Prenuptial agreements and postnuptial agreements for a couple

Amid the romance and emotions that surround a wedding and the lead up to it, come the hard realities of the financial aspects relating to the union of a couple. Increasingly the word prenuptial agreement pops up. On the one hand is the die-hard romantic, who believes ‘Marriages are made in heaven and should last forever’ and frowns upon the concept of the prenuptial agreement. On the other, there is the realist who thinks ‘Marriages might be made in heaven but if it becomes a living hell, you might have to opt out’ and accepts the practicality of entering into a prenuptial agreement.

What is a prenuptial agreement?

A prenuptial agreement (or ‘prenup’) is a written contract, entered into by a couple before they get married, that clearly and specifically lists all the property and assets (as well as debts, if any) each person owns and how those assets will be distributed in the event of a divorce or death.

Bringing up a pre-nuptial agreement

Especially if you sense that your partner is a true romantic or you are the wealthy one, bringing in the bulk of assets into the marriage, you may be reluctant to bring up a prenuptial agreement, afraid of your partner’s reaction. But look at it this way – and convey the same to your partner:

A prenup enhances communication and promotes transparency in a potential union, with expectations clearly outlined, leaving no scope for gray areas in terms of division of assets.

It is a good idea to broach the subject as early as possible, even better if you and your partner have expressed, early in the relationship, your acceptance of the need for having a prenup. Honesty and communication are the keys to a good relationship and provide a good foundation for drawing up a prenup.

It is of vital importance, if one partner is skeptical or even disapproving of the idea of a prenup, that the other partner emphasizes that being in favour of a prenup does not make him/her cynical of the idea of marriages lasting forever or dooming it to failure from the start.

You have to convey to your partner that a prenup is simply a way to avoid bitterness, unnecessary heartache, disillusionment and messy situations in the unlikely event the marriage does not work out.

And finally, the strongest argument in favour of a prenup is that, if you don’t have a valid prenup, in the event the marriage ends, and you disagree about the division of assets, they will be distributed by the State. This means your privacy is violated and the State has to step in to decide on the allocation of assets, something you could have calmly decided right in the beginning.

Before going into the intricacies of a prenup, certain things should be kept in mind by the couple, and a few preliminaries sorted out…

1. Enter into the prenup well before your wedding date
2. Complete disclosure of financial assets, debts, obligations, etc.
3. Each of you has to have independent legal counsel
4. Other helpful steps are to update wills, insurance policies etc. to reflect changes

Why are prenuptial agreements gaining popularity?

While in the past, prenups might have been reserved for the rich and famous, this no longer holds true. An average couple could also opt for one because…

1. One partner comes into the marriage with substantial assets (for instance a home or a business) or stands to gain an inheritance in due course.
2. One partner (or both) has children from an earlier marriage and would like to protect their interests in the event of death or divorce, and ensure a fair and equal distribution of assets.
3. You have family to be taken care of, such as elderly parents or a mentally or physically challenged child/sibling.
4. You can keep finances separate.
5. To protect the other from debts of one or the other partner.
6. To avoid legal wrangles and interference by the State in the event of a divorce.
7. One partner has already been through a messy divorce and would like to avoid ever being in that situation again.
8. You may not be wealthy now, but you are in the pursuit of or are completing a degree that will prove lucrative in the near future, or your fledgling business is just beginning to show tidy profits.

Getting off to a good start…

Each of you will need a separate lawyer, but before you hire them, draw up a list of all your assets and communicate with each other what you would like to state in your prenup. Reach a casual agreement in privacy, rather than argue or debate issues in front of a third party. This will help you be clearer about what you would like to put down in your prenup and this clarity of thought will reflect in your discussions with your lawyers and save you both time and money.

Both partners have to get separate lawyers who will co-write the agreements ensuring an unbiased and fair representation of both clients’ interests. As attorneys charge on an hourly basis, sorting out issues beforehand could save you a considerable amout, as well as eliminate arguments and misunderstandings before your legal counsel. You could check with your lawyers at the start what the legal fees would be like.

Inclusions and exclusions…

Briefly, a prenup can include decisions on or deal with…

1. Ownership of property, both jointly and separately
2. How the property is to be divided
3. Inheritance of property/assets
4. Alimony/ spousal support
5. In some cases, even the religious upbringing of the children of the union)

A prenup is limited by/ cannot deal with access to/ custody of children or child support obligations.

What is generally included in a prenup?

In order to have your prenup sufficiently exhaustive it should preferably cover the following after you have reviewed the same with your partner…

1. A detailed list of all assets, income, potential inheritances, trusts etc.
2. A list of all debts and liabilities of the individual partner before entering into the marriage
3. Accountability for the debts and a description of how they will be sorted out/ paid
   Decide on the outcome of premarital property in terms of appreciation, dividends or proceeds thereof if the marriage doesn’t work out
4. Division of property owned separately or jointly, such as the marital home or other estates
5. Clarifying property rights of children from a previous marriage and how they will be supported, during the marriage or in the event of death or divorce
6. The outcome of inheritances or trusts in terms of its division or sole ownership
   Specify alimony or spousal support obligations
7. You can also specify death benefits, medical or life insurance coverage

For your prenup to be ironclad and valid, it must…

1. Be in writing, like a formal contract. This constitutes that it must be voluntary, fair, reasonable and without fraud. An agreement signed under coercion or pressure can be discarded by a court.
2. There must be full disclosure of the assets. Withholding information on certain assets or finances can make the agreement invalid.
3. A contract must be signed well before the wedding, as early as possible. You don’t want to leave it for the last, as a court may find elements of coercion to it, which could render it void.
4. A court can also set aside a prenup if it feels it is unjust and not equitable on the grounds of spousal support etc., leaving one of the parties destitute.
5. While prenups can deal with non-monetary terms and obligations (like children’s religious upbringing) anything of minor consequence relating to petty expectations of a partner could render the entire prenup invalid.

Additional tips…

It is recommended to use either matrimonial lawyers or those who specialize in divorce and remarriage, who are well acquainted both with drawing up a prenup and the laws of the state in which you reside.

1. The signing of the prenup must be witnessed by a lawyer.
2. It is preferable to sign the prenup in triplicate, with one copy retained by each partner and the third with an independent lawyer or in a safety deposit box.
3. Ensure all your financial and legal documents like wills, insurance policies etc. are consistent with each other so that there is no discrepancy or confusion at a later date.
4. It might be a good idea to review a prenup after several years of marriage.

Post-nuptial agreements

In case you were too caught up in the intricacies of wedding planning or slightly reluctant to bring up the word ‘prenup’ with your partner - now your spouse - it’s not too late. There’s always the post-nuptial agreement, made during a marriage, rather than before. In case you woke up to the realization that your state’s marriage laws or the court/ judge will determine your property distribution in the event of death or a divorce, it’s not too late to amend that in the way you see fit, through a post-nuptial or a post-marital agreement.
While it may not be easy to bring up the topic of finances and your spouse may accuse you of ‘anticipating a divorce’, communicating openly and without reservations about these sensitive issues can strengthen your relationship.

Why should you still consider a post-nuptial agreement?

You may not have had the time or the opportunity to get around to having a prenup
Your state laws (which could be vague) or a third party (the court) will arbitrarily decide on how your property should be distributed, whereas the control should rest in your hands.
There is a change in your financial circumstances either through setting up a business, inheriting assets, etc.

You may wish to make amendments to a prenup

It’s best to bring up a postnup in a neutral setting, where both of you are relaxed and at ease, with minimum scope for distractions or tensions. A postnup is a delicate issue so broach the subject sensitively and avoid getting defensive about it. Adopt a collaborative approach; be open-minded, straightforward, honest and willing to compromise.

Pre-conditions for a postnup

1. Just as in a prenup, both parties must have independent legal counsel.
2. Full financial disclosure.
3. As courts sometimes scrutinize postnups more stringently than prenups (as they feel there is less scope for leverage), the terms ‘fair and equitable’ assume paramount importance.
4. Complete and total absence of coercion of any kind.

It is vital to have an honest discussion about the following:

1. Assets and debts, income or inheritance expectations, etc.
2. Financial contributions of you and your partner and your respective financial status.
3. Expectations of property distribution and allocation of assets in the event of death or divorce
4. Drawing up an agreement in the presence of your respective lawyers
5. Reviewing or updating the agreement periodically, especially if you move to another state, to ensure the laws there don’t affect your contract in any way.

What can be included in a postnup?

1. A list of all assets, liabilities, incomes and expectation of gifts/ inheritances
2. Payment of post-marital debts.
3. How property and income earned thereof, as well as assets, should be divided in the event of death or divorce
4. Decision on ownership of the marital home and other such residences in the event of death or divorce
5. Decisions on the division of trusts or inheritances, real estate, jewelry etc.
6. Alimony or spousal support
7. Death benefits
8. Medical and life insurance coverage