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Health & Fitness

Will You . . . Sign On The Dotted Line? Pennsylvania Prenuptials: A New Kind of Proposal

A prenup and the discussions that go with it can help ensure the financial well-being of the marriage.

The setting for a marriage proposal is just all too common in romantic comedies and romance novels. In a dimly-lit corner of a cute little Italian bistro sits a couple. They are enjoying a romantic, candlelit dinner on a small circular table, which is adorned by a small bud vase with a single red rose in a seemingly peak of bloom. The wine in their glasses is glistening. He pretends to drop his fork, and gets down on one knee. Out comes a small, velvety box with a diamond
ring tucked into a tiny little pillow. She says “yes”, of course. Very romantic, right?

Now, imagine a different scenario, one in which the wedding proposal is preceded by a prenuptial agreement. Not so romantic anymore, right? Just the mention of a “prenuptial agreement” seems to kill the love out of a wedding proposal.  However, a prenuptial agreement is a very sound plan, one which only helps strengthen a marriage at its very core, by forcing couples to address some very real and often overlooked issues of finances.

Marriage is not just an emotional, physical, spiritual, and legal union – it is also a financial union. A prenuptial agreement and the discussions that go with it can help ensure the financial well-being of the marriage, as it will force couples to
discuss a very real and important issue – their respective financial health and
how that will contribute to the overall finances in the marriage.

Couples of all ages and socio-economic backgrounds choose to enter into a prenuptial agreement, also referred to as a premarital agreement or antenuptial agreement, for a variety of reasons.

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Some of these reasons include: (1) protecting their respective pre-marital estates – either or both spouses may be bringing substantial assets to the marriage; (2) preserving a portion of a separate estate for the benefit of their children from prior marriages -- one or both spouses may have substantial property and assets and may want to assure that, in the event of death or divorce, the property is retained for the benefit of the lineal heirs; (3) providing for post-divorce alimony.

Another situation in which antenuptial agreements are used is one in which both parties are employed at a substantial income level. The parties may well anticipate having children, but the total family income will greatly exceed that needed for the ordinary expenses of living. In such a case, each spouse may wish to retain his or her earnings and property acquired during marriage free from any claim of the
other. The spouses may also wish to be able to terminate the marriage free from
any claim for support other than child support.; and (4) guarding against
costly and time-consuming litigation in the event of divorce--in essence
''divorce planning.''

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Okay, let’s get some of the legal jargon out of the way. A prenuptial agreement, or more commonly referred to as a “prenup,” is an agreement between prospective spouses made in contemplation of marriage to be effective at the time of marriage. The scope of prenups is generally limited to property rights, support, and rights of inheritance between the parties.

However, other subjects, such as business relationships between the parties may be covered. Because the state reserves parens patriae jurisdiction over children, provisions concerning custody and visitation are generally inappropriate for a prenup. However, the agreement may include provisions for child support as long as it does not attempt to relieve a parent of the responsibility of support. 

Like any agreement, there are legal formalities to a prenup. Prenups are instruments of contract, so they are governed by the law of contracts. Therefore, prenups must contain the elements required for the formation of valid contracts. They must be entered into freely, understandingly, and without fraud, by persons legally competent to contract. There must also be consideration exchanged. 

The marriage itself may constitute adequate consideration for a prenup, although there is often additional consideration present. A promise to make a testamentary devise for the support of a spouse in exchange for the spouse's waiver of the right of election to take against the will is valid consideration for the agreement.
Similarly, mutual waivers of all future rights in the property of the other is
sufficient consideration to enforce the waiver of either party.

A prenup, to be valid, must also embody an understanding that there has been full and fair disclosure. Because the parties do not deal at arm's length, but stand in a relation of mutual confidence and trust, the highest degree of good faith is required. Therefore, a court will give a contract between spouses particular scrutiny because of the special relationship. 

As such, for a prenup to be valid and enforceable, it is mandatory that both parties make a full and fair disclosure of their financial positions prior to the execution of the agreement. A broad description of assets is not sufficient. There must be at least a reasonable estimate of the worth of the assets and there must be an affirmative disclosure of financial information. If the agreement states that full disclosure has been made, a presumption of full disclosure arises. This presumption may be rebutted by clear and convincing evidence of fraud, misrepresentation, or duress.

So what can you do with a prenup? In Pennsylvania, all of the real and personal
property acquired by either spouse during the marriage is presumed to be
marital property, whether title is held individually or in some form of
co-ownership. One exclusion to this rule is property excluded by a valid agreement entered into before, during, or after the marriage. Therefore, spouses can use a prenup to remove property they acquire during marriage from the operation of the law of marital property and equitable distribution, so that in the event of divorce, each party will retain his or her separate property.

A prenup can also protect each spouse from the other’s debts. Some of us bring debts, as well as assets, to a marriage. If there's no prenup, creditors can sometimes turn to marital or community property to satisfy the debts of just one spouse. But if you want to make sure that saying "I do" does not mean saying "I
owe," you can use a prenup to limit your liability for each other's debts.

A prenup can also be used to provide for children from prior relationships or marriages. A prenup is helpful, perhaps essential, if either spouse has children from another relationship or marriage, and they want to make sure that their children inherit their share of property. In a prenup, one or both spouses can give up the right to claim a share of the other's property at death, perhaps in
exchange for an agreed upon amount of money. Of course, here it is important that each spouse’s will also incorporates this same understanding and agreement.

Couples may also choose a prenup to keep property in the family. If one or both spouse have something they want to keep in their birth family, whether it be an heirloom or a share in a family business, the spouses can agree that it will remain in one spouse’s family. This can even include property that one spouse expects to
receive in a future inheritance. 

This is yet another area where estate planning comes into play. In addition to using a prenup to waive inheritance rights at death, it's vital that both spouses prepare the estate planning documents -- a will, living trust, and so on -- that actually transfer the property as intended.

A prenup can be used to define who gets what at time of divorce. Couples can use a prenup to establish their own rules for property division and avoid potential disagreements in the event of a divorce.  

Couples can also use a prenup to memorialize agreements regarding alimony. During the marriage, spouses are liable for each other's support according to their respective abilities to provide support. The duty to support one's spouse is terminated by a legal divorce decree.

However, alimony may be allowed in an action for divorce or annulment if the court finds that alimony is necessary. Because of the potential of an award of alimony, spouses may agree to establish the right to post-divorce support through private support agreements. Therefore, spouses may include provisions in prenups designed to establish the right to and amount of spousal support in the event the marriage is terminated by divorce. 

Couples may choose to enter into a prenup to clarify each other’s financial responsibilities during the marriage. The list of things that this can cover is almost limitless.

For example, some people include in their prenups: whether to file joint or separate income tax returns or to allocate income and tax deductions on separate tax returns; who will pay the household bills -- and how; whether to have joint bank accounts and, if so, how to manage them; agreements about specific purchases or projects, such as buying a house together or starting up a business; how to handle credit card charges -- for instance, whether you will use different cards for different types of purchases, what kinds of records you will keep, and how you will make payments; agreements to set aside money for savings; agreements for putting each other through college or professional school; how to settle any future disagreements -- for example, you might agree to hire either a mediator or a private arbitrator.

There are some things you just can't -- or shouldn't -- do with a prenup. As a general rule, any agreement to do something that is illegal or against state-defined public policy will be considered unenforceable -- and may even jeopardize other valid aspects of the premarital agreement. 

Some other things that you cannot do with a prenup include: restrict child support, custody or visitation rights. No state will honor agreements limiting or giving up future child support. The same holds true of agreements limiting future custody and visitation rights. This is because state lawmakers consider the welfare of children to be a matter of public policy and do not enforce any private agreements that would impair a child's right to be supported or to have a relationship with a parent in the future.

If the agreement appears to offer a financial incentive for divorce to one party, it may be set aside by the court reviewing the agreement.

For practical reasons, personal agreements should be kept out of a prenup. Some of the non-financial matters that sometimes find their way into prenups, but are better dealt with separately, include responsibility for household chores -- from laundry to cleaning to car care; use of last names after you marry; agreements about having and raising children, such as birth control, having children, children's
names, child care responsibilities, and education; how you will relate to
in-laws or stepchildren; and whether you will have any pets and who will be
responsible for them. These kinds of nonmonetary agreements aren't binding in court. In fact, they could cause a judge to take the entire prenup less seriously.

So what are the next steps you should take? If you, a family member, a friend, a
colleague, or a client are considering a prenup or are ready to prepare one,
you should consult an attorney who has experience drafting these documents.  Such an attorney will be in the best position to provide everything you need, from deciding whether prenup is the right option to negotiating and drafting the  agreement. 

Should you wish to set up a consultation to prepare a prenuptial agreement, please do not hesitate to contact me at 267-615-8090, or at fsciarrino@fabio-law.com.

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