Prenuptial Agreements are important for any couple, regardless of the amount of money each has or each plans to make in the future. However, prenuptial agreements or pre-marital agreements as they are also called are “crucial” for couples entering into high net worth marriages. In fact, in the event of a high net worth divorce, a prenuptial agreement can reduce complications involving finances. It can also protect assets while ensuring that both spouses are financially secure and protect children’s access to assets in the event of spouses entering into a second or third marriage.
Proper Drafting of a Prenuptial Agreement
Prenuptial agreements are governed by the state laws in which the parties reside. Maryland, Pennsylvania, New York and New Jersey all have laws that recognize the validity of pre-nuptial agreements. The parties should both be represented by attorneys familiar with drafting pre-marital or pre-nuptial agreements to ensure the agreement represents all of the concerns of the parties and is also recognized as a valid document if the document is ever the subject of a dispute in court.
It is extremely important to ensure that the agreement is entered into voluntarily between both parties. If the court finds that one party did not understand the document or was forced into signing the agreement or that the agreement is unconscionable, the court could decide that the prenup is not enforceable. Especially when it comes to high net worth marriages, it is essential that you take all the necessary steps to show that your spouse entered into the prenuptial agreement understanding the financial implications.
Further, in addition to making sure that the court will enforce the prenup in the event of divorce, the language contained in the premarital agreement can drastically change the outcome of your divorce settlement. Prenuptial agreements can have a big impact on divorces in which much of the wealth was accumulated during the marriage. The agreements are also very important when the parties have their own business or several businesses or when this is the parties’ second or more marriage and previous wealth was accumulated and children are involved.
A prenuptial agreement can also act as a type of estate planning tool, especially if there are children from a previous marriage or relationship. The agreement can specify how the children may be protected, i.e. placing money obtained during the marriage in a trust or other instrument for the children, in the event Husband and Wife should divorce, as part of the distribution of assets.
A prenuptial or pre-marital agreement can be a very useful tool for both Husband and Wife to protect their premarital assets, create certainty of how the assets will be distributed if the parties would divorce, and to help preserve the parties’ lifestyle after divorce.
What is included in a High Net Worth Prenuptial Agreement
First, it is important to understand what can and cannot be included in a prenuptial agreement. Couples can contract about the disposition of property, spousal support, alimony and other assets or debts in a prenuptial agreement. They can also contract about where money is to go toward college accounts or in trusts for children or others. However, the parties cannot contract about child support in the event of divorce.
When coming to an agreement about how assets will be divided, the following are some tips to ensure that you have an enforceable and workable agreement:
- Being open about wealth and financial assets before the marriage;
- Drafting the premarital agreement with sufficient time before the wedding such that the other spouse does not feel pressured;
- Both parties are represented by their own lawyer;
- Encouraging the other spouse to engage in active negotiation before signing; and
- Being willing to make concessions about terms in the prenuptial agreement.
High net worth divorces can be extremely complicated, but a prenuptial agreement can help to protect parties in the event of a divorce. If you have questions about preparing a prenuptial agreement or filing for divorce, contact the Law Office of Robin J. Gray at
