Legal and Practical Considerations for Entering into a Prenuptial Agreement

A well drafted prenuptial agreement provides certainty to couples.  Such an agreement can determine most financial obligations during the marriage or in the event of divorce (except those related to children), thereby eliminating or reducing uncertainty, acrimony and costly, lengthy or hostile divorce or probate litigation.  Without a prenuptial agreement, in the event of death, an estate may not be distributed according to the wishes of the deceased.  In the event of divorce without a prenuptial agreement, disputes frequently arise about support obligations, what assets should be included in the marital estate for purposes of dividing marital property, valuation of assets, the percentage of marital assets to be awarded to each party, and other matters.  Prenuptial agreements allow spouses to determine, in advance of marriage, the outcome of these events.

The subject of a prenuptial agreement should be addressed early in a relationship, ideally before or shortly after engagement.  A prenuptial agreement should be finalized at least thirty days before the wedding date as agreements negotiated and finalized shortly before a wedding are subject to increased scrutiny and may not be enforced.  The prospective spouse who wants the agreement should explain the reasons why the agreement is important and be prepared to acknowledge the other party’s fears or misconceptions about such agreements.  Each spouse should speak with a separate attorney about the drafting of the agreement and to discuss special considerations.  Once a couple decides to enter into a prenuptial agreement, the one of the first steps is to prepare a list of all assets owned by either party.  This asset disclosure should include all assets and current values or good faith estimates of values where current values cannot be obtained.  A party must know the full extent of the existing assets and interests in order to effectively waive those rights, so the preparation and completeness of the asset disclosure is of critical importance.

The terms of a prenuptial agreement must be fair, both at the time of execution and the time of enforcement.  Courts have wide latitude and discretion to determine what is fair.  Determinations of fairness vary from case to case.  If possible, prospective spouses should speak with each other and determine what would be a fair resolution in the eyes of both parties.  Discussion and agreement about such issues will bolster enforceability, expedite the process of drafting a prenuptial agreement, eliminate unhappiness or surprises and reduce the cost of the process.

The laws that govern prenuptial agreements are state-specific and vary widely, but in New Hampshire a legally enforceable prenuptial agreement is a voluntary, written agreement made after a full and complete disclosure of all relevant facts, consultation with any desired advisors and an opportunity to negotiate.  If information relating to a disclosure is reasonably requested, it should be provided.  The parties should also view some negotiation of the agreement as a positive part of the process, as it will increase the likelihood that the agreement will be enforced.

Prenuptial agreements are frequently challenged in the event of death or divorce.  If a prenuptial agreement is challenged, it will be closely scrutinized by the court to ensure that the spouses fully understood the agreement, that there was full disclosure, that it is not unconscionable and that the agreement was not obtained through fraud, duress, mistake, misrepresentation or non-disclosure of a material fact.  Case law in New Hampshire emphasizes the importance of legal counsel in the process of drafting a prenuptial agreement, to ensure that the parties understand the effect of the agreement on their rights and have a meaningful opportunity to negotiate terms.  Representation of both parties is not absolutely necessary, but it is certainly ideal.  An agreement entered into without each party being separately represented by an attorney may be difficult to enforce.  Consequently, it is best for each party to seek the advice of an attorney well before the date of the wedding, so that the attorneys can appropriately draft and negotiate issues surrounding the agreement.

About the Author: Margaret Kerouac[1]

Endnotes:
  1. Margaret Kerouac: https://orr-reno.com/our-people/margaret-r-kerouac/

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