Doing it Right: Seven Rules for a Rock-Solid Prenup

If you and your spouse-to-be decide that a prenuptial agreement makes sense in your case, it is not enough simply to scribble your understanding down on a scrap piece of paper. Rather, you must follow certain established rules when negotiating and memorializing your agreement. This chapter explains the seven most important rules for a rock-solid prenuptial agreement. If you ignore these rules, you could end up with a prenuptial agreement that would never stand up in court.

Rule #1:

Put your prenuptial agreement in writing and make sure you and your spouse-to-be both sign it. You might think it is unnecessary to have a formal prenuptial agreement in place, specifying each spouse’s rights in the event of debt, divorce, and death. Why can’t you and your loved one simply sit down and reach an understanding on your own without going through all the bother and expense of having lawyers put it in writing? The answer is simple. Most courts will not enforce a prenuptial agreement unless it is in writing and signed by both spouses.

Example: Russ and his fiancé, Charlotte, were both musicians who shared a love of jazz and a strong distaste for lawyers. Before they married, they had a long heart-to-heart about the not-so-romantic practical side of marriage—death, divorce, debt, and money in general. Charlotte and Russ agreed that if they ever divorced, they would divide everything they earned while they were married equally between them. Russ and Charlotte also promised to rewrite their wills to leave their entire estates to one another. Neither Russ nor Charlotte discussed their agreement with a lawyer and they did not bother to write anything down. Both of them felt that their word was enough.

Charlotte rewrote her will, just as she had promised. But Russ never got around to rewriting his before he was tragically killed in a motorcycle accident. Charlotte learned from the lawyer for Russ’s estate that his will made no mention of her whatsoever. Because the prenuptial agreement that she and Russ had agreed to was not in writing, there was no way for Charlotte to enforce Russ’s promise to rewrite his will to leave her all his assets. Charlotte was therefore entitled to nothing more than her elective share of Russ’s estate—which, in their state, was only one third of his estate. The remainder of Russ’s estate went to Russ’s parents, who were the only people named in his will.

Rule #2:

Hire a lawyer to advise you on your prenuptial agreement and make sure that your spouse-to-be does the same. You might be tempted to save on legal fees and enter into a do-it-yourself prenuptial agreement with your loved one. Though you might consider this biased advice (since it is coming from someone who makes her living practicing matrimonial law), not hiring a lawyer for the purposes of your prenuptial agreement is penny-wise and pound foolish.

Lawyers serve several important purposes in the context of prenuptial agreements. Your lawyer will:

• explain your legal rights to you and help you understand how your prenuptial agreement will affect those rights;
• keep you from signing an agreement that is overly lopsided in favor of your spouse-to-be;
• provide you with bargaining power by negotiating better terms on your behalf;
• help you comply with the financial disclosure requirements (see Rule #3);
• make sure that you receive appropriate financial disclosure from your spouse-to-be; and,
• take all necessary steps to ensure that your prenuptial agreement will stand up in court.

Not only should you go out and retain a lawyer, but you should make sure that your spouse-to-be does the same. If your spouse-to-be cannot afford a lawyer, you should cover the legal bills yourself. (Trust me, this is a very wise investment.) The last thing you want is for your spouse to challenge the agreement down the line on the grounds that he or she did not understand the legal consequences of your prenup. You should make certain that your spouse-to-be hires a lawyer who is just as competent as your own, and that his or her lawyer is completely independent of you. For example, this would not be a good time to call in that favor from your cousin Bill, a criminal lawyer who happens to do a little family law on the side. Otherwise, your spouse-to-be could later claim that he or she did not have the benefit of independent legal counsel, since the lawyer you provided was biased in your favor.

When each spouse-to-be has his or her own independent lawyer, it is much more likely that their agreement will stand up in court. Having separate and well-qualified lawyers ensures that each spouse-to-be will understand what he or she is signing (because it is a lawyer’s obligation to explain the consequences of each and every term of a prenuptial agreement) and will also have the opportunity to negotiate for more favorable terms before signing the agreement.

Example: Alexis was a very well-endowed young woman (her trust fund was larger than the gross national products of some developing nations). When Alexis announced her engagement to Joshua, a man who considered his friends and family to be his greatest riches, Alexis’s family immediately demanded that the commoner sign a prenuptial agreement. Joshua said that he would gladly sign anything in order to put their minds at ease, but Alexis insisted that he hire a lawyer to look over the agreement and negotiate on his behalf. So Joshua begrudgingly retained a lawyer and Alexis paid the bill.

Joshua’s lawyer looked over the agreement proposed by Alexis’s family and carefully explained the terms to Joshua. Joshua was surprised to learn that the agreement essentially provided that Joshua would get nothing in the event of a divorce—not even spousal support—even if they were married for twenty years. While Joshua was not troubled by this (since he felt in his heart that he and Alexis would never part ways), he was very hurt by the provision that left him with nothing in the event that Alexis died.

Joshua discussed this with Alexis (who had left the details of the agreement to her lawyer) and the two agreed that the provision was incredibly unfair. Alexis instructed her lawyer to redraft the agreement to provide that Joshua would receive half of her entire estate in the event of her death, with the other half going to charity. Alexis’s family was not pleased, but Alexis and Joshua were comfortable with the arrangement. Joshua was grateful that he had a lawyer to translate the agreement into plain English for him. Had it not been for the lawyer, Joshua would have signed away all of his rights without even realizing it.

Rule #3:

Provide your spouse-to-be with the complete details of your personal finances and ask for the same in return. Comprehensive financial disclosure is perhaps the most important prerequisite to a valid prenuptial agreement. This is because you and your spouse-to-be need to have a thorough understanding of one another’s financial situation before you can negotiate the terms of your prenuptial agreement in fairness. For example, you probably would not agree to waive all spousal support claims if you knew that your soon-to-be spouse was a millionaire and not the starving artist he claimed to be. Or you would not agree to be jointly responsible for all debts incurred during the marriage if it turned out that your spouse had a secret gambling problem and had already accumulated tens of thousands of dollars in casino debts. The fact of the matter is that unless you and your spouse-to-be provide one another with thorough details

As Featured in the Book

What to Do Before “I Do”

Nihara K. Choudhri, Attorney at Law

What to Do Before “I Do” takes the potentially unromantic idea of a prenuptial agreement and helps you see its importance to your relationship.

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