Family Law,Money matter

Premarital Agreements

What does a spouse give up by signing a premarital agreement?
In signing an agreement, a spouse agrees to have his or her property rights and support obligations determined by the agreement rather than by the usual rules of law that a court would apply on divorce or death. An agreement can give the spouse more or less than state law allows. In most states, courts divide property as the court considers fair, and the result is less predictable: The split could be fifty-fifty or something else. If one spouse dies, courts normally follow the instructions of that person's will, but in most states the surviving spouse is entitled to one-third to one-half of the estate regardless of what the deceased spouse's will says. If the husband and wife have signed a valid premarital agreement, that agreement will supercede the usual laws for dividing property and income upon divorce or death. In many cases, the less-wealthy spouse will receive less under the premarital agreement than he or she would receive under the usual laws of divorce or wills.
What does a spouse give up by signing a premarital agreement?
In signing an agreement, a spouse agrees to have his or her property rights and support obligations determined by the agreement rather than by the usual rules of law that a court would apply on divorce or death. An agreement can give the spouse more or less than state law allows. In most states, courts divide property as the court considers fair, and the result is less predictable: The split could be fifty-fifty or something else. If one spouse dies, courts normally follow the instructions of that person's will, but in most states the surviving spouse is entitled to one-third to one-half of the estate regardless of what the deceased spouse's will says. If the husband and wife have signed a valid premarital agreement, that agreement will supercede the usual laws for dividing property and income upon divorce or death. In many cases, the less-wealthy spouse will receive less under the premarital agreement than he or she would receive under the usual laws of divorce or wills.
Why would a spouse sign a premarital agreement if he or she would receive less under the agreement than under other laws?
The answer to that question depends on the individual. Some people prefer to control their fiscal relationship rather than to leave it to state regulation. They may want to avoid uncertainty about what a court might decide if the marriage ends in divorce. For some, the answer may be "love conquers all"--the less-wealthy person may just want to marry the other party and not care much about the financial details. For others, the premarital agreement may provide ample security, even if it is not as generous as a judge might be. Still others may not like the agreement, but they are willing to take their chances and hope the relationship and the financial arrangements work out for the best.
What is necessary to make a valid premarital agreement?
In general, the premarital agreement must be in writing and signed by both parties. In most states, the parties must fully and clearly disclose in writing their income and assets to each other. This way the parties will know more about what they might be giving up. In some states, it may be possible to waive a full disclosure of income and assets, but the waiver should be done knowingly, and it is still best if each party has a general idea of the other's net worth.
The premarital agreement must not be the result of fraud or duress. An agreement is likely to be invalid on the basis of fraud if one person (particularly the wealthier one) deliberately misstates his or her financial condition. For example, if a man hides assets from his future wife so that she will agree to a low level of support in case of divorce, a court probably would declare the agreement invalid. Similarly, if one person exerts excessive emotional pressure on the other to sign the agreement, a court might declare the agreement to be invalid because of duress.
Must the parties to a premarital agreement be represented by lawyers?
No, but it is a good idea. Lawyers can help make sure that the agreement is drafted properly and that both parties are making informed decisions. The lawyer for the wealthier party usually prepares the initial draft of the agreement. The less-wealthy party should also have a lawyer to review the agreement, even if only on a minimal-cost consultation basis. Although you do not need to have a lawyer in order to have a valid agreement, the agreement is more likely to be enforceable if each person's interests are represented and significant back-and-forth negotiations have taken place. The agreement is more likely to be challenged if one of the parties does not have an independently chosen lawyer.
Do premarital agreements need to provide for a certain amount of support?
No, the law does not set a specific amount. In some cases, though rare, a court may decide that an agreement is enforceable even if it leaves one spouse with no property and no support from the other party. In determining whether a premarital agreement is enforceable as drafted, courts will examine circumstances that may have changed since the time of the marriage--such as the birth of a child, a career given up, or an unforeseen illness.
Some states will enforce an agreement to provide no spousal support, so long as waiver of support does not leave the less-wealthy party so poor that she or he is eligible for welfare. Many courts will apply broader notions of fairness and require support at a level higher than subsistence. Some states provide that the support cannot be "unconscionably" low. That is a somewhat vague term that means different things to different courts.
Some lawyers think it is a good idea for premarital agreements to contain an escalator clause or a phase-in provision that will increase the amount of assets or support given to the less-wealthy spouse based on the length of the marriage or an increase in the wealthier party's assets or income after the agreement is made.
May premarital agreements decide future issues of custody and child support?
No. A court may consider a premarital agreement the parties have reached regarding child custody or support, but the court is not bound by it. Broadly speaking, parties cannot bargain away rights of children, particularly before children are even born. A later section in this chapter will discuss child support guidelines and custody.