish expectations, rather than planning for divorce, which they do. A well-drafted pre-marital agreement can actually serve as divorce prevention.
Having a pre-marital agreement is like buying insurance - you hope you never need it but it is there in case you do. Having this agreement can also be helpful to a spouse with fewer assets because individuals will often quit a job or relocate prior to a marriage. A pre-marital agreement can ensure that the non-working spouse is made financially stable in the event of a divorce.
A very common question asked by a spouse is, “Why is he or she asking me to sign a prenup? Don’t they trust me?” Having a pre-marital agreement can be a win-win for both parties. In fact, one of the biggest misconceptions of a prenup is that one of the parties is actually untrustworthy. I explain to many couples that a prenup can be a road map for their financial future.
An engaged couple should plan for their financial future and be able to agree upon financial issues before hand. By planning and taking the stress out of their relationship beforehand, couples can focus on what is most important to them in their relationship. A pre-marital agreement can build trust throughout the relationship on both sides and can always be modified as a couple’s financial future changes.
One of the biggest mistakes couples make is to just write down the division of assets on a piece of paper. While certain exceptions may apply, there is no “DIY prenuptial” and oral agreements are unenforceable. Like many other states, Nevada follows the Uniform Prenuptial Agreement Act (“UPAA”), which sets forth the rules for pre-marital agreements. In sum, a pre-marital agreement must provide a full and fair disclosure of each party’s assets, it must be notarized, signed voluntarily, and each spouse must be represented by separate and independent counsel.
Under the UPAA, Nevada has outlined some specific terms that can be contained in a pre-marital agreement. Some examples include:
· the rights and obligations of each spouse to property either spouse owns, the right to buy, use, sell, transfer and control property;
· the ownership of property upon separation, divorce, death, or any other event;
· The elimination or modification of alimony or spousal and support;
· the making of a will or trust to carry out the goals of the prenuptial agreement;
· which state law governs the agreement; and,
· any other term that does not violate public policy or the law.
There are many legal issues which are not allowed in a pre-marital agreement in Nevada, such as:
· A Nevada prenuptial agreement cannot negatively affect a child’s right to child support;
· An agreement may be unenforceable if the agreement was unconscionable when the couple entered into the agreement;
· The spouse seeking the prenuptial agreement filed to disclose his or her property and financial obligations in a fair and reasonable manner;
· The agreement was not entered into voluntarily; and,
· The agreement eliminates or modifies spousal support or alimony to the extent that the spouse becomes eligible for public assistance.
A pre-marital agreement should also outline how the growth in value of non-marital assets will be treated. Recently, courts have taken a closer look at this valuation and have determined that the appreciation in those assets value is shared, rather than individual property.
Of course, signing a prenup does not mean you will not end up in court should you divorce, or that your interests would be protected as intended. However, having an attorney provide you with a pre-marital agreement will provide you with peace of mind that the agreement complies with the law, and allows you to focus on more important things, like how to pay for taking your kids to Disneyland.