With peak wedding season fast approaching, now is the time to sit down with your soon-to-be spouse and discuss if a premarital agreement would be beneficial for you as a couple. A premarital agreement, also known as a “prenuptial agreement," or a "prenup," is a written contract between individuals who intend to marry, which affirms, modifies, or waives a marital right or obligation during the marriage, or upon a legal separation, marital dissolution, or death of one of the spouses. A marital right or obligation is reserved between spouses because of their status of being married, as opposed to living together or sharing an apartment. So, is a premarital agreement the right fit for you and your fiancé?
Here are ten things to consider when making your decision:
How is a premarital agreement legally created?
These are legally binding contracts, and there are certain laws, rules, and requirements for them to be legally formed. Like other contracts, the parties must be of legal age and competent to execute a contract. They must also be in writing (paper or an electronic form) and signed by both parties. However, unlike most contracts, premarital agreements and marital agreements are enforceable without consideration.
When does a premarital agreement become effective?
A premarital agreement is effective upon marriage. However, the effective date of an agreement does not foreclose the parties from agreeing that certain provisions within the agreement will not go into force until a later time or will go out of force at a later time. For example, a premarital agreement may grant a spouse some additional rights, should the marriage last a specified number of years.
What are not premarital agreements?
Agreements where spouses do not intend to marry, remain married or do not involve a marital right or obligation. Cohabitation agreements, separation agreements, and conventional day-to-day commercial transactions between spouses are legal and can be enforced, but they are governed by general contract law and are not included in the laws that specifically pertain to premarital and marital agreements.
What does a premarital agreement cover?
Oregon law allows premarital agreements to define “the rights and obligations of each of the parties in any of the property of either or both of them whenever and wherever acquired or located.” This can include a variety of issues regarding property, assets, debts, and inheritance ranging from identifying specific properties and how they are owned, controlled, used, and managed, to the disposition of property upon separation, marital dissolution, death, or the occurrence (or nonoccurrence) of some other event.
Premarital agreements can also agree to the amount of future spousal support, including its modification or elimination, as well as the making of and terms of wills, trusts, insurance policies, or other death benefits and arrangements to carry out the provisions of the agreement.
They also can cover the making of wills or trusts. For example, the agreement can outline the steps that will be taken when one party unexpectedly passes away. This can be especially important when couples with children from previous relationships decide to get married. It can help to ensure that the final wishes of each party are honored.
Can a premarital agreement resolve child custody and child support?
No, parents cannot decide future child custody, child support, or parenting time schedules in a premarital agreement. A judge must consider the child's best interests in every custody case and will look at the child's best interests at the time of a hearing on child support child custody and parenting time schedules, but not before.
While the court will ignore any custody provisions that are included in a premarital agreement, a judge can make a custody order that reaches the same result as the parents' premarital agreement as long as it serves a child's best interests at the time he or she makes that determination.
What doesn’t a premarital agreement cover?
Premarital agreements are meant to address monetary issues, such as assets, debts, and property matters. They are not meant to cover matters of personal preferences, such as who is responsible for household chores, which spouse’s name to use, where to spend the holidays, decisions on child-rearing, or what relationship to have with specific friends and relatives. These nonmonetary terms are likely not going to be enforced by a court.
Are premarital agreements hard to enforce?
The general approach courts take is that parties should be free, within broad limits, to choose the financial terms of their marriage. While the majority of premarital contracts are enforceable, there are certain standards of due process in formation and substantive fairness that can make these agreements unenforceable or have certain terms in them not enforced.
- There was not full financial disclosure. One of the biggest no-no’s during a divorce is attempting to hide assets or information. This is also true in a premarital agreement. As a part of the agreement, you are asserting that each person has given the other full disclosure of all their financial information. If either person does not do that the premarital agreement could be invalidated.
- The agreement is extremely one-sided. Prenups are not enforceable if they are found to be “unconscionable” or in extreme favor of one spouse over the other. For example, an agreement that forced one spouse to take all of the marital debt while the other takes no debt may be considered unconscionable. This does not mean that a court will necessarily deem a premarital agreement unconscionable if it awards more money to one spouse than the other. The contract must have an extreme result for it to be unreasonable.
- One of the parties was coerced into signing the agreement. When a premarital agreement is signed, it must be voluntarily signed by both parties and they both must be in a state that allows them to understand the terms of the agreement. If one of the parties was coerced into signing the agreement or if they lacked the capacity to understand it, the premarital agreement may be invalidated.
A court may also refuse to enforce a provision of a premarital agreement, without rejecting the entire agreement. This can happen if the court finds that the term is unconscionable at the time of signing, or that it would result in substantial hardship for a party because of a material change in circumstances arising after the agreement was signed. Terms about spousal support might also be struck down if a spouse is forced to seek public assistance under the premarital agreement.
Doesn’t a premarital agreement mean you don’t trust each other?
There is a preconceived notion that discussing a prenuptial agreement with your future spouse is really saying, “I don’t trust you and I doubt our marriage will work out, so I have to protect myself.” In reality, premarital agreements can help to build trust and defeat doubt by giving couples an opportunity to discuss their hopes, dreams, and lifestyle expectations for the future. They also prompt couples to be fully honest with each other about their personal and financial situations and broach delicate topics that otherwise would have been left unsaid. By sharing these long-term expectations for the future, spouses-to-be are taking a crucial step to help ensure that outcome.
Aren’t premarital agreements mainly so that wealthy people can protect their assets?
It is a misconception that a premarital agreement is only meant to help protect the person with the most assets. These agreements can be essential to help everyday people in a wide range of situations, such as where: couples own a small business or professional practice; a partner has children from a previous marriage or care responsibilities to elderly parents; a partner leaves the workforce to raise children, or supports the other through schooling, especially graduate or professional school.
For example, the agreement can outline the steps you want to be taken should one party unexpectedly pass away. This can be especially important when couples with children from previous relationships decide to get married. It can help to ensure that the final wishes of each party are honored.
So, should I get a premarital agreement?
There is no easy way to know, objectively, if a premarital agreement is right for you, and bringing up such a topic with your soon-to-be spouse may be uncomfortable and awkward, It can also be difficult to think about the breakdown of the relationship, while you are promising to make a future life together in anticipation of marriage,
Yet, premarital agreements that are fair and entered into willingly by both parties and with full knowledge of the circumstances, can be very helpful in many ways to both of you. They can support their estate planning goals, protect separately-held property, reduce conflicts, and establish guidelines for future matters. In the end, you and your future spouse should consider at least talking with each other and deciding what is right for both you and your future spouse.
If you’d like to speak with a family law attorney about your specific circumstances and if a premarital agreement is right for you, call our office today at (888) 981-9511 to set up your free consultation!