With so many asset-heavy marriages ending in divorce, having a legal agreement is critical. It isn’t there to make sure one person stays rich while the other ends up with nothing. Instead, it helps protect both spouses’ rights and assets. When you need to transition from a married couple to singledom, a marital agreement makes all the difference.
Here is a broad look at what prenups are, what they do (and don't do) for high net worth divorces, and why creating one could save you time and resources in the long run.
What Are Marital Agreements?
These documents outline how to divide assets after a divorce. They can also account for other post-divorce agreements like spousal support, child support, child custody, and so on.
Before they get married, couples can sign a prenuptial agreement, also called a “prenup.” You can also create a marital agreement after the wedding. This document is called a “post-nuptial agreement.”
A marital agreement is especially important for couples with high value assets. It can protect each spouse’s financial interests. Without an agreement, asset division can become overly complicated and tense. A pre(or post)nup can prevent prolonged legal battles and allow both parties to move on with their assets intact.
Marital agreements can bring peace of mind. They let you know that certain assets, such as family businesses or properties, will not be subject to division in a divorce.
How Do Courts Evaluate Prenuptial Agreements?
Not all marital agreements are created equal, and courts will not simply go by whatever the contract says. They must evaluate the agreement first.
Courts must verify:
- Whether both parties signed the agreement voluntarily
- Whether the agreement is fair under the circumstances of the marriage
- That both parties had adequate legal representation at the time of signing
(You must keep this fact in mind when creating your marital agreement. A contract that heavily favors one party can be overruled.)
- Establishing what will happen in the event of a divorce
- Minimizing the stress and turmoil that often accompanies a divorce
- Specifying who will be responsible for debts accrued before the union
- Specifying which assets each person brings into the marriage, keeping this property separate
The Cons of Prenuptial Agreements
- Some people may feel uncomfortable discussing finances before getting married.
- Circumstances change over time, and it may be necessary to regularly update or redraft your agreement.
- It is expensive to draft a marital agreement. Doing so requires legal assistance, adding extra costs to an already expensive wedding.
- They are not the most romantic thing a couple can do together. Simply suggesting a marital agreement can cause hurt feelings or mistrust.
Tips for Negotiating a Successful Prenuptial Agreement
- Seek the advice of a qualified lawyer
- Discuss your individual goals and priorities
- Be transparent and honest about your finances
- Remain open to compromise and understanding
- Approach the negotiation process with a positive, collaborative attitude
Mistakes to Avoid When Creating a Prenuptial Agreement
- Failing to disclose all assets and debts. Accurate information helps avoid future disputes.
- Creating an agreement that is too restrictive or unfair to one party. To be enforceable, a prenuptial agreement must be reasonable and balanced.
- Failing to review and update the agreement regularly. Major life events, such as the birth of a new child, significantly changes your assets and financial plan.
Russell S. Hershkowitz, L.L.C. is here to help you craft a fair, mutually-beneficial marital agreement. If you are ready to help protect your future, contact us online today or call our office at (407) 753-4111.