then wait for better or worse
It's the moment you've been dreaming of: The
man who sends your heart skipping slips a sparkling ring on your
finger and asks, "Will you marry me?"
After you accept and your vital signs return
to normal, he then delivers what feels like a heavyweight's jab
to the gut: "Honey, I want you to sign a prenuptial agreement."
Nothing can kill romance faster than the word
prenup. But with about one in three of all first marriages ending
in divorce, and 50 percent of second or third ones hitting the skids,
a prenup is smart financial planning, legal and financial experts
"Think of it as a business arrangement
or as an insurance policy to help remove some of the emotion that's
naturally involved," says Nancy Dunnan, a New York City financial
adviser and author. "Marriage is not just an emotional and
physical union -- it's also a financial union. A prenup and the
discussions that go with it can help ensure the financial well-being
of the marriage."
A prenuptial accord is a contract between two people about
to wed that spells out how assets will be distributed in the event
of divorce or death. Such agreements have existed for thousands
of years in some form or another, particularly in European and Far
Eastern cultures, where royal families have always made provisions
for protecting their wealth.
But you don't have to be a Rockefeller or Trump
to need a premarital agreement. A person who has managed to save
$30,000 may be more protective of their little nest egg than someone
who has millions.
"Those are sometimes the most jealously
guarded assets because it has taken a lot of hard work to accumulate
a small amount," says Joseph P. Zwack, an Iowa lawyer and author
of a best-selling handbook Premarital Agreements: When, Why and
How to Write Them.
You should consider having a prenup if you fall
into any of the following categories:
- You have assets such as a home, stock or
- Own all or part of a business
- You may be receiving an inheritance
- You have children and/or grandchildren from
a previous marriage
- One of you is much wealthier than the other
- One of you will be supporting the other through
- You have loved ones who need to be taken
care of, such as elderly parents
- You have or are pursuing a degree or license
in a potentially lucrative profession such as medicine
- You could see a big increase in income because
your business is taking off, or that garage band you play in has
just gotten a contract with a big record company.
So how does one broach this touchy subject?
First, do it as early as possible. The mention of a prenup shouldn't
come as a surprise if you and your sweetheart have been open with
each other as the relationship became serious.
about it beforehand
Dunnan recommends couples talk it over before the engagement.
"Let your intended know you believe these agreements are important
and that you'd like to go over the topic."
Second, the discussion must be honest. "You
have to be real candid about why you want the agreement. It's not
very romantic, but you have to appreciate what the other party's
concerns are," says Michael McDonough, a Palm Beach County,
Fla., lawyer who specializes in matrimonial and family law.
The first step in the prenup process should
be to sit down with your sweetie and reach an agreement about what,
in general, you want the contract to say. "Draw up your list
of assets and talk about it before you hire the lawyers," suggests
Zwack. "You won't know the specific laws, but have a concept
Doing that can save you money. Fees for prenups
depend on how long they take to draft. Hourly wages for attorneys
can go from $300 to $500 an hour on the East and West coasts. In
the Midwest, you might be able to get away with $100 to $125 an
hour. Ask your attorney at the first meeting what the anticipated
charges will be.
Next, hire separate attorneys. To help ensure
an enforceable agreement, both parties need their own lawyers. Many
a prenup has been thrown out because an aggrieved spouse did not
have legal representation. The attorneys co-write the agreement
with their clients' best interests in mind.
Perhaps the most important ingredient of a solid prenuptial
agreement is honesty. Both parties must FULLY disclose their assets.
If it turns out either person has hidden something, a judge can
toss out the contract.
An ironclad agreement also must be signed well
in advance of the wedding. You can't present your honey with a prenup
two days before the big day and say, "Uh, by the way, I need
your signature on this."
The document should be signed as early before
the nuptials as possible to avoid the appearance of coercion, another
key reason why some agreements are rendered null and void.
"I recommend at least one month before
the wedding and preferably before the invitations have been sent
out," says Dunnan. "Then you both have time to back out
if you're uncomfortable with the terms. If the discussion revealed
such deep and basic differences between two people that they decide
not to marry, it's obviously best if all the talks took place well
in advance ... You don't want to have to send back presents!"
A valid prenup also is "fair" and
will not leave one of the parties destitute. "No matter what
state you're in, the state will look for equity to make sure one
spouse is not being taken advantage of," Zwack says.
Prenups can include responsibilities that don't deal with
money, but you should avoid making demands that might seem frivolous,
such as requiring that your spouse not gain weight, or that he or
she quit smoking and take out the garbage three times a week. A
judge could look askance upon terms that are less serious than,
say, stipulating what religion your children will observe if you
and your betrothed are of different faiths.
"It's dangerous to do that, and you're
flirting with having the whole thing set aside," warns Zwack.
- Use only matrimonial lawyers who are familiar
with prenups and the laws of the state in which you will be living.
- Know that you cannot waive rights to child
- Understand that your spouse's will can't
supersede the prenup if the will is stingier. But a will can be
more generous than a prenup and leave the widow or widower more
than what they agreed to before the marriage.
Finally, and although it seems obvious, make
sure the agreement is in writing and the signing is witnessed by
a lawyer. It is recommended the contract be signed in triplicate
with the groom- and bride-to-be each getting an original copy, and
a third being kept with an independent lawyer, CPA or in a safety
Without a formal contract, you could end up
a lot less rich -- like director Steven Spielberg. His ex-wife,
Amy Irving, got half of what he earned during their four-year marriage
because their prenup was scribbled on a napkin and she didn't have
a lawyer. Her take: $100 million.
Keep it up
Zwack encourages couples with prenups to review them every few years.
After 10 years of marriage, for example, you might want to consider
giving your spouse more than the original prenup provided for. "Prenuptial
agreements are written defensively," he said, "so after
a certain number of years, it's good to be more generous."
One option for softening the blow of a prenup
is to add a "sunset clause," which specifies a time at
which the contract would expire -- for example, after 10 years of
marriage. "Some people like that idea, others don't,"
says Dunnan. "However, marriages do end after 10 or 20 years,
so review it with your lawyers carefully."
Difficult as it may be to talk about money before
marriage, doing so can save heartache and hassles in the long run.
A prenup can minimize the financial and emotional toll of a divorce.
Couples without one will have their assets distributed for them
by the state if the marriage ends and they disagree about who should
Without a prenup, assets could end up in the
hands of your spouse's children from a previous marriage instead
of your own kids, or they could go to a slothful mate who did nothing
while you toiled away at a business or book that eventually became
a big success.
from court division
"If you don't want a divorce court to make the final
decision about how your assets will be divided, a prenuptial can
protect you," says Dunnan. "Without a prenup you're letting
your financial future be determined by a third party."
If you live in one of the nation's nine community
property states -- Arizona, California, Idaho, Louisiana, Nevada,
New Mexico, Texas, Washington or Wisconsin -- the law says property
accumulated during the marriage will be divided equally.
In all other "equitable distribution states,"
assets are divvied according to what the court deems fair. The judge
would take into consideration things such as the length of the marriage,
whether there are children, and the couple's age, health, job skills
and other factors. Alaska is a special case -- it's an equitable
distribution state, but it has a law that allows people to voluntarily
enter into a community property agreement.
Zwack says premarital agreements are a personal
decision, but without one couples relinquish not only power over
their assets but privacy as well.
"[The courts] shouldn't have to step in
and interfere with a husband and wife's private financial affairs,"
-- Posted: June 11, 1999