As the summer wedding season approaches, so does “prenup season.” Often, the mere mention of a prenuptial agreement (prenup) makes people uncomfortable, as if these documents and the discussions they prompt constitute a wholly unromantic anticipation of ultimate failure—even before the couple share their first dance.
High-net-worth individuals need to protect their financial interests before marriage. A carefully considered, well-crafted prenup is an insurance policy of sorts, should the marriage not work out as everyone hopes.
Here are some scenarios we see frequently in our practice that indicate the vital importance of a prenup:
- When an individual has children from a prior marriage, to ensure that they are taken care of in the event of divorce or death during a subsequent marriage.
- When an individual’s family has substantial wealth, to ensure that separate funds used during the marriage to purchase a home, vacation property, fine art, or other valuable assets remain their separate property (unless there is a written intention to gift it to the marital estate/community property).
What is the right time to discuss and sign a prenup? As early as possible before the wedding. Neither party should feel pressured to sign something on the eve of the wedding. Moreover, prenup discussions can bring out issues between couples that need to be addressed, perhaps even in pre-marital counseling. At its extreme, this process can make both parties reassess their readiness to marry each other. At its best, these discussions provide a forum that forces couples to work through the practical aspects of marriage: managing money, raising children, allocating responsibilities of income earners and caregivers, and possible religious differences.
While there are no one-size-fits-all agreements, here are a few cautionary aspects essential to every prenup:
- Each party should be separately represented by an experienced matrimonial/family law attorney or estate planning attorney. Attorneys who practice in the divorce realm, however, offer an added advantage: they understand the detritus of failed marriages, so they write prenups defensively.
- The ultimate goal is to have a clear picture of what happens in death or divorce. If the agreement is too complicated or too vague, it won’t serve its purpose.
- There must be financial disclosure of assets and income of both parties.
- A spouse who is successful in securing a prenup that is punitive also runs the risk of having that agreement successfully attacked in the future.
- Be protective. Be fair. Don’t be greedy.
Prenups can prevent not only divorce battles but estate battles as well. After all, it is the peaceful resolution of family matters that matters most.