Pre-Nuptial Agreement

What is it:

A pre-nuptial agreement is a financial agreement drawn up between a couple
before they get married.

Standard Use:

Pre-nups are a protective mechanism for your assets if your new marriage
doesn’t succeed.

Tailored Use:

A pre-nup can also be used to supplement your asset protection planning. For
instance, it can mandate separate accounts and assets, prepare for the filing of separate tax returns from separate data after marriage (so that each of
you and your spouse have separate tax data to submit in the event of a suit or
claim) even if a joint return is filed, and more.

Key:

Pre-nups can do more than protect assets from divorce; they can establish
procedures and structure to backstop your asset protection planning as well as
provide asset protection in the event that one spouse is a professional with a
higher likelihood of incurring malpractice or liability claims stemming from
ones job.

Creating a valid pre-nuptial agreement:

When signing a pre-nup, make sure that the document will be considered valid
in a court of law if it ever comes under review.

Separate counsel:

Each party should have his or her OWN attorney. While prenups are created in
a non-confrontational environment, where both parties may be on the same page
with the goals of the pre-nup, it is still essential that each party have his
or her own attorney. Should the pre-nup come under review by a court (e.g., if
the marriage ends), there can be a strong argument that the party who signed
away rights was disadvantaged by not having had his or her own competent
counsel to ensure full understanding of the terms of the agreement.

Financial Disclosure:

When discussing the terms of the pre-nuptial agreement, there should be
complete financial disclosure between the parties (if an engaged couple is
hesitant to share all information, this may be a sign of problems to come)
well in advance of the wedding. If there is not full disclosure of assets, this
may be grounds to have the agreement invalidated.

Pre-nuptial Agreements and Estate Planning:

Be sure that after signing your pre-nup, both husband and wife should alter
their wills and other important financial documents to comply with the terms
stated in the pre-nup.

Wills:

Once a pre-nup is signed, both parties should update their wills. The new
wills should clearly state what is intended for the new spouse. It is a good
idea to re-visit the will six months later, making changes to other provisions,
but leaving the bequest to the new spouse intact. Sign the new will, but save
the old wills to demonstrate a consistent pattern of distributions to the new
spouse. If not, someone may claim that it was not your true intention to leave
everything to her.

Post-Nuptial changes:

If there is a change from the pre-nuptial agreement, e.g. favoring the new
spouse, have your matrimonial counsel amend the pre-nuptial agreement, using
all appropriate formalities. Revise your will and other estate planning
documents to confirm these wishes. It is important that all documents are
consistent to minimize future problems.

Post-Nuptial Agreements:

If you are already married and do not have a pre-nuptial agreement, or if
time just ran out before you got married and you couldn’t get the document
signed, don’t worry, it is not too late! Once you are married, you can sign a
post-nuptial agreement to the same effect as a pre-nuptial agreement.
Alternatively, you can begin more comprehensive estate planning with an attorney
or financial advisor that would include the bequests to your spouse.