Why Smart Couples Create Prenups

May 1, 2010

(Published in the New Hampshire Wedding Guide, 2010)

The mention of a prenuptial agreement (often called “prenups”) seldom triggers happy thoughts, however, the vast majority of prenuptial agreements are drafted fairly and requested for good reason. In fact, prenuptial agreements often protect and advance the interests of both spouses.

Prospective spouses may wish to protect certain assets or income upon death or divorce for many valid reasons. The ability to do this allows some parties, who might otherwise refrain from marriage, to marry their loved one while still protecting dependents, family members or others in the event that disaster strikes years later. Common reasons for prenuptial agreements, include:

  • To protect substantial wealth or to protect against substantial debt.
  • To ensure that an inheritance is received by the intended recipient(s).
  • Medicaid planning to protect assets from the government in the event that a spouse becomes ill and requires substantial medical care.
  • To prevent an order requiring the sale of certain property to satisfy a judgment.
  • To establish the terms under which each party will manage his or her separate finances or assets and to establish how associated investments, expenses, debts and other obligations will be handled.
  • To protect and provide for children from a previous marriage, grandchildren, parents or other dependents and loved ones.
  • To protect and conserve a closely held or family business from intrusion, disputes or dissolution.
  • To exclude a gift or inheritance from the definition of marital property and, therefore, from an undesired distribution or liquidation.
  • To provide for an expedient and hassle free dissolution of marriage.

A well drafted prenuptial agreement will provide certainty to the spouses. Such an agreement can determine most financial obligations of the husband and wife during the marriage or in the event of divorce (except those related to children), thereby eliminating uncertainty, contention and costly, lengthy or hostile divorce litigation. Without a prenuptial agreement, in the event of death, an estate may not be distributed according to the wishes of the deceased. For example, a bequest could be overridden by a spouse asserting a claim for a greater share of the estate. In the event of a divorce between parties without a prenuptial agreement, disputes frequently arise about support obligations, what assets should be included in the marital estate for purposes of dividing marital property, valuation of assets, the percentage of marital assets to be awarded to each party, and other matters. Often a third party, whether a judge, relative acting under a power of attorney or executor, must make decisions that the spouse would rather make. Prenuptial agreements allow the spouses to control these events.

The content of individual prenuptial agreements can vary dramatically, from a limited agreement that addresses only a specific asset, to an agreement that addresses all present and future property, assets, income, and spousal support, both during marriage and in the event of divorce. Prenuptial agreements can be rigidly structured or flexible. For example, many prenuptial agreements provide spouses with an increasing right to some asset(s) over the course of marriage or an increasing amount of support to reflect the duration of the marriage. Some agreements apply only in the event of death or only in the event of divorce or only to assets acquired before the marriage, etc. Other prenuptial agreements include so-called “sunset provisions” that terminate the prenuptial agreement upon a date certain or the occurrence of an event. In sum, a prenuptial agreement can be as standard or creative or as liberal or restrictive as the parties wish it to be.

The subject of a prenuptial agreement should be addressed early in a relationship, ideally before or shortly after engagement. The prospective spouse who wants the agreement should explain the reasons why the agreement would be helpful and be prepared to acknowledge the other party’s fears or misconceptions about such agreements. Once a couple decides to enter into a prenuptial agreement, the first step is to prepare a list of all assets owned by either prospective spouse and then talk about a fair resolution to achieve your objectives. Knowing what you want and what you agree upon will make the process of drafting a prenuptial agreement move quickly and will also make the process less emotional and less expensive. During this process, it is important to keep in mind that a prenuptial agreement should be completed at least thirty days before the wedding date. It is also very important that each person retain separate counsel to ensure that their rights are protected.

A prenuptial agreement is not an indicator of distrust or lack of commitment. Instead, the document provides certainty to the spouses and is a simple, often very fair, planning mechanism to ensure that the spouses’ agreements before their marriage are heard and implemented.

Margaret Kerouac practices domestic relations law in the Litigation Group for the law firm of McLane, Graf, Raulerson & Middleton, P.A. She can be reached at 603.628.1330 or at margaret.kerouac@mclane.com The McLane Law Firm is the largest full-service law firm in the State of New Hampshire, with offices in Concord, Manchester and Portsmouth.