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Pre-Nuptial and Post-Nuptial Agreements – Do You Need One?

by | May 15, 2015 | Pre-Nuptial and Post-Nuptial Agreements |

Advising a young couple to enter into a pre-nuptial or post-nuptial agreement is uncomfortable. Basically, I am asking them to plan for divorce. But the divorce statistics are compelling. More than two million people divorce every year in the United States, with a 52% divorce rate for first marriages and a 60% divorce rate for second marriages. Older couples are now divorcing. Baby boomers are looking at twenty-five or thirty years of marriage after retirement. Many are now opting for divorce, with the hope of finding someone new to share their retirement years.

A Pre-nuptial Agreement is entered into before marriage. Most young couples marrying for the first time don’t believe that they need one because they don’t yet own anything or have children. This is a valid point. The good news is that a Post-Nuptial Agreement, which is entered into after marriage, is legally enforceable in Massachusetts. As a couple acquires or inherit assets, they may decide that a Post-Nupital Agreement is appropriate. Some clients come to me after they have inherited real estate or a stock portfolio from a parent. They want to preserve their inheritance, so that it will pass to their chidren. In this situation, they have two options. They can enter into a Post-Nuptial Agreement with their spouse that ensures that the inherited assets will pass to the children in the event of divorce or after their death. If the client is not comfortable with that option, he or she can establish a Trust that will protect the trust property if the couple divorces. In most cases, the trust property will not be treated as marital proprety in divorce proceedings subject to division between the spouses. After the client’s death, the trust property will pass to his or her children and not to their spouse.

Couples marrying for a second (or third) time usally have more to protect. If both spouses own real estate or have investment portfolios, there are a lot of issues that should be resolved before they marry: where the couple will live, which spouse will sell their house, how the couple will hold title to bank accounts and investments, how they will share expenses, how their combined assets will be divided in the event of divorce and what each spouse’s children will inherit after the death of a spouse. See Estate Planning for the Modern Blended Family for plannnig suggestions.

The requirements for both Pre-Nuptial and Post-Nuptial Agreements are the same. Each spouse may have their own attorney, although many clients who have worked out the details themselves don’t want to pay two attorneys. The couple can retain one attorney to draft the agreement, as long as they sign a disclosure agrement stating that they have been advised to seek separate counsel and have declined to do so. Each spouse must fully disclose all assets that they own and all sources of income. An agreement is not valid if one spouse is hiding assets from the other. A Judge can overturn an agreement if he or she finds that one spouse did not enter into the agreement with full knowledge of what he or she was giving up by entering into the agreement. The agreement should state what assets will remain the separate property of each spouse and how joint assets will be divided if they divorce. There should also be an agreement that each spouse will not interfere with the Estate Planning of the other spouse.

Starting this conversation is awkward, but ignoring the divorce statistics is unrealistic. See Part 2 of this Article (Getting Started) for suggestions about how to proceed.