Chapter 28 Prenuptials and the Marriage Vow

“Courtship is the feast.Marriage is doing the dishes.”

Do I Need to Read This Chapter?

● Am I about to marry,especially not for the first time? ● Do I have preexisting,separate property to protect? Does my future spouse? ● Does the subject of premarital agreements somehow make me uneasy? ● Have I thought about all the factors such an agreement should address?

Prenuptial agreements,like estate planning,are no longer exclusively for the rich and famous.The likelihood is great that people marrying today will have preexisting separate property to protect.There is no better method to protect a party’s rights,assets,and those financially dependent on each of the parties than by a legally binding contract called a prenuptial agreement. The terms prenuptial,premarital, and ante nuptial are virtually synonymous.

What Is a Prenuptial Agreement?

In addition to being a contract,a prenuptial agreement is a plan to achieve protection of assets.Those assets acquired prior to the marriage are known as nonmarital property,and assets acquired during the marriage are known as

marital property.The use and ultimate distribution of assets involves arm’slength negotiations between the soon-to-be spouses.While this notion may dampen the fires of love (“Love means never having to say ‘sign here.’”),it is imperative that the parties act openly and in good faith and that they take the time to develop a plan in order to satisfy each other’s wishes.

The nature of a prenuptial agreement and its inherent legal requirements and characteristics provides each party the freedom to protect his or her nonmarital property from each other.Provisions affecting marital property and other issues arising from the marriage are subject only to notions of fairness and equitable constraints.It cannot be overemphasized that any financial plan should take advantage of the protection available from prenuptial agreements.

A wise person once quipped that a prenuptial agreement is like putting an asterisk next to the vow “I do.” That is a true statement—and a smart practice.

What Elements Make Up a Prenuptial Agreement?

Like any other legal contract,a prenuptial agreement must satisfy basic legal requirements.The agreement must be in writing and must be executed by the parties whose signatures are witnessed or notarized,and there must be consideration,which is the marriage itself.Indeed,while prenuptial agreements are entered into prior to marriage,the terms and conditions are effective only upon marriage.The marriage may be a civil or religious ceremony,so long as it is a valid,recognized ritual affecting a legal union.

All 50 states recognize prenuptial agreements,although the laws of each state are not uniform.There is a Uniform Prenuptial Agreement Act,but not every state has adopted its provisions,and some of those states that did have made modifications.

In addition to being in writing,executed,and witnessed,a prenuptial agreement must possess characteristics common to all contracts and essentially required in some form by every state law.It is important to appreciate,however,that in determining the validity of a prenuptial agreement for whichever

reason,generally only the facts and circumstances existing at the time the agreement was made are considered by the court.

What Are the Categories to Be Addressed in a Prenuptial Agreement?

Each party must enter into the prenuptial agreement freely and voluntarily. Courts are sensitive to the personal relationship of the parties, with its attendant frailties and emotional influence. Consequently, courts will not enforce agreements where the circumstances indicate that one party took unfair advantage of the other. The terms of the prenuptial agreements must be fair.

The parties should include any topic important to each of them in their prenuptial agreement.There are available preexisting forms that contain standard language of a prenuptial agreement,but these standard forms are run-ofthe-mill and probably will not deal with specific topics or situations unique to each party.

The prenuptial agreement should contain a blueprint of which assets and income of each spouse are to be used during the marriage and for what purposes.The prenuptial agreement can act like a business plan in this regard.The agreement can also state how joint assets are to be distributed after the marriage,whether it ends by reason of death of one spouse or divorce.A discussion of important provisions follows.

Separate Property and Separate Income

Simply identifying each party’s separate property is not sufficient.Since one of the major purposes of a prenuptial agreement is to preserve the nonmarital assets of each spouse for the children of the first marriage or other family members of each spouse,the prenuptial agreement should be specific in describing each spouse’s desires in this regard.Therefore,the prenuptial agreement should state under what circumstances or to what extent,if any,one party has any rights or interest in the nonmarital property of the other.

The prenuptial agreement should state clearly when and how much of,if at all,nonmarital property and income from this property is to be used in the marriage and for what purpose.Very often,nonmarital property or income of one spouse,even though it is identified as nonmarital income,is used to satisfy debts incurred after the marriage by the other spouse.Generally,the debts incurred by one spouse (the “debtor spouse”) can be collected from the other spouse unless the vendor or creditor is notified that one spouse is not responsible for debts of the other.This is true even though the spouse paying the debts does not use or have enjoyments from the items purchased by the debtor spouse.

For example,if one spouse charged purchases on a joint credit card and cannot pay the balances,the nondebtor spouse can be forced,legally,to pay for those purchases using his or her separate property.Worse yet,suppose one spouse makes a large purchase on credit,like a boat,and puts it in joint name, but the other spouse is not happy with the purchase.If payments are not made and the value of the boat becomes less than the debt on it,the other spouse may have to use his or her own income or separate property to pay the balance.

Thus,the prenuptial agreement should clearly state how major purchases and joint debt are to be paid.Spouses who must use separate,nonmarital property to satisfy joint debts or debt of the other spouse should be reimbursed. This can be accomplished in a well-thought-out prenuptial agreement.Also, the identification of joint funds (wages or other earnings while married) and the use of such funds should be specified.

Income Tax Returns

A joint debt that always occurs after the marriage is income tax owed on a joint return filed by the married couple,whether federal or state.The total amount of income tax owed on a joint return can be collected from either spouse without regard to which spouse’s income or losses produced the amount of tax owed.

As a rule,it is very difficult for a spouse to be relieved of paying joint income taxes,even where the total tax was caused by the other spouse.But there are limited circumstances in which a spouse may not be held responsible by the tax authorities for paying joint income taxes.This occurs where a spouse did not know or did not have reason to know that income or losses were omitted or

not reported properly on the joint return and where under the circumstances, because of the spouse’s ignorance in preparing the joint tax return,it would be unfair to hold that spouse responsible for the total tax.

If a spouse truly does not know about the other’s financial affairs,for example,because the other spouse has concealed the information,or the business and financial affairs are too complex for any reasonable person to understand, then the law says it is unfair to hold the unsuspecting spouse responsible for all or a portion of the joint income taxes.The key point is that an “innocent spouse”has to prove his or her status as “innocent”in order to obtain relief from payment.

Nonetheless, a so-called innocent spouse who signs a joint income tax return cannot simply turn his or her back on the obvious realities of the couple’s financial circumstance. What a spouse knows or should have known about the information reported on the tax return is judged by whatever a reasonable person standing in the shoes of the spouse would know or understand.

Pensions and IRAs

As stated earlier,people use the prenuptial agreement to preserve separate assets for the children of their first marriage or other separate commitments. Pension funds are a classic type of separate asset that a party may want to keep separate from the new spouse.To accomplish and maintain separate asset status for pension funds,prenuptial agreements generally provide that the new spouse waive his or her rights to receive the pension funds of the other spouse. This waiver is necessary because the law mandates that “spouses”be named the primary beneficiary of pension funds.If a spouse is not named a recipient of pension money,the spouse must consent in writing to giving up his or her rights to such money.

A person is considered a spouse only if he or she is legally married to the other person and the marriage has not been formally ended by a decree of divorce.A legally valid divorce,then,terminates the spouse status.A separation agreement alone may not be sufficient.

If you’re about to be divorced, take note. To ensure that your soon-to-be exspouse has no claim to your pension fund, your separation agreement should contain an explicit clause waiving pension funds until the final divorce.

Prenuptial agreements pose a problem involving the waiver of pension rights because persons entering a prenuptial agreement are not spouses on the day they sign the agreement.Remember,a prenuptial occurs before the marriage even though its terms become effective after the marriage.Since persons signing prenuptial agreements are not married on the day they sign,they are not spouses.The result is that any waiver of rights to pension funds is not made by a spouse.As a consequence,any waiver of rights to pension funds contained in a prenuptial agreement is likely not to be valid because it was not signed by a spouse.The fact that the people signing the prenuptial will become a spouse a short time later does not make the waiver valid.In order to validate the waiver right to pension funds that may appear in a prenuptial agreement,it will be necessary for the parties to re-sign the waivers when they become spouses.

Other Categories

● A prenuptial agreement can provide for alimony and other maintenance andsupport,as well as the division of joint or marital property,in the event the marriage fails.The prenuptial agreement,however,cannot deal with child custody issues since this is against public policy. ● The prenuptial agreement cannot eliminate spousal support by one or both parties during the marriage.Similarly,a person cannot be relieved of the obligation to support his or her children.A provision in the prenuptial agreement eliminating or limiting child support is likely not to be enforceable. ● While the prenuptial agreement does not include the parties’ wills,it should contain an outline of each party’s general intentions of how marital and nonmarital property would be distributed upon death.

The discussion contained in this chapter is only the tip of the iceberg in dealing with prenuptial agreements.Remember that an attorney should be consulted before drawing up any agreement and that the attorney should be separate from the other spouse’s.

And on the subject of marriage,marriage is the only union that cannot be organized,because both sides think they are management.

It’s a Wrap

● Premarital legal agreements are not just for the rich and famous;they are for everyone who has preexisting,separate property to protect. ● While premarital agreements seem cold and calculating to some,these agreements usually provide long-term fairness and peace of mind. ● Any premarital agreement must meet the conditions of a basic legal contract.That’s why it’s advisable to draw up such agreements under a lawyer’s guidance,rather than trying to do it on your own. ● Premarital contracts should address the issues of separate property,separate income,tax returns,pensions,IRAs,alimony,and the division of joint or marital property in case the new marriage should fail. ● Child custody issues are beyond the scope of premarital contracts.

“Accept the fact that some days you are the pigeon and some days you are the statue.”

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