A prenuptial or premarital agreement, many times called a “pre-nup,” may seem like a contentious topic to discuss leading up to a marriage that most fully intend to make last a lifetime. It can, however, actually be viewed as a tool couples can use to further “get to know” each other in addition to safeguarding each other’s interests. A discussion about a pre-nup prior to saying “I do” can initiate a conversation between future spouses that outlines their financial standing prior to the marriage. Farming and ranching families with generational assets, including family land and substantial business assets such as equipment, may want to consider a pre-nup to protect the family business and legacy in the unfortunate event a marriage ends. And while a premarital agreement is not necessary to have these types of conversations, it definitely can serve as a vessel to do so. So whether a couple is getting married in their 20s or later in life, a visit and potential execution of a pre-nup should at least be considered.
Making it happen
While the details and specific agreements can drastically vary from document to document, just like any other contract, most states require certain minimum standards in order for the pre-nup to be enforceable should that ever become necessary.
Each individual must hire their own independent attorney who will only represent the interest of the person who hired them. Both parties must disclose all financial interests to the other person. This would include things such as cash accounts, property, business interests, etc. Once that has been analyzed, all of the information will be memorialized in the premarital agreement.
The agreed-upon terms of the pre-nup must be “fair and reasonable.” If a court had to determine this element, they would likely look at factors such as things like equality of the agreed-upon split of assets. It should not be one-sided or blatantly unfair to one party or the other.
Additionally, the pre-nup cannot be signed by either person if they are under duress or undue influence. Now, telling your future spouse “I won’t marry you if you do not sign this” is not enough to render the agreement unenforceable. It must be something more threatening. In the example I gave, you would still have the choice not to marry the person and walk away.
Finally, the agreement should be signed and executed in accordance with the couple’s state law. Hiring a reputable attorney will ensure you meet this and other requirements needed.
What to consider and include
There is no one-size-fits-all pre-nup. What the couple decides to include and agree to is totally dependent on their individual assets and what they decide during their discussions.
A major component of the pre-nup is: The future spouses will agree, in writing, how their property will be categorized once they are married. In a community property state, like Texas and California, property is categorized as either separate property or community property. Separate property is any property owned prior to marriage or inherited at any time before or after marriage. Community property is any property accumulated or purchased after marriage. Many people say, “Well, if I own everything before we get married or everything I have is inherited, it is clear that it is my separate property; therefore I don’t need a pre-nup.” While it is true property may be technically classified as separate property, in most jurisdictions property is presumed to be community property by courts. This means you must prove it is separate property. A premarital agreement may be used to do just that. In states that do not recognize community property laws, they still categorize property as marital or non-marital property. Here, a prenuptial agreement will similarly identify the property each spouse owned prior to marriage and what was built during the marriage.
It is a common misconception that courts will split property 50-50 during a divorce. More properly, the court must divide this property in a “just and right” division. Many times, this comes out to an equal split of assets. But many other factors such as the length of the marriage, earning capacity of each spouse, and what each spouse has put into the businesses and other assets of the marriage will be considered. The premarital agreement allows the couple to agree to exactly what will happen should the marriage end. This may be as simple as “he or she gets what he or she came in with” and vice versa, or it can be detailed and dependent on many different factors. Again, as long as these terms would be considered “fair and reasonable,” the pre-nup will be enforceable and followed by the courts.
Why does all this matter? For one, it reduces the things a couple can fight in court should it come to that point. When the court gets involved, it ultimately means legal fees and uncertainty. A premarital agreement can drastically reduce these future legal fees and the fear of unknown outcomes, should a divorce happen. Also, as I mentioned at the beginning, the pre-nup can help parties, and their families, feel more confident they are protecting their farm and ranch legacies.
A pre-nup is a highly personal decision and, for various reasons, may or may not be used. But it should not just simply be overlooked or not considered because you think it is setting your marriage up to fail. Because, in addition to knowing what will happen if the couple wants out, it also lets them know what they are getting into. And instead of being a “dirty word,” a premarital agreement should be viewed as a practical tool for two people entering into the ultimate partnership of a long-lasting marriage.
This information is for educational purposes only. It is not legal advice, and is not a substitute for legal advice or representation from an attorney licensed to practice law in the appropriate jurisdiction.
