Prenuptial Agreements: Why You Need One.

What is a “Prenup”?

A prenuptial agreement (commonly referred to as “prenup”) is a contract between two individuals who intend to get married to each other, which is signed prior to the marriage. For decades, prenuptial agreements were viewed as a sign of distrust between partners and regarded in an unfavorable light by the Courts. However, today, couples are utilizing prenups more and more without attaching the same taboo notions that these agreements once held. Couples today are embracing prenups and changing the stigma attached to them by focusing more on the parties ability to be transparent and candid with each other as a sign of emotional maturity and pragmatism rather than worrying about the financial burden a divorce or separation may cause. Prenups have become generally more accepted as courts and couples realize that prenups are a form of setting financial expectations between the parties upfront in an attempt to limit discord.

Prenups serve many purposes, such as financial planning, wealth protection, and protection of family assets and preservation of the parties’ intent as to their finances and final wishes in the event of a divorce or death. Prenups also help avoid the unpleasant intrusion of the courts into the parties’ private lives in the event of a divorce or the death of one of the parties. This legal document can set financial security in place for your marriage in the unfortunate event of a divorce or death, by ensuring individual assets and liabilities are protected or devised as each party wishes and by clearly defining what the parties intended to be marital assets and liabilities vs. non-marital or separate property.

What to Include in a Prenuptial Agreement

The prenuptial agreement can address some or all of the issues that may arise after the parties’ marriage. In the event that the parties’ agreement does not address a specific marital right or issue, then the state law applying to that issue shall govern the marital rights of the parties as if there was no prenup. So, it is very important to give great thought and consideration to all provisions of a prenuptial agreement.

Typically, prenuptial agreements address the parties’ understandings as to their alimony and equitable distribution rights in the event of separation or divorce. [These links should go to the alimony and equitable distribution pages on the web site] It is crucial to have these legal provisions agreed upon beforehand so both parties will understand how the assets would be divided. This avoids having emotional spousal disputes interfere with the reasons for separation.

In Florida, a prospective spouse can include anything relevant to their potential dissolution in their prenup, so long as it does not conflict with public policy. For example, under Florida law, you cannot waive your right to temporary support such as alimony or attorney’s fees, before the entry of a final judgment of dissolution (also known as a divorce decree). However, the agreement can specify that in the event Florida law changes in the future, the other party waives his or her right to temporary alimony or attorney fees.

Typically, a prenuptial agreement outlines what is considered marital vs. non-marital or separate property, how to split finances, personal properties, and marital homes. Additionally, it may include mechanisms for splitting marital assets and/or liabilities (such as debt), retirement plans, pensions, and life insurance policies. Moreover, a prenup can also include waivers or limitations of certain types of alimony and specific instructions as to how the parties intend to deal with the synthesis of any marital and non-marital assets during the marriage.

With the boom of technology, many prenups now include confidentiality clauses, provisions for ownership, and the storage of embryos. These clauses can protect confidential information disclosed during the marriage, protect both parties’ private information (such as pictures) from the public (i.e., via specific social media websites), financial circumstances and holdings of the parties and determine the property rights between the parties of any embryos the parties choose to store during their marriage.

In most states, however, a prenuptial agreement cannot determine or affect timesharing/child custody or child support rights. However, the parties can include desires or intent of the parties regarding the possibility of a child being born during the marriage. The parties may also want to include a provision that additional rights are granted to one party versus the other in the event of a birth of a child or children. For instance, a spouse’s alimony or lump sum payment may increase, or the other spouse may have the right to remain in the marital home after a divorce or death of the other party until the children reach the age of majority.

If the agreement does set forth parental responsibility, decision making and/or child support rights in the event of the birth of a child, then the agreement is likely to be heavily scrutinized and/or subject to modification by the court. The court will take into consideration the circumstances that exist at the time of adjudication in determining whether the provisions of the parties’ prenuptial agreement are and/or continue to be in the child’s best interest when deciding whether to enforce the provisions.

Prenuptial agreements also can determine what rights each of the parties have in the event of the death of one of the parties during the marriage. Absent governing provisions in a prenuptial agreement as to what happens in the event of the death of a party, Florida law will govern and determine the spousal rights of the surviving party and who will inherit from the deceased spouse depending on whether the spouse died intestate or not.

When to Complete a Prenup

Ideally, your prospective spouse should receive the prenup agreement three to six months prior to the actual wedding or marriage date. Your prospective spouse needs time to review the prenup and pursue independent legal counsel, which is strongly recommended. If there are many assets involved, it is always best to give the prospective spouse a sufficient amount of time to review and consider your draft of the prenup.

In addition to providing your spouse with ample time to review the prenup agreement, it is important to provide their legal counsel with ample time to review, revise and finalize the prenup. Your intended spouse’s legal counsel must consider the time in which he or she is given the agreement in order to properly review and negotiate the prenuptial agreement when determining the feasibility of completing the agreement prior to the marriage and whether the timing of the exchange of the document may pose a challenge to the enforceability of the agreement.

Further, the prenup agreement must be documented and signed by both parties. If it waives any rights that either party may have in the event of the death of the other spouse, it should be executed with the formalities required by your state’s laws. This ensures that the prenup is legally binding regarding inheritance and estate planning. The prenup agreement should also be signed by the parties with the same formalities as required by the last will and testament in your state, if different.

Why Get a Prenup?

Prenups are not just for the rich and famous, Prenups can help the average person avoid a messy, lengthy, and expensive divorce. For example, consider the advantages of a prenuptial agreement in the following situations:

• If you own assets and/or property before your marriage.
  • This may include inheritance, property co-owned with a parent, joint bank accounts with a parent or friend, property or assets you acquired before marriage (like a home, car, or boat), a trust fund, stocks, investments, and retirement accounts.
• If your partner has a lot of debt.
  • Given the rise in student loans and the number of people in credit card debt, it is essential to protect yourself from creditors. A prenup can ensure that your partner’s debt remains their responsibility.
• You are starting your business.
  • Your business has the potential to grow and, down the line, might become highly profitable. A prenup can protect your business and the investments that you have made, allowing you to separate or limit your spouse’s rights to the business in the event of a divorce or your death.
• Stay at home partner/Change in careers to stay home.
  • If one party plans on not working during the marriage, a prenup can establish a financial plan in case of a divorce. This is particularly important for the partners that will be contributing the most financially during the marriage. Alimony can be pre-determined. This can also be helpful to the non or lesser-earning spouse to clarify how their decision of staying home will affect their lives in the event of a divorce.
• Prior Marriage.
  • A prior divorce can create financial complications. A prenup can help ensure that your finances do not get tangled up from previous divorce actions. Additionally, if your spouse had children from a previous marriage, a prenup can protect your children’s inheritance if your current marriage leads to a divorce proceeding.
• Public Figure.
  • Similar to a non-disclosure agreement (NDA), a prenuptial agreement can limit what the ex-spouse can say to the public about you, the marriage, and the divorce.
• Limit Future Litigation Cost.
  • Though prenup agreements can be challenged, in general, they provide the parties with certainty or at least an expectation of what will happen in the event of a divorce or death of the other spouse. This tends to greatly reduce litigation costs and expenses and preserve marital assets.

Issues Prenups May Bring

Prenups are not “airtight”. There are many guidelines a prenup must abide by before the court declares the prenup valid and enforceable. Florida follows the Uniform Prenuptial Agreement Act (UPAA), which has a set of guidelines that help the courts determine whether prenups are enforceable.

Prenups are sometimes disputed or challenged by parties in court, especially if there are many assets involved or if there were questionable circumstances surrounding the execution of the prenup. Some of the most common arguments and/or basis by which to attack the validity of a prenup agreement are as follows:

• Involuntary or duressed spousal signatures.
  • For example, there have been situations where a spouse was unaware that they were signing a prenup. Conversely, to claim one party was under duress, it is not enough for the other party to simply refuse to continue with the marriage the prenup is not signed. For a valid argument, there must be evidence of a threats, physical or psychological, or other forms of coercion for duress to be considered.
• Unfair Agreements and Lack of Disclosure.
  • Overturning the validity of a prenup on the grounds of unfairness is rarely granted by the court. A prenup that seems like an unfair distribution of assets does not automatically give the courts reason invalidate the prenup.
  • There must have be evidence of fraud or a lack of disclosure. For example, the other spouse hid their assets and/or financial information at the time in which the prenup was executed. Full and transparent disclosure of all assets is very important to prove the validity of a prenup agreement. A common question attorneys are often asked is, “What should I disclose?” To proceed with caution, the answer is disclose anything and everything, even if there is some question surrounding whether an asset may or may not be yours in the future. Furthermore, if you are unsure, it may be better to disclose an asset than to be faced with more formidable and valid defenses to a prenup agreement after expending the resources and time to prepare the agreement.
• Attorney Involvement.
  • Some courts focus on the ability the other party had to understand and receive independent legal advice. Therefore, it is highly recommended that if the other party lacks the financial resources to hire an independent attorney, to err on the side of caution once again and provide your prospective spouse with attorney’s fees so that he or she can choose an attorney of their own selection who can perform a proper and thorough review of the agreement and your finances. Failing to offer separate legal counsel, in certain scenarios, could work against you and open your prenup up to modifications that you did not intend.

It is evident that the drafting, negotiation, and execution of a prenup, is not a “one size fits all” for couples. To avoid potential indifferences with your partner regarding your prenuptial agreement and to preserve the validity of the agreement ensure you and your spouse seek independent family legal counsel. This will also ensure that you and your partner sign an agreement which is tailored to your specific circumstances and preferences and that each of your questions about your rights under Florida law have been answered to each party’s satisfaction prior to entering into the agreement. You and your prospective spouse must consult a family law attorney to avoid some of the pitfalls mentioned above and to ensure that your prenup is drafted for you and your prospective spouse’s specific needs.

The Campbell Law Group offers in-person and virtual consults. If you have any questions or concerns about the topic of this Article or any corporate, commercial, or complex family law issue, please feel free to call our office at 305-460-0145 or to schedule a consult here.

Conclusion

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