Most individuals considering a prenuptial agreement will probably tell you that they are dreading having the “prenup” conversation with their fiancée or fiancé. People fear discussing prenuptial agreements because of the discomfort and stress it puts on a relationship otherwise focused on wedding and honeymoon planning. People fear post-nuptial agreements because of the potential to derail an otherwise healthy marriage. However, going through the process of planning and executing a prenuptial or post-nuptial agreement does not have to be an uncomfortable experience. In fact, if handled properly, it can lay the foundation for a wonderful marriage centered on education, communication, trust, balance and equality.
Anyone going through the process needs to understand that society has turned prenuptial and post-nuptial agreements into dirty words. There is such a negative stigma associated with these agreements that an individual considering one is often fearful of the pushback he or she will receive for bringing up the conversation. Therefore, it is critical that anyone considering a prenup or postnup understand that it is an incredibly sensitive topic. Recognizing this early will help considerably.
Making the process a positive one is all about planting the seeds and giving yourself plenty of time. The first time you bring up a prenup or a post-nup with your fiancée or spouse is not the time to make any demands or even begin thinking about getting an answer. Start very early (well before any wedding date for a pre-nuptial agreement), and begin by asking if it’s OK to have a discussion. The path to a comfortable process begins with realizing that it is a long process, and not something that should be done under pressure with a looming deadline. It will require several conversations over a comfortable course of time to be handled correctly.
Educating your future or current life partner about a prenuptial or post-nuptial agreement is a critical first step. People often do not understand that an agreement can protect the person being asked if they would be willing to sign one, as much as the person presenting one. Prenuptial and post-nuptial agreements can offer financial protection and stability for spouses who are homemakers and/or full-time parents. If done properly, it can lay the foundation for a secure financial planning strategy that will allow both people to enter into or continue a marriage in a stronger position than before.
It’s important that both parties to the agreement feel that they are negotiating on a level playing field with equal footing. A prenuptial agreement can be more akin to an insurance policy for the financially dependent spouse versus a tool used to protect a wealthy individual considering marriage. Provisions regarding retirement contributions and spousal support can be made part of these agreements so that the financially dependent individual feels safe and protected. A well-drafted prenuptial agreement is an effective estate planning tool that can help strengthen both individuals’ financial futures. In fact, the people who lose out when folks decide to sign an agreement are the attorneys!
When you are entering into a marriage or are already in a marriage where incomes and assets are dramatically disproportionate, considering a prenuptial or post-nuptial agreement is a prudent and wise decision. When handled properly it can be a comfortable process that strengthens a relationship and lays the foundation for financial security for both individuals. Just remember to start early, be sensitive and recognize that it is an emotional issue, and educate your fiancée or spouse.
After the initial conversation between you and your partner, the next phase will be engaging an attorney and gaining an understanding of the legal aspects of a prenuptial or post-nuptial agreement.
When selecting an attorney, it’s critical that you find the right fit for you. Personality can often be a critical a factor in selecting an advocate as legal expertise. A good consumer shops around, and selecting an attorney should be no different. Interviewing several attorneys can help you determine the right personality fit for you, as well give you an opportunity to compare cost. To help determine if the person would be a good fit, ask questions tailored towards discovering information related to experience, personality, and expertise.
As with doctors, finding a specialist to handle your pre-nup or post-nup has advantages over hiring a general practitioner. Attorneys who focus their practice on a particular area of the law become intimately familiar with handling that aspect of the law. It is important that you ask the following questions in your initial attorney interview:
After you interview several attorneys and select the person whose combination of personality, expertise and cost best fits your needs, it’s important to understand what makes a prenuptial or post-nuptial agreement enforceable. The last thing you want is to go through this entire process, only to have your agreement invalidated by a Court because it was improperly drafted. The seminal case in the area of prenuptial agreements is Scherer v. Scherer.
In Scherer, the Supreme Court of Georgia established a three-prong test that all pre-nuptial agreements must satisfy in order to be enforceable. First, was the agreement obtained through fraud, duress, or a mistake, or through misrepresentation or nondisclosure of material facts? Second, is the agreement unconscionable? Third, have the facts and circumstances changed since the agreement was executed, so as to make its enforcement unfair and unreasonable? If the three elements of the Scherer test are satisfied, then the Court must enforce the agreement.
In instances where an individual has failed to disclose a retirement account or a business interest, Courts have set aside the entire agreement for nondisclosure of material facts. Full disclosure of all assets will help your attorney draft an iron-clad pre-nup that will stand the test of time and remain enforceable as you grow in your marriage. If you have significant financial changes in your life, it is important to follow up with your attorney about the enforceability of your prenuptial or post-nuptial agreement. Courts have also set aside entire agreements when one person was signing under significant duress (i.e. on the eve of a wedding without sufficient notice or time to properly review and retain counsel).
Obviously, a critical component of the pre-nuptial and post-nuptial process is to be organized and educated about your financial assets. Meeting with a financial advisor to gain an understanding of your assets, and then categorizing them based on tax implications, who owns them, and how they are titled will be invaluable to your attorney. It will also help you minimize the time with your attorney and utilize their legal expertise efficiently. Remember that attorneys should not wear all hats and provide financial, tax and legal advice. A CPA is better suited for tax advice, while a financial professional, especially a Certified Divorce Financial Advisor, is better equipped to provide financial guidance. Utilizing a team of professionals will help keep the process efficient and ensure that the quality of the final agreement is of the highest possible standard.
Do not make the mistake of coming to an attorney without first having met with a CPA and financial professional to get organized and educated about your financial assets. Minimizing your attorney’s time by being fully prepared and organized will help save significantly in attorney’s fees.
Issues and emotions around money are challenging for many couples. By opening up the lines of communication early in the relationship, you can avoid surprises and build on a foundation of transparency and respect.