conley6.gif (2529 bytes)

 


Pass the prenup
Is a prenuptial agreement right for you and your spouse?

By GUY FIORITA

February 2016

When Beyoncť married Jay Z in 2008, she reportedly signed a prenuptial agreement that gives her $5 million for every child she bears to him, plus $1 million for every year of the marriage if they divorce. Itís a step Roseanne Barr didnít take when she married Tom Arnold. The two never signed a prenup, and when the marriage ended in a bitter divorce just four years later, Arnold walked off with $50 million.

Thatís Hollywood. In the real world, most people marrying for the first time are young and have very little "pre" to bring to the "nup." Second marriages, however, are a different story. By this time, one or both parties have probably accumulated assets worth protecting. And that is what a prenup does. It is a legally binding contract between two people who are getting married that essentially puts down in writing what will happen with property and spousal support if the marriage ends in divorce.

"Many states like Wisconsin have default statutes that cover property in a marriage, divorce and death. A prenup is an opportunity for a couple to alter those default statutes in a way that suits their needs or situation better, through legal agreement," says Eido Walny of the Walny Legal Group.

The clauses of each prenup vary, and some include sunset provisions that allow for the agreement to expire if the marriage lasts a certain amount of time. In general terms, prenups seek to categorize property acquired before and during the marriage as either marital or individual property or assets into "mine" vs. "ours" groups. If the marriage ends, I get to keep what is "mine," but everything that is "ours" must be divided.

The agreements can be contoured as the parties wish too. For example, the parties may want to treat each other one way if there is a divorce, but another way if a spouse dies. The parties may have the property division change over time, or they might want to be less forgiving toward one another if the marriage ends over certain reasons, such as infidelity. "Divorce can be messy and expensive," says Walny. "A good prenup settles a lot of the issues while the parties still like one another, not when they are least likely to agree on anything. Unfortunately, the people who know this best are those who have already gone through a divorce. Most of the prenups we arrange are for people marrying for the second or third time."

If there is a second or third (or more) marriage, prenups can also protect any financial obligations to a previous spouse. "We often see divorce agreements require life insurance policies as a way to ensure payment of support to an ex-spouse or children. A prenup can protect such an asset from going to the wrong place," says Walny.

"For a prenup to be legal, it has to fulfill certain requirements ó it must be in writing, there must be full financial disclosures by both sides, the document cannot be unreasonable, it must be executed legally, and it has to have been entered into voluntarily by the two parties. For a prenup to hold up, we always want both spouses to have legal counsel and be properly represented. This helps ensure that no one is being taken advantage of," Walny continues. "Also, the agreement should be signed well in advance of the actual marriage. We never want to see a spouse threaten to cancel the wedding if it is not signed. That is a clear cause of duress and evidence of a lack of willingness. The same applies to when the marriage is for the next day. You always want the parties calm and clear headed as they enter into such an agreement."

Walny says the question he is most asked is whether prenups really hold up in court. "The answer is: it depends," he says. "In theory, a good, valid, properly negotiated prenup should always hold up in court. When they fail, itís usually because the parties took their very good agreement, put it in a drawer, and left it there until the marriage was breaking up, having never followed a single term they agreed to. Just like any legal contract, you cannot selectively enforce terms. If you ignored the prenup during your marriage, a court is unlikely to enforce the deal upon divorce. And there are always defenses available to an aggrieved spouse who can claim things such duress, lack of full disclosure, unreasonableness and other such claims. It is very important to follow legal formality during the prenup drafting and agreement stage with the hopes of having a court enforce the agreement later. Going through that process will likely help avoid fighting, stress and other factors that lead to divorce. In an odd way, prenups can actually save marriages."

Tell that to Roseanne.

 


This story ran in the February 2016 issue of: