Philadelphia, PA Prenuptial Agreements Attorney
Prenuptial agreements are often viewed as the antithesis of romance and as having the potential to destroy the relationship before the marriage has even happened. Many people might feel insulted that their potential spouse wants them to enter into a prenuptial agreement because they presume their fiancé is already planning the divorce. However, a properly drafted prenuptial agreement will protect both spouses, regardless of whether one or both spouses have significant assets or income at the start of the marriage. Even if a divorce never happens, drafting a prenuptial agreement is still important because it forces the spouses to put in writing their expectations for the marriage and their decisions for how money will be handled.
DISCLOSURE OF FINANCIAL SITUATION
In order for the prenuptial to be upheld by any court during a divorce, both spouses must have full knowledge of what rights they are giving up. That means there must be a complete disclosure of both future spouses’ financial situations. This includes income, bank and investment accounts, retirement accounts, real property, cars, artwork, and jewelry. It also includes the premarital debts of both spouses. This is especially important because the extent of a spouse’s premarital debts will have an impact on how much that spouse can contribute to household expenses, such as a mortgage and other shared expenses. Furthermore, if one spouse has children from another marriage, the financial obligations associated with those children will also impact how that spouse can contribute toward household expenses.
WHAT ASSETS YOU WILL SHARE AND WHAT YOU’LL KEEP SEPARATE
If you are going into the marriage with assets that you have acquired during your lifetime, you and your future spouse should discuss how those assets will be handled during your marriage. For instance, if one spouse already owns a house in his/her name alone but then the other spouse contributes to the mortgage payments during the marriage how would that asset be divided upon divorce? Having this discussion while the relationship is strong and both spouses are thinking rationally can help avoid additional headaches if things go sour. One common approach is to have all assets owned before the marriage kept separate and all the assets acquired during marriage to be considered marital property. Alternatively, you can opt to continue treating all of the assets held in one name alone as separate property and whatever is placed in joint names will be marital property. It all depends on each of your financial situations and expectations for how property will be handled during the marriage. It is much better to have this conversation before the marriage so neither spouse feels that they have been treated unfairly or blindsided during a divorce.
WHO WILL BE FINANCIALLY RESPONSIBLE FOR WHAT.
For those getting married for the first time, it is prudent to have a discussion regarding how each spouse plans to contribute to household expenses. For instance, if a young couple plans on having children, this can alter the financial dynamic of the relationship even if both spouses are employed and contribute financially at the outset of the marriage. If the couple decides that one spouse will stay home with the children that spouse will no longer be able to contribute financially to household expenses. Moreover, because he or she will be out of the workforce for some time, they will not be able to save for his or her own retirement during the years he or she is home with the children and will potentially have a decreased earning potential when he or she does go back to work.
Discussing how this change in financial earning power will be handled will make sure that both spouses understand each other’s expectations regarding the division of both financial and household responsibilities. Once the spouses come to an agreement about how these situations should be handled, it can be incorporated into a prenuptial agreement.
HOW TO HANDLE CURRENT AND FUTURE DEBT
A common misconception is that if neither spouse has significant assets when they get married then a prenuptial agreement is not necessary. However, regardless of how much money either spouse has at the beginning of the marriage, it is likely that both spouses will incur debts over the course of the marriage. Before getting married many couple will not have already combined their finances and therefore probably are not intimately acquainted with each other’s spending habits. One spouse might end up being quite surprised when learning of the other spouse’s six figure college and professional school debt or how the other spouse spends his/her money or upon learning that the spouse frequently maintains a high unpaid balance on their credit card or has extravagant spending habits. In order to avoid receiving this shock down the road, spouses should discuss their spending habits and what debts will be considered marital debts and what will not be considered marital debts.
For instance, the future spouses might agree that debts which they jointly incur will be their equal responsibility in the event of a divorce but that if one spouse opens a new credit account the debts incurred on that account will be the sole responsibility of that spouse. This might seem like a very common sense approach, but without this agreement in place a judge presiding over the divorce might allocate a larger share of the debt incurred during the marriage to the spouse with the higher income regardless of who incurred the debt and what the debt was for. This way it is clear to both spouses how debts will be treated both during the marriage and after its dissolution.
PRESERVING A POTENTIAL INHERITANCE
In general, inheritances are not considered marital property while they remain solely in the name of the spouse who inherited the property. This changes once you re-title the property in the name of both spouses; it becomes marital property and subject to equitable distribution at the time of a divorce. This is where having a prenuptial agreement can be very useful. For instance, if one spouse inherited a large sum of money and wanted to use part of that money as a down payment on a house or summer home to be held in joint names, that inherited sum would normally become marital property. In a properly drafted prenuptial agreement, the spouses can agree that the spouse who contributed the inherited money for the down payment will receive a credit off the top if the house is sold during a divorce so that he or she can recover the inheritance.
PROTECTING THE FINANCIAL WELL BEING OF CHILDREN FROM A PRIOR MARRIAGE
If you have children from a previous relationship, you will likely want to protect their interests and leave them an inheritance at your death. However, your spouse has certain rights granted to them under the law regarding what portion of your estate he or she is entitled to and this could potentially cut into what your children will inherit. Particularly, if this marriage is happening later in life when both you and your future spouse have accumulated assets, you may want to have your future spouse waive some or all of his or her rights to a specific portion of your estate. For instance, instead of your future spouse having the absolute right to a third of your estate you can agree to leave him or her a life estate in the home you share in addition to some money in trust for his or her wellbeing. This way you can ensure that your property will eventually pass to your children from the other marriage and your future spouse will also be adequately provided for after your passing.
ELIMINATE BATTLES OVER ASSETS AND ALIMONY IN THE EVENT OF A DIVORCE
Another issue that arises during divorce that can be planned for in a prenuptial agreement is the payment of alimony after the marriage ends. You can agree that no alimony will be paid at all or set time limits on how long the marriage must last before there will be any alimony payments. Alternatively, you can also set limits on how long alimony will be paid. These are issues that courts routinely decide but by coming to an agreement on these terms while the relationship is still healthy may lead to less resentment later on when the alimony has to be paid and you will have more certainty in how long these payments will be made instead of being subject to the whims of the court. However, it should be noted that topics such as child support cannot be bargained for in a prenuptial agreement; the right to child support belongs to the child and cannot be used as bargaining power between the parents. Instead, you can outline your expectations regarding the payment of college tuition as that is a topic that is frequently provided for in property settlement agreements during divorces.
All the issues discussed above will help make a divorce less financially stressful because both spouses have already agreed to how property will be divided and there will be less to fight over. Although asking for a prenuptial agreement does not seem like the most romantic gesture before tying the knot, an attorney for both you and your spouse can help you determine what issues are important to you and help outline how you will handle financial and household decisions during your marriage.