What is a prenuptial contract and why would you need one?
What is a Prenup? Prenuptial agreements have been viewed by courts as a sign that partners are distrustful of each other for decades. Today, couples are using prenups in greater numbers without the taboos they once had. Couples are now embracing prenups, and removing the stigma associated with them. They do this by focusing on the parties’ ability to be honest and transparent with each other. This is seen as a sign that they have emotional maturity and pragmatism. Prenups became more popular as couples and courts realized that prenups were a way to set financial expectations upfront between the parties in an effort to avoid discord.
Prenups have many uses, including financial planning, protecting wealth, protecting family assets, and preserving the parties’ intentions regarding their finances and final desires in the event of divorce or death. Prenups can also prevent the intrusion of the court into the private lives of the parties in the event of divorce or death. This legal document can set financial security in place for your marriage in the unfortunate event of a divorce or death, by ensuring individual assets and liabilities are protected or devised as each party wishes and by clearly defining what the parties intended to be marital assets and liabilities vs. non-marital or separate property.
What to Include in a Prenuptial Agreement
The prenuptial agreement can address some or all of the issues that may arise after the parties’ marriage. If the prenuptial agreement does not address any specific marital issue or right, the state law will govern the marital rights as if the prenuptial agreement did not exist. So, it is very important to give great thought and consideration to all provisions of a prenuptial agreement.
Typically, prenuptial agreements address the parties’ understandings as to their alimony and equitable distribution rights in the event of separation or divorce.
It’s important to have these legal provisions agreed on beforehand so that both parties understand how assets will be divided. This avoids having emotional spousal disputes interfere with the reasons for separation.
In Florida, a prospective spouse can include anything relevant to their potential dissolution in their prenup, so long as it does not conflict with public policy. Under Florida law, a spouse cannot waive their right to temporary support, such as alimony, or attorney’s fee, before a final judgment is entered of dissolution. However, the agreement can specify that in the event Florida law changes in the future, the other party waives his or her right to temporary alimony or attorney fees.[These links should go to the alimony and equitable distribution pages on the web site]Typically, a prenuptial agreement outlines what is considered marital vs. non-marital or separate property, how to split finances, personal properties, and marital homes. It may also include mechanisms to split marital assets or liabilities (such a debt), retirement plans and pensions, as well as life insurance policies. Moreover, a prenup can also include waivers or limitations of certain types of alimony and specific instructions as to how the parties intend to deal with the synthesis of any marital and non-marital assets during the marriage.
With the boom of technology, many prenups now include confidentiality clauses, provisions for ownership, and the storage of embryos. These clauses protect confidential information revealed during the marriage and protect both parties’ private data (such as photos) from the public. They also protect financial circumstances and holdings and determine the ownership rights between the parties for any embryos they choose to store during the marriage. The parties can, however, include their desires or intentions regarding the possibility of having a child during the marriage. The parties may want to include a clause that grants additional rights to one spouse versus the other if a child is born. If the agreement does include parental responsibility, decision-making and/or child support in the event of a birth, the agreement will likely be scrutinized and/or modified by the court. The court will take into consideration the circumstances that exist at the time of adjudication in determining whether the provisions of the parties’ prenuptial agreement are and/or continue to be in the child’s best interest when deciding whether to enforce the provisions.
Prenuptial agreements also can determine what rights each of the parties have in the event of the death of one of the parties during the marriage. Absent governing provisions in a prenuptial agreement as to what happens in the event of the death of a party, Florida law will govern and determine the spousal rights of the surviving party and who will inherit from the deceased spouse depending on whether the spouse died intestate or not.
When to Complete a Prenup
Ideally, your prospective spouse should receive the prenup agreement three to six months prior to the actual wedding or marriage date. It is important that your prospective spouse has time to review the agreement and seek independent legal advice. It is important to give your spouse and their legal counsel ample time to review, edit and finalize your prenup. Your intended spouse’s legal counsel must consider the time in which he or she is given the agreement in order to properly review and negotiate the prenuptial agreement when determining the feasibility of completing the agreement prior to the marriage and whether the timing of the exchange of the document may pose a challenge to the enforceability of the agreement.
Further, the prenup agreement must be documented and signed by both parties. If the prenuptial agreement waives any rights either party may have if the other spouse dies, it must be executed according to the laws of your state. The prenup will be legally binding in terms of inheritance and estate planning. The prenup agreement should also be signed by the parties with the same formalities as required by the last will and testament in your state, if different.
Why Get a Prenup?
Prenups are not just for the rich and famous, Prenups can help the average person avoid a messy, lengthy, and expensive divorce. For example, consider the advantages of a prenuptial agreement in the following situations:
If you own assets and/or property before your marriage.
This can include inheritances, property owned jointly with a parent (or friend), joint bank accounts, assets acquired before marriage, trust funds, stocks, investments and retirement accounts.
A prenup can ensure that your partner’s debt remains their responsibility. A prenup can ensure that your partner’s debt remains their responsibility.
You are starting your business.
Your company has the potential to grow, and in the future, it could become very profitable. A prenuptial agreement can protect the business and investments you have made. It allows you to limit or separate your spouse’s right to the business if you divorce or die.
If a party does not plan to work during the marriage, then a prenup will help establish a financial plan for a divorce. This is especially important for those partners who will contribute the most financially to the marriage. Alimony can be determined in advance. This can also be helpful to the non or lesser-earning spouse to clarify how their decision of staying home will affect their lives in the event of a divorce.
- Prior Marriage.
- A prior divorce can create financial complications. A prenup will help you avoid financial complications from previous divorces. Additionally, if your spouse had children from a previous marriage, a prenup can protect your children’s inheritance if your current marriage leads to a divorce proceeding.
- Public Figure.
- Similar to a non-disclosure agreement (NDA), a prenuptial agreement can limit what the ex-spouse can say to the public about you, the marriage, and the divorce.
- Limit Future Litigation Cost.
This can reduce litigation costs and expenses, as well as preserve marital assets. This tends to greatly reduce litigation costs and expenses and preserve marital assets.- Issues Prenups May Bring
- Prenups are not “airtight”. Prenups must adhere to many guidelines before the court will declare them valid and enforceable. Florida follows the Uniform Prenuptial Agreement Act (UPAA), which has a set of guidelines that help the courts determine whether prenups are enforceable.
- Prenups are sometimes disputed or challenged by parties in court, especially if there are many assets involved or if there were questionable circumstances surrounding the execution of the prenup. Some of the most common arguments and/or basis by which to attack the validity of a prenup agreement are as follows:
- Involuntary or duressed spousal signatures.
- For instance, there have been cases where a spouse did not know that they had signed a prenuptial agreement. In order to prove that one party was under duress it is not sufficient for the other party simply to refuse to continue the marriage if the prenup has not been signed. For a valid argument, there must be evidence of a threats, physical or psychological, or other forms of coercion for duress to be considered.
- Unfair Agreements and Lack of Disclosure.
The court will rarely invalidate a prenup if it appears to be unfair. The courts will not invalidate a prenup just because it appears to be unfair. The other spouse may have hid assets or financial information when the prenup agreement was signed. To prove the validity of prenup agreements, it is important to disclose all assets in full and transparent fashion. Attorneys are often asked, “What should you disclose?” Proceed with caution and disclose everything, even if it is unclear whether or not an asset will be yours at some point in the future. Furthermore, if you are unsure, it may be better to disclose an asset than to be faced with more formidable and valid defenses to a prenup agreement after expending the resources and time to prepare the agreement.- Attorney Involvement.
- Some court focus on the other party’s ability to understand and receive independent advice. In this case, it is recommended that you provide your prospective spouse’s attorney’s fees, so that they can select an attorney of their choice to review the agreement and your finances. In certain situations, failing to offer separate legal advice could work against your interests and allow modifications to your prenup that you didn’t intend. To avoid any disagreements with your partner about your prenuptial contract and to preserve its validity, you and your spouse should seek independent family legal advice. This will ensure that your partner and you sign an agreement that is tailored to your circumstances and preferences, and that all of your questions regarding your rights under Florida laws have been answered to the satisfaction of both parties before entering into the agreement. The Campbell Law Group offers both in-person and online consults. Please call us at 305-460-0145 if you have any questions about this article or any complex family law, corporate, or commercial issue.
