Prenuptial Agreements: An Overview
When entering into a prenuptial agreement, there are several important considerations. Let us begin here:
What is the purpose of a prenuptial agreement? In short, its function is to limit (or expand) rights lawfully granted to married people.
First, we should establish which legal rights marriage grants. In prenuptials, we are concerned with the financial rights and responsibilities of marriage. The law grants certain [economic] rights, privileges, and protections to married people. Legally, marriage creates a union out of two individuals and treats the unit as a whole — in many cases giving the unit priority over the individuals comprising it. The unit — as I am calling the married couple — has privileges and responsibilities — particularly financially as to accruing assets including real property. Prenuptials concern themselves with the financial implications of marital status.
In general, married people automatically:
Jointly own the income they earn while married.
Jointly own assets they acquire during the marriage.
When they jointly own real property, it is as tenants in the entirety, meaning each spouse owns 50% of the real estate, and if either dies, the entire property becomes the sole asset of the surviving spouse.
Upon death, spouses get special consideration if there is no Last Will or Testament so that the surviving spouse still inherits a portion of the estate of the deceased.
Have joint responsibility for debt incurred during marriage.
If married people divorce, based on a multifactorial analysis, the more monied spouse may be required to financially support the less monied spouse.
A prenuptial agreement often waives or limits those rights.
Public policy favors marriages as societal building blocks, in which spouses are financially invested in the family unit and build an interdependent partnership. While some could argue that our society, particularly economically, is an “every man for himself” model, marriages are structured to ground an individualistic, self-interested society by creating legal enterprises (marriages, among others) where individuals care for more than themselves and benefit by so doing.
During marriage, there is a legal presumption of joint ownership unless certain, clear steps are taken to establish separate ownership. There is a legally rebuttable presumption that all property accrued during a marriage is marital property and thus subject to equitable distribution in the event of divorce. A spouse claiming that an asset is separate has the burden of proof to demonstrate that it is, in fact, separate, otherwise, it will be presumed to be marital.
A prenuptial agreement addresses what will happen in the event the upcoming marriage ends in divorce, and usually includes provisions as to what will happen in the event of death. The latter shall be taken up, well, later. A prenup can cover a lot of ground dictating how multiple scenarios will affect the rights of the parties, particularly concerning separate property. A prenuptial agreement can include provisions regarding spousal support, from complete waivers to limitations and thresholds based on years of marriage prior to divorce and even conditioning support on the cause or fault for the divorce. For example, a prenup may include a provision that if a marriage ends due to infidelity, the unfaithful spouse relinquishes all rights to support.
Whereas those who enter marriages without a prenup will rely exclusively on the laws of their jurisdiction in the event of divorce, couples with prenups will be guided by their agreement, which shall generally take precedence over otherwise applicable law. Provided it is neither unconscionable nor against public policy, the limitations or expansion of rights dictated by a prenup will stand.
Alexander Mediation Group