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.

Worth a look? Anyone who has been through a divorce, or knows someone who has, understands that it can be a drawn-out, expensive and painful process.  Typical divorce clients have entangled their finances in ways that make separation and division difficult, especially when two soon-to-be-former spouses find themselves at odds with each other emotionally. As a result, the parties often have trouble finding common ground in order to settle and move on with their post-divorce lives. One often-overlooked tool to make this process less painful is the premarital, or prenuptial agreement.

What are they? Premarital agreements are contracts between prospective spouses who are planning on getting married. Although the premarital agreement is a kind of contract, no consideration is required—that is, neither party has to “pay” anything to the other in order to make the agreement binding.

What topics can a premarital agreement address? Premarital Agreements are commonly used to address division of assets and spousal support in the event of a divorce. Oregon’s premarital statutes are broadly written to allow the parties to agree on just about anything, as long as the subject of that agreement does not violate either public policy (such as an agreement addressing payment of future child support) or a law that imposes a criminal penalty such as an agreement to steal a car.

For example, premarital agreements can be used to address:

• What to do with one spouse’s retirement account that the spouse brought into the marriage;
• How to deal with a spouse’s rental property;
• How to ensure that the parties can acquire jointly-owned property such as a marital residence when they are married;
• Whether, and to what extent, divorce should trigger mechanisms to support one of the spouses, either by providing or limiting spousal support, or by assigning an interest in income-producing assets to generate income for a spouse;
• How the surviving spouse should divide a deceased spouse’s assets;
• Whether to assign life insurance proceeds to the surviving spouse, the deceased spouse’s children, or to a previous spouse to ensure payment of a pre-existing obligation; and
• Any other matter, including personal rights and obligations, provided the agreement does not violate public policy or a statute imposing a criminal penalty.

When do they become effective? Premarital agreements become effective upon marriage.

Can premarital agreements be modified or revoked after marriage? Yes. If both spouses agree to modify or revoke their premarital agreement after they are married, they have to do so in writing, and both parties have to sign. No additional consideration is needed to modify or revoke the agreement.

Who else could benefit from a premarital agreement? Often, the parents of a spouse can benefit from a premarital agreement that ensures any inheritance left for one spouse will actually go to the intended beneficiary and not be the subject of a contested divorce case. Similarly, a spouse can use a premarital agreement to provide, for example, that assets brought by that spouse into the marriage, or some agreed-upon portion of assets held by both spouses within the marriage, can be used to pay for college expenses of a spouse’s child of another marriage. If you have questions about whether a premarital agreement might be worth considering for yourself, an employee, or a family member, we would be happy to schedule an appointment to discuss your specific needs and identify some options for addressing them.

Next time Part II will discuss: Anything worth doing is worth doing right.