Prenuptual Agreements: Not Just For Royalty

Published: Portsmouth Herald
May 1, 2011

Prenuptial agreements, “prenupts”, once rare, are now commonly executed preceding second, etc., marriages and increasingly prior to first marriages.  The announced nuptials of Prince William and Kate Middleton has raised the question of whether brass tacks financial concerns of the royal family will intrude upon this fairy tale romance.  Considering that the bulk of Princess Diana’s post-divorce wealth came from Prince Charles and having already broken up with Kate once in their eight year relationship, Prince William might well follow the advice of those advocating in favor of a prenupt.  Following tradition, however, Prince Charles married Camilla in 2005, ignoring such advice, even after Princess Diana took him to the cleaners.

Not just royals are contemplating the protection of prenupts these days.  Such agreements are often encouraged by parents of us commoners who wish to insure that future inheritances remain in the bloodline.  While such protection can be legally addressed in other ways, valid, enforceable prenuptial agreements are the best first line of defense.  The key words here are “valid” and “enforceable”.  Unlike other contracts, the validity of prenupts will be challenged in almost every case.  The manner of their execution prior to the wedding and the observance of their terms during marriage are critical factors affecting their enforceability.

Courts in New Hampshire apply a three part test in assessing a prenupt’s validity:  (1) whether the agreement was fair when executed; (2) whether the agreement was appropriately executed; and (3) whether changed circumstances at the time of death or divorce have rendered the agreement so unconscionable as to make it unenforceable.  The following admonitions should be heeded to insure a prenupt’s validity:

  1. Make Your Intentions Known Early.  Those who present the agreement to their intended the day before the wedding might as well light a match to it on the honeymoon.  Giving your fiancé adequate time to consider the agreement and to comprehend its legal and financial consequences are critical factors affecting later enforceability.
  2. Plan For The Likely As Well As The Inevitable.  Keep one unfortunate fact in mind:  before most couples die, they get divorced.  Over 50% of marriages now end in divorce.  Therefore, address divorce issues first in such agreements and estate planning issues second.
  3. Preserve, Protect And Defend The Document.  The executed original should be kept in a safe deposit box inaccessible to the other spouse, not in a file at home or in a joint safe deposit box.  Many divorces start with the disfavored spouse dispossessing the other from the marital home.  That is similarly the case where a spouse dies.  If the original agreement is kept at home, it likely will disappear.
  4. Practice What You Preach.  Actions speak louder than words.  Actions taken contrary to the terms of the agreement may result in a court finding that the parties effectively revoked the prenuptial agreement.  Moreover, even the most carefully worded prenupts may be worthless if separate property is not kept separate during the marriage.  Avoid co-mingling of separate property with marital property.
  5. Provide Copies Of The Agreement To Professional Advisors.  Estate planning documents should be revised following the marriage to reflect the intent of the agreement.  The agreement should also be disclosed to accountants and financial advisors with admonitions to them that they abide by its terms.
  6. Don’t Rub Salt In The Wound.  Prenupts should be viewed as unalterable. Revising a prenuptial agreement after the marriage is personally wrenching and opens up a legal can of worms.  Desired changes can often be accomplished by employing other legal devices.
  7. Make It Fair.  Providing for a fair, albeit skewed, disposition of property dramatically improves the odds of validity.  Effectively addressing the possible financial situation of the parties years into the future by adequately providing for the party in need, while protecting the preferred party from future loss of significant assets, helps to make it fair.  Making the agreement fair improves the odds that it will be enforced for, as the House of Windsor is aware, not even the royal family is immune from divorce.  The financial advisors of the likely future King of England might wish to write the script now for what may turn out to be something other than a fairy tale ending to this royal romance.