Matrimonial & Family Law Articles

Prenuptial Agreements – Not Just For the Wealthy

Pre-nuptial agreements are generally considered to be utilized only by the very rich to protect their vast wealth from their future spouses in the case of divorce.However today, with laws expanding the definition of marital property, the pre-nuptial agreement is a prudent and simple device accessible to all levels of society and can be used to avoid the potentially excessive costs and delays in obtaining a divorce. With rising divorce rates, the likelihood that a marriage will end in divorce is unfortunately high, thereby making the prenuptial agreement a wise topic of discussion before tying the knot.

A prenuptial agreement is, in its most basic terms, a written agreement entered into by a man and a woman before they marry which, among other things, defines the nature and scope of their respective separate assets and anticipated marital assets.From a legal standpoint there are surprisingly few formal requirements that govern the validity of such an agreement.The parties’ wishes as reflected in a properly drafted prenuptial agreement are honored by divorce courts and thus streamline the divorce process.

Today, even the simplest divorce is an expensive and exhausting process.When a married couple faces divorce litigation they are confronted with the anticipated issues of child custody and support and spousal support, but also generally face issues of asset division and distribution. While historically only marital assets (ie. those acquired by the couple during their marriage), as opposed to separate assets, could be distributed upon divorce, the recent trend is to carve out the pre-marriage value of a separate asset and nonetheless distribute the appreciation in the post-marriage value of that separate asset between the parties upon divorce.

Furthermore, while some marital assets are relatively easy to value and divide such as bank accounts and investment accounts, other assets may not be as easily susceptible to valuation (eg. business interests and pensions).In fact, some items that have been determined to be assets by the divorce courts defy our traditional definitions of an asset.For example, today assets also include intangibles such as the value of a professional license or even the value of a special skill which is said to have increased or enhanced one spouse’s earning capacity beyond that which the spouse may have otherwise been capable of earning in the absence of same.Consequently, the valuation of these newly defined assets alone can double or triple the costs of a divorce for the average couple as a result of the costs to retain professional experts on both sides to determine these valuations and the increased litigation costs to determine which expert’s valuation is accurate.

Instead of avoiding these issues until the time of a divorce when emotions may be at an all-time high and reason may be at an all-time low, the parties can determine these issues in advance and lock-in values and separate asset designations when fairness and equity are at their optimum levels.The effect of this pre-determination can drastically reduce divorce litigation expenses and the typical delays inherent in that process.

Accordingly, prenuptial agreements are not just for the rich anymore.Those individuals that have married without the benefit of a prenuptial agreement can nevertheless take heart as there are a host of other devices that can be created to meet their specific needs and accomplish tasks similar to those of the prenuptial agreement.