Prenuptial Agreement: How to prepare for potential divorce before you get married, Part III of a series regarding property division and divorce.
A prenuptial agreement, which is sometimes referred to as a “premarital agreement,” or a “prenup,” may be prepared and executed by two people before they get married in order to protect their interest in property at the end of the marriage. It is difficult for people to think about a potential break-up before the vows are spoken. There are many reasons to consider making a prenuptial agreement just in case the marriage eventually fails. In recent articles, we described the difference between “ marital property” and “separate property”, and the factors that lead to the Court’s ultimate decision about what property division may be considered “equitable.” A prenuptial agreement can affect whether property or financial assets of one spouse before the marriage are treated as separate property, and it can influence the way that a divorce decree results in an equitable division of the marital property.
What is a Prenuptial Agreement?
A prenuptial agreement is contract made between individuals who intend to marry, and it goes into effect and is therefore enforceable only if the couple actually marries. The agreement must be in writing and signed by each future spouse. The primary goal of entering into a prenuptial agreement is to protect the individual assets of each person in the event that the marriage fails or, in some instances, if one party dies, but there are many other reasons to create and sign this document. The benefits are not reserved for the wealthy, as tradition may lead you to believe.
For example, a prospective spouse may have a business or personal property that he or she wishes to ensure will remain in the family. Similarly, prenuptial agreements can be used to protect future gifts or inheritances of the spouse or the inheritance rights of heirs from a statutory spousal interest, although they are not an adequate substitute for a will. When debts are included in the agreement, it is possible to require that monies owed to creditors by one individual remain the sole responsibility of that spouse, protecting the credit of the spouse who is more financially stable. If assets are the focus of a prenuptial agreement, the equitable distribution of property at the time of divorce can be simplified, saving time and attorney’s fees and avoiding drawn-out divorce litigation. It is not a way to resolve child custody or child support matters, and jointly-acquired assets and debts of the marriage must still be divided fairly.
The prenuptial agreement may specifically list certain items of real and personal property, investments and financial assets owned at the time the agreement is signed and provide for who will keep them if the marriage ends in divorce. A retirement account may be the primary means of savings for one individual, and the future contributions to the account during the marriage may belong to both parties at the time of divorce without a prenuptial agreement preserving the total investment for that individual. Simply as a contract, the signed document is presumably enforceable unless one person can prove that the agreement was unconscionable, signed under coercion, or agreed to without sufficient disclosure of assets by the other party.
The law in Pennsylvania, set forth at 23 Pa. C.S.A. 3106, requires that a spouse seeking to set aside a premarital agreement has the burden of proving, by clear and convincing evidence, that:
(1) the party did not execute the agreement voluntarily; or
(2) the party, before execution of the agreement:
(i) was not provided a fair and reasonable disclosure of the property or financial obligations of the other party;
(ii) did not voluntarily and expressly waive, in writing, any right to disclosure of the property or financial obligations of the other party beyond the disclosure provided; and
(iii) did not have an adequate knowledge of the property or financial obligations of the other party.
For these reasons, it is important to make sure that the prenuptial agreement is prepared, disclosed and executed properly to ensure that it effectively serves its purpose at the end of the marriage. If you are considering having a premarital agreement made, or if you have questions about the equitable division of assets between you and your spouse at the time of divorce, call The Mazza Law Group, P.C. at (814) 237-6255 to speak to an experienced divorce attorney.