Frequently Asked Questions about Premarital Agreements
Por: Linda J. Ravdin and Anne W. Coventry
- What is a premarital agreement?
A premarital agreement is a contract entered into by a couple who plan to marry. It determines their rights regarding property and support when the marriage ends-whether by death or divorce. Some premarital agreements provide that each party will keep all money earned and assets acquired before or after marriage; in other words, what's his is his and what's hers is hers. Other agreements provide for each party to keep premarital and inherited assets and for assets acquired through their efforts during the marriage to be shared. Some agreements provide for one spouse to make transfers of cash or property to the other spouse or provide for alimony for a dependent spouse in the event of divorce.
- I am planning to get married. Do I need a premarital agreement?
Every married couple has a premarital agreement. State laws provide certain property rights for a surviving spouse after the first spouse dies. State laws also provide for division of assets if the parties divorce and for support for spouses who are unable to support themselves. In that sense, state law is the parties' agreement. Today, it is increasingly common that couples choose to write their own agreement to meet their own objectives and reflect their own values rather than rely on state law to determine their rights at death or divorce.
- My fiancé(e) and I just got our degrees and neither of us has any assets or expects to inherit any. Should we have a premarital agreement?
Many young couples in this situation feel they do not really need a premarital agreement. However, every couple considering marriage can benefit from talking about some of the same issues that are generally covered in a premarital agreement. For example, they might discuss whether they will pool their income and share all the fruits of their labor, or whether a party wants to maintain separate bank accounts and control his or her income. They might also discuss what they each would consider fair if the marriage did not work out. Most people getting married do not discuss money matters until after they get married; sometimes they find out too late that their ideas about money are quite different.
- My fiancé(e) asked me to sign a premarital agreement. Doesn’t that mean s/he does not trust me?
Not really. There are many reasons a couple considering marriage may want a premarital agreement. A party may wish to provide for children of a prior marriage in his or her estate planning. In fact, a premarital agreement can improve family relationships when a stepparent enters the picture by giving children the peace of mind of knowing that their inheritance expectations remain intact. When there is a family business, the party and his or her family members may feel a premarital agreement is necessary to protect the business in the event of a death or divorce. When a party has been married and divorced he or she may be reluctant to marry again without a premarital agreement. With the high incidence of divorce, even hopeless romantics must recognize the risk of failure. For many couples it is better to acknowledge the possibility of divorce and agree on a fair division of property in advance if things do not work out for them than to take their chances with the courts.
- Are premarital agreements only for the very rich?
Not at all. One reason even people of modest means may want an agreement is to decide in advance how assets accumulated during the marriage will be handled in the event of divorce or when the first spouse dies. Other reasons might be to reassure one another that neither party will seek alimony or to agree that the parties will use mediation, arbitration, or a collaborative process in the event of marital dissolution. Deciding such matters in advance, before a breakdown in the relationship, can significantly reduce legal fees for divorce and can give both parties peace of mind.
- My fiancé(e) and I plan to have children. Can I get a premarital agreement that gives us joint custody and says that we will share the children’s expenses equally?
Yes, but it is not binding. A premarital agreement cannot prevent a court from deciding custody and determining the parties' obligations for support of their minor children based on the facts at that time.
- I want a premarital agreement. When should I bring up the subject with my fiancé(e)?
As soon as possible after deciding to get married, before booking the caterer or putting down a deposit for a honeymoon cruise. Unfortunately, many people delay because they are uncomfortable bringing up the subject. The longer the party who wants the agreement waits, the more difficult it becomes. Couples seeking a premarital agreement almost always underestimate the amount of time it takes to negotiate an agreement that is acceptable to both parties. Often they think all they need is a simple agreement because they are not aware of all the issues they should consider. It is also unfair to the other party to delay; delay may make it difficult for him or her to obtain competent counsel and to negotiate the terms. Negotiations that take place in the midst of wedding plans with invitations about to go out can be extremely stressful for both parties and too often unfair to one of them. Unfairness breeds unhappiness and that is not a good way to begin a marriage. In addition, if the wedding date is coming soon, a party may later claim that s/he signed the agreement under duress. Ideally, the parties should have 3 or 4 months to consider and negotiate the terms of the agreement.
- My fiancé(e) and I each have children from prior marriages and we want to ensure that half of our combined assets go to my children and half to his/her children after our deaths. Can’t we just accomplish that through our wills, without a premarital agreement?
No. A will is the act of one individual. A person who makes a will can change it without the other spouse's permission. Even if you write identical wills leaving 50% of each estate to your children and 50% of each estate to your fiancé(e)'s children, a surviving spouse could re-write his or her will after the first spouse dies and leave everything to his or her own children. A premarital agreement is a contract that is binding on both, even after death. To carry out your plan to share your assets with both sets of children, you need both a binding agreement and wills.
- What are the requirements for a valid premarital agreement?
Both parties must enter into the agreement voluntarily. The agreement must be in writing and signed by both parties. Both parties should provide disclosure of their assets and income.
An agreement is voluntary if each party had a choice about whether to sign it. A party who is unhappy with the proposed terms but decides to sign the agreement anyway, needs to know that he or she will be stuck with the agreement even if the terms are unfair. However, the parties should consider fairness of terms when they are negotiating. An agreement that is very unfair to one spouse can undermine the marriage itself. It also gives a disadvantaged spouse an incentive to try to convince a court to invalidate the agreement.
- How much financial disclosure is necessary?
The standard method is a written list of assets and debts and amounts of income, but parties can also use a recent loan application, copies of tax returns, account statements, or a combination. Both parties should have the opportunity to ask for additional information so that each is satisfied that he or she knows enough to make an intelligent decision about whether to accept the proposed terms. As a rule, the more fully parties disclose their financial situation, the harder it will be to challenge the validity of the agreement later.
- My fiancé(e) and I agree that my lawyer will draft our premarital agreement and that he/she will not have a lawyer. Will the agreement be thrown out by a judge if both parties do not have lawyers?
No. There is no requirement that both parties have lawyers in order to create a valid premarital agreement. However, it is a good idea for both parties to have independent legal advice, especially if there is a significant disparity in assets or income. Independent counsel for the economically weaker party can negotiate for better terms than may have been proposed originally and can make sure s/he understands how the agreement will affect his or her rights.
- We both agree that we want a premarital agreement and we know what we want in it. Can we go to the same lawyer for our premarital agreement?
No. Even when a couple agrees on what should go in the premarital agreement, each of them should get independent legal advice. Sometimes an agreement that seems fair at the outset may have unexpected consequences. Each party should receive independent advice about the rights s/he would have without an agreement and how the agreement might affect him or her later. Each should get advice about any additional terms that s/he should consider.
- Aren’t premarital agreements easy to break?
No. Many people considering a premarital agreement have heard stories about how easy it is to get such an agreement thrown out. This is a myth. If the parties entered into the agreement voluntarily and with disclosure of assets, the court will uphold it. The court will enforce the agreement even if it is unfair to one party. This is one reason it is so important that both parties have independent counsel; independent counsel can make sure the economically weaker party understands that s/he cannot change the terms of the agreement later unless the other party agrees.
- My fiancé(e) and I are a same-sex couple planning a wedding in D.C. Can we have a premarital agreement?
Yes, and it may be even more important for you to do so than for an opposite-sex couple. If an opposite-sex couple marries without a premarital agreement, state law will step in to determine their rights at the end of the marriage. If a same-sex spouse moves to a state that does not recognize the couple's marriage, both spouses move together to such a state, or either spouse owns property in a state that does not recognize their status as spouses, the courts in that state may refuse to consider their claims. A premarital agreement can remedy this problem by predetermining parties' financial rights; they would not need to fall back on state law.
Moreover, even if the couple lives (and remains) in the District of Columbia or a state that recognizes their marriage, their rights will be affected by federal law in some fashion. The federal defense of marriage act (DOMA), 1 U.S.C. §7, prohibits recognition of a same-sex marriage for all purposes under the U.S. Code. The Obama administration has declared that it will cease to defend DOMA in court cases, but there is no guarantee that the next administration will do the same. A premarital agreement can take account of these gaps in the law's protection of marriage.
- My same-sex fiancé(e) and I may eventually move to another state after we marry. Will our premarital agreement be enforceable in the new state?
The agreement should be enforced as a valid contract. In the majority of states courts have acknowledged that unmarried cohabiting adults have a right to enter into a contract governing the financial incidents of their relationship. Therefore, a same-sex premarital agreement should be recognized as valid even if the marriage is not. Nevertheless, there is uncertainty about whether courts in some states will enforce such an agreement. The law is still developing. It is very important that a same-sex couple get legal advice.
- My spouse and I meant to have a premarital agreement, but we ran out of time before the wedding. Can we use a postmarital agreement?
Yes. Parties can accomplish the same objectives in a postmarital agreement as they could have pursued in a premarital agreement. There is one important difference, however. Before a marriage, either party can refuse to marry unless the other party accepts a premarital agreement. However, after the wedding, if a party threatens a divorce as a means to drive a very hard bargain, that may put the validity of the agreement at risk. A postmarital agreement will hold up in court as long as the parties entered into it voluntarily. Each party should disclose his or her assets and liabilities and his or her income. Neither party should use unfair methods to obtain terms that are very disadvantageous to the other spouse. Threatening to leave an intact marriage to extract an agreement is inappropriate as is exploiting a spouse's financial dependence or the mental or physical weakness of a seriously ill spouse.
- I am considering a premarital agreement. What should I do next?
The first step is to let your fiancé(e) know you would like to enter into a premarital agreement. Then, you should gather your financial information (a list of assets and liabilities and amounts and sources of income) and give some thought to what you want to accomplish. The third step is to meet with an attorney to be sure you understand your rights under state law in the absence of a premarital agreement, discuss your objectives, ask questions, and obtain legal advice. Your fiancé(e) should also hire a lawyer. Your lawyers will work with you to craft an agreement that is acceptable to both of you.