LEGAL VIEW: Prenuptial agreements: The business plans of marriage

By Bill Howe The Daily Record Newswire Premarital agreements have become increasingly common. No longer just for the wealthy, they are sought by many couples who wish to achieve a solid financial foundation for their relationship. Every marriage will end: some by divorce, others by death. In a sense, everyone has a premarital agreement, just as everyone has a will even if they don't sign one. If you die without a will the law defines how your property will be divided. Likewise, if you marry and later divorce without having signed a premarital agreement, property division and spousal support are determined by the laws of the state where the divorce occurs. This can lead to wildly inconsistent results. For instance, assets received by gift or inheritance are subject to Oregon's "presumption of equal contribution" and divisible by the court in a divorce proceeding. In California and many other states these assets are separate and not subject to division. Spousal support rules vary dramatically too. California applies a guideline formula that is generally generous to the recipient. On the other hand, in Texas spousal support is rare, a small amount and limited to one year. Premarital agreements are contracts. If both parties enter into the agreement voluntarily, if neither is acting under duress, both understand the agreement (have a lawyer), and if both have fully disclosed their assets, liabilities and income, then the agreement will be enforced. If a couple that has signed a valid premarital agreement is married and later divorces, it is a simple and inexpensive exercise to determine what is "his," what is "hers," and what is "ours," and each will typically be awarded their separate property with the "ours" property divided equally. As recently as 40 years ago, premarital agreements were generally unenforceable. They were seen as encouraging divorce. However, there is now growing evidence that couples with prenuptial agreements are less likely to get divorced. Perhaps those who sign the agreements are more sophisticated or cautious, though mental health experts speculate the real reason is that discussing money -- how it's controlled and other issues -- is one of the last taboos in our culture. During the romance of courtship, couples often discuss where to live, sexual practices, whether to have children and the like, but rarely the management of money. Negotiating a premarital agreement forces a couple to have this conversation and, assuming they come to an agreement, it provides a model for how to discuss other difficult topics. In the past premarital agreements were sought only by the wealthy. The recent surge in popularity of prenups, even in first marriages, has been driven by parties who wish to achieve: * Predictability concerning the division of gifts and inheritances. * Definition of interest in family businesses * Preservation of separate assets to care for parents or children of previous relationships or the support of the parties. * General avoidance of the uncertainty and expense of a judicially imposed outcome. The basic structure of prenups is simple, though the drafting is complicated and should only be attempted by an experienced lawyer with expertise in prenups. Even a provision seeking to ensure that the agreement will be enforceable regardless of where the parties are living when their marriage ends presents a minefield to draft. Fortunately, prenups are an inexpensive insurance compared to the risks and costs they avoid. Parties often express both relief and gratitude when signing their premarital agreement. Their gratitude derives from having learned much more about each other and having a solid business plan for their marriage. This translates into a happier marriage. ---------- Bill Howe is a shareholder in Gevurtz, Menashe, Larson & Howe PC. Contact him at 503-227-1515. Published: Fri, Jul 20, 2012