DO I NEED A PREMARITAL AGREEMENT?

Q:

What is a premarital agreement?

A:

A premarital agreement is a legal document that both spouses sign prior to getting married that specifies how their assets will be divided in the event of a divorce or death.

Q:

Do I only need a premarital agreement if I am wealthy?

A:

No. It is a misconception that only wealthy individuals can benefit from a premarital agreement. Premarital agreements can by utilized for several different reasons. If you are expecting to inherit a significant amount of assets or a family business, then a premarital agreement could be useful. Also, if you have started a business that could become very lucrative in the future, a premarital agreement could be used to ensure you keep that value and it does not end up in the hands of a former spouse. In addition, individuals that each have grown kids from a previous marriage and are both independently wealthy can utilize a premarital agreement by keeping all of their individual assets separate from the other as if they were never married. This ensures these assets will be available for their own kids rather than end up with their spouse and then ultimately the spouse’s children.

Q:

Can premarital agreements be revised or terminated if circumstances change in the future?

A:

Yes. Most premarital agreements have a provision allowing them to be changed or terminated if both spouses agree in writing. Also, most premarital agreements have language that allows you to “trump” the premarital agreement by subsequently executing a will or other estate-planning document that has provisions providing more assets to your spouse. For example, if you execute a premarital agreement stating your spouse gets only certain assets upon your death, but you execute a will stating your spouse gets all of your assets, the will “trumps” the premarital agreement and your spouse will get everything. This can also be accomplished through trusts or beneficiary designation forms on assets such as life insurance policies, retirement accounts, and anything else that has designated beneficiaries.

My fiancé is asking me to sign a premarital agreement. Should I do it?

Another misconception is that premarital agreements are all bad and should be feared. While it is rarely enjoyable for someone to sign a premarital agreement restricting their ability to obtain certain assets of their spouse, the majority of premarital agreements are simply designed to protect a family business or farm or family inheritance. Typically, all income earned by both spouses, and assets accumulated while married will be considered marital assets and will be divided equally in the event of divorce and available to the surviving spouse upon death. Also keep in mind that premarital agreements are a legal agreement like any other and can be negotiated if you feel the terms are not fair. Also, both spouses should be represented by their own counsel to protect their interests and explain the legal ramifications for signing the premarital agreement.

James R. Maring

This article was prepared by Jim Maring, an attorney with the Serkland Law Firm in Fargo.

For more information, call 701-232-8957, email jmaring@serklandlaw.com or visit serklandlaw.com

This article should not be considered legal advice and should not be relied upon by any person with respect to his/her specific situation.