Premarital Agreements: Facts vs. Myths

Fact: 

You may not be rich, but you definitely want to have a successful marriage. Having honest discussions regarding how you both will approach finances ensures that there won't be any surprises once you are married. No one wants to be in a position where they need to enforce the premarital agreement. Talking about financial issues in advance helps ensure that you handle your finances with minimal conflict during your marriage, or in case of divorce.

Example: You may become rich in the future. Your education, ideas, and talents may one day become more valuable than they are today. It would be prudent if you thought about how you'd want to handle the sale of a book, screenplay, or song. You may also need to think about dealing with dividing a business in the event of a divorce.

Example: Second and third marriages can often bring conflict between children from prior relationships and new spouses. Having clear discussions about financial plans in a divorce or premature death situation helps everyone avoid conflict later.

Fact:

The design of premarital agreements should protect both spouses. Unfair and completely one-sided premarital agreements are probably not enforceable in court. By definition, a Premarital Agreement must be fair. 

The basic requirements for premarital agreements to be enforceable are: 

• Signing the agreement must be voluntary.
• The agreement can't be unfair when it's signed.
• Each party needs to make full disclosure of their assets and debts. [California Family Code 1615] 

Premarital agreements can be designed so that everyone's needs are met. 

Example: With a premarital agreement, you will know in advance how assets and debts are treated if you do not stay married. You're negotiating the property settlement while you're both in love with each other. You would not be at the mercy of your spouse's generosity, or lack of generosity, at the time of a divorce.

Example: If you end up needing your agreement to be enforced by the court, you'll be glad that you made it reasonable from the beginning (and therefore enforceable). For example, by providing a reasonable support structure for your spouse in the premarital agreement, this agreement defines the support's limits, terms, amount, and duration in the event of a divorce. If you left it up to a court, you would have no control over any terms.

Fact: 

Jessica Simpson didn't think they were romantic, either. But there's nothing romantic about fighting over money once you're married because you never discussed how you'd handle your finances. 

Premarital agreements are touchy subjects. To see the benefits of having those difficult conversations, consider these quotes from the Nolo Press book Prenuptial Agreements: How to Write a Fair and Lasting Contract (Nolo Press 2004):

"While a prenuptial agreement may not seem like a very romantic project, working together to consider and choose the terms of a prenup can actually strengthen your relationship. After all, marriage is a partnership in every sense of the word. Learning how to deal respectfully and constructively with each other about finances is a benefit in itself. So even if you conclude that you don't need a prenup, using this book can help you converse with each other about the important — and sometimes challenging — financial matters that are sure to arise in the course of your marriage."

"When you marry, you make what you expect and hope will be a lifetime commitment to be there for each other in every way. Your prenup should support and reflect the spirit of partnership with which you approach your wedding vows."

Fact: 

You can include as many issues or as few issues as you wish. Because premarital agreements are private contracts, you can make them as detailed as you want.

Example: If the only thing you want your premarital agreement to accomplish is to protect your premarital property, you can limit your premarital agreement to that issue alone. 

If the only thing you want for your premarital agreement to accomplish is to outline what would happen in the event of your death (in addition to a Will or a Trust), you can limit your premarital agreement to that issue alone.

Suppose you want your premarital agreement to cover almost every issue that might come up in a divorce except one or two issues (such as spousal support or contributions to a pension during the marriage). In that case, you can have the agreement cover everything except the issues you want to exclude. 

If you want your premarital agreement to cover every issue, you can do that, too.

Fact: 

You could risk your income or assets by living together without marrying.

Palimony is a spousal support substitute for alimony or spousal support for people who are not married. Palimony claims are challenging to prove, but that doesn't stop some people from trying.

Also, suppose you have an oral or written discussion about how you will own property, share income, assets, debts, and so forth. In that case, it's sometimes possible to claim that contract law applies (as opposed to family law) and that property should be divided even if it's only in one person's name or only one person paid the bills. 

There are also real estate partition laws that can dictate the division of property. In some cases, you can even force an involuntary sale at auction.

If you are going to live together without getting married, you'll want a cohabitation agreement. It's better to decide who contributes to and owns the property before you buy things - rather than afterward.

Example: Remember actor Lee Marvin (The Dirty Dozen and more than 60 other movies)? In the 1970s, his live-in girlfriend of 6 years, Michelle Triola, brought an action against him. 

In this action, she alleged that they entered into an oral agreement during the time they lived together wherein:

• They would combine their efforts and earnings.
• Equally share the property accumulated through their individual or combined efforts.
• Michelle agreed to be his companion, housemaker, housekeeper, and cook while giving up her career as an entertainer and singer. 
• Marvin agreed he would provide for all her financial support for the rest of her life.

After a couple of appeals, the court agreed with Michelle Triola. Lee Marvin had to pay her $104,000, which was quite a bit of money back in the 1970s. Worse still, you can imagine what he probably paid in attorneys fees to defend these claims. 

But that's only half the story: Michelle Triola also had an attorney she needed to pay too. From this perspective, a premarital agreement or cohabitation agreement is a cost-effective way to handle a situation like this.