Growth 2Go
The Who,
What, When, Where & How
Of Prenuptial Agreements Jill M. Scheidt, Esquire, Masano Bradley
Y
ou might think prenuptial agreements are only for the rich and famous, the Hollywood elite, or heirs to the largest fortunes of old money dynasties. But prenuptial agreements have a place in almost any marriage and can benefit members of the middle class tremendously. Simply put, prenuptial agreements are contracts that add order to the economic consequences in the event a marriage ends in divorce or the death of a spouse. For those of us who cannot cash flow years of litigation, these contracts provide an efficient and inexpensive framework to avoid legal fees. It is a legal tool that clearly exemplifies where an ounce of prevention is worth a pound of cure.
Now let’s discuss what a prenuptial agreement is not. Child support and custody cannot be resolved in advance with certainty, as agreements for both are always subject to modification by a Court. So if you try to set an agreement for future support or custody, please know both are modifiable. A prenuptial agreement is also not a once and done proposition. What I mean is that after marriage, spouses have to consider future purchases, debt and restructuring of asset choices they make. Did the decisions they made comport with the intent of the prenuptial agreement? For instance, if the prenuptial agreement provides that
individual assets remain the sole asset of those individuals but joint assets are subject to division in a divorce, the parties have to remember that when they sell or use individual assets for the purchase of a joint asset. I have seen situations where the parties execute a prenuptial agreement, put it in a drawer, and then get divorced 15 years later only to have comingled or purchased new assets without a further written agreement reflecting their intentions. Another reason to execute a prenuptial agreement is to provide for an orderly transition of assets upon death. In Pennsylvania, you cannot disinherit your spouse without a written agreement. The prenuptial agreement satisfies this requirement. In a second marriage situation, where the spouses wish to leave their estate to their children from the first marriage, a prenuptial agreement is crucial to fulfilling this intent. When I draft estate plans, I ask if the parties have a contract for this very reason.
Who? What?
Anyone who is getting married.
Probably most of you know that a prenuptial agreement is essentially a contract between two parties as they embark on their happily-ever-after. Either or both spouses may wish to memorialize the smooth exit from the marriage either caused by divorce or death.
Why?
There are many reasons, all of them being important, that motivate people to seek a prenuptial agreement. Ownership interest in a privately held business such as a family business is a driving factor for many. In fact, some parties who are engaged to be married are encouraged by other members of their family, with whom they are in business, to obtain a prenuptial agreement to request that the new spouse disclaim any interest in the family business. Avoiding litigation over the value of a family business in a divorce eliminates a very difficult and costly obstacle. If a spouse has to buy out another spouse from a family business and there is no liquidation, it can devastate the business finances.
22 Women2Women Spring 2016