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Premarital Agreements (Part 2): Anything Worth Doing is Worth Doing Right.

In Part 1, we discussed what premarital agreements are any why they are important. Next, we will address how to effectively draft and execute an enforceable agreement.

What can a premarital agreement do for me? A properly drafted premarital agreement is a small, initial investment that can produce long-term results by easing the fear of the unknown and saving the couple time, money, and stress in the event of a separation or divorce. The ultimate goal in premarital agreement drafting is to create a document that will allow you to enforce the terms of the arrangement and ensure that both parties get what they bargained for.

Why does it matter how I draft my premarital agreement?
Divorces are messy and painful. What might have seemed perfectly reasonable at the time the parties entered into a premarital agreement may seem completely unreasonable at the time of divorce. One party will try to avoid the agreement, often claiming that it is “unconscionable.” The elements of unconscionability are:

  1. The other party did not provide a fair and reasonable disclosure of their property or financial obligations;
  2. The objecting party did not voluntarily and expressly waive, in writing, any right to a fair and reasonable disclosure beyond what was actually provided; and
  3. The objecting party did not know (or could not reasonably know) the property or financial obligations of the other party.

How do I execute an effective premarital agreement?
There are three keys to avoiding claims of unconscionability and ensuring that your premarital agreement is enforceable:

1. Disclose Everything
Both parties to a premarital agreement have a “fiduciary duty” to each other, which means they should be unfailingly honest and forthright in disclosing what assets and liabilities they have at the time of marriage. A “meaningful disclosure” gives each party the knowledge of the value, amount, and character of the other party’s property and liabilities so that they are fully aware of the nature and extent of the property affected. Be sure to provide a list of all of the assets and liabilities you are bringing into the marriage. Consider offering your spouse-to-be the opportunity to review bank statements, have properties appraised, and see bank statements, mortgages, and other evidence of your debt. Providing everything avoids claims that there was not meaningful disclosure. This person is going to be your spouse. Be honest.

2. Get the Agreement Done Voluntarily and Well in Advance
You must provide enough advance notice that will allow your spouse to have a reasonable opportunity to review and become aware of the purpose of the agreement. In one case, the Court of Appeals determined a party did not voluntarily enter into the agreement when the other party provided the agreement only one day prior to the parties flying out-of-state for their wedding. Do not hesitate to provide a draft of the premarital agreement well in advance of asking your spouse-to-be to sign it. Six months is not too far before the wedding to set as a target date for getting the agreement signed.

3. Have Separate Attorneys
Because the interests of each party to a premarital agreement are adverse, one attorney should not represent both parties. Each party should have separate counsel available to review the other party’s property and liabilities and to negotiate the terms of the agreement. A meaningful bargaining process between two represented parties creates an inference of a legitimate premarital agreement process where both parties had reasonable opportunity to review and become aware of the purpose of the agreement. There is less possibility that the provisions of an agreement will be found unconscionable or involuntarily entered into if the parties are represented by separate counsel. Consider paying for your spouse’s attorney if necessary.

What will a premarital agreement do to my relationship?
Many couples hesitate at the idea of a prenuptial agreement because they expect it to bring tension into their relationship and destroy the “happily ever after” feeling of being engaged. However, if done correctly, a prenuptial agreement can serve an important role of stimulating conversations about how the couple wishes to define and safeguard their marriage. This can help build a strong a lasting relationship based on mutual understanding of financial expectations and aspirations.