Prenuptial agreements have long been recognized as providing definition to and protection of a married couple’s assets and income, as well as gifts and inheritances, in the event of a separation or divorce of the parties. Equally important are the definition and protection they can provide in the event of the death of one or more members of the couple.
It is not unusual for well-established, successful clients with ample assets to arrange to meet with me well in advance of their marriage–or re-marriage–to engage in planning for the drafting and negotiation of a Prenuptial agreement to be signed by the parties before they marry. Often, a focal point of such agreement is the protected inheritance of a party’s assets for his or her children, from the prior marriage, in the event that the parent dies survived by his or her new spouse. For example, in the absence of a valid Prenuptial agreement, a spouse who is left less than one-third of his or her spouse’s estate upon death—either by Will or otherwise– has the right, under Pennsylvania law, to claim, as a matter of right, with a limited period of time, one-third of the deceased spouse’s estate. This right is also known as the “elective share.” State law defining which assets constitute the “estate” for purposes of this claim is detailed and warrants a careful review. Nevertheless, this is a spousal right under the law of Pennsylvania and certain other states. This right can be mutually waived by the parties in a valid Prenuptial agreement.
Not until recent years, however, have I witnessed such great and unprecedented interest by younger, less-established clients embarking on first marriages in securing Prenuptial agreements to protect them in the event of separation, divorce, or death. This is a favorable trend, having the potential to benefit both parties in several ways. Specifically, the discussion and exchange of information required by the parties in developing such an agreement are generally among the best practices for most couples, requiring consensus as to how best to plan for their domestic life together, maintain household budgets, growth, care of family, educational needs, and unanticipated life events. In addition, it often reflects an awareness on the part of the parties, even at relatively young ages, of their respective parents or family’s own estate planning wishes and the parties’ desire to receive and protect possible gifts and inherited assets in the future.
A good Prenuptial agreement defines the rights and obligations of the parties in the event of separation, divorce, or death. Less frequently, clients who have already married seek my representation to enter into Postnuptial agreements, either because they did not enter into a Prenuptial agreement before their marriage or because the parties now wish to modify an already existing Prenuptial agreement to address changed circumstances or certain financial or other conditions. If carefully drafted, negotiated, and executed, a Postnuptial will be equally enforceable as a Prenuptial agreement.
Other important features and best practices of a valid and enforceable Prenuptial or Postnuptial agreement include the following:
- Written disclosure by each party to the other of his or her current assets, income, and liabilities incorporated into the agreement.
- Independent legal counsel for each of the two parties. Though the right to independent counsel may be waived in writing, best practices prefer separate counsel for each party to preclude future claims of duress or undue influence.
- Reference to special financial arrangements desired by the parties, such as maintaining joint bank accounts for depositing the parties’ wages or other income, paying certain household expenses, improvements, taxes, and other recurring items.
- Reference to applicable state property, divorce, and inheritance laws. Pennsylvania laws in such areas vary in certain respects from the laws of other states.
- Definition of the treatment of gifts and inheritances received by the parties before and during the marriage. Gifts and inheritances do not constitute “marital assets” subject to division in a divorce if the recipient keeps such assets separate and individually owned. However, the income earned by the gifted or inherited assets and the growth of those assets during the marriage could be construed as marital assets. A valid Prenuptial agreement will protect all aspects of a party’s gifts and inheritance.
- Signature of the agreement well in advance of the marriage, without undue influence on either party by the other.
- A valid Prenuptial agreement will supersede the provisions of one’s Will and any testamentary Trusts.
Nevertheless, it is imperative for each party to have an up-to-date estate plan (Will, Financial Power of Attorney, and Medical Power of Attorney/Living Will) in effect at all times.