Protect Yourself Before You Merge, And Even After Merging
by Colleen M. Quinn
A prenuptial agreement doesn’t seem very romantic. It is difficult to talk about—and can even be somewhat emotional. However, for most folks who are contemplating marriage, it is essential. Many marriages and committed relationships end in divorce, without a happily-ever-after. That is the unfortunate reality.
A prenuptial agreement is just plain practical. Going into the partnership, it also shows consideration and responsibility for the partner and for oneself. It shows consideration because it can spare a couple the messier and emotional aspects of divorce – the division of property and issues of support. It also can serve as an operating agreement during the marriage to help govern the handling of finances. Further, it shows responsibility for many aspects of life together, including the protection of children who came from prior relationships, protection of inheritance funds, protection of prior separate assets, and, most importantly, protection of one’s financial independence. Marriage is not just an emotional commitment, but a legal one — why not legally spell out the financial obligations in advance?
Who most needs a prenuptial agreement? Any person who
- Has children from a prior marriage or relationship;
- Is bringing a lot of assets (especially over $50,000 or more) to the relationship;
- Has a considerable chance of receiving a significant inheritance;
- Owns his or her own company;
- Is a partner or has significant ownership in a company;
- Is on a fast career path with the prospect of a very good future, including the prospect of a hefty salary;
- Is (or will be) supporting his/her spouse while he/she obtains an advanced degree;
- Will be foregoing his/her own career and/or stream of income to raise children to otherwise serve as a “household engineer”; or
- Knows that the other spouse has a potentially disabling condition or illness.
At Locke & Quinn, we know of too many people who have suffered needlessly because they failed to enter into a prenuptial agreement. We could tell about spouses who supported the other spouse through medical school or law school—only to end up owing continued spousal support to ex-spouses who not only were having affairs but were poised to make hefty salaries. We can tell stories about spouses who have given up their careers to support the other spouse, the house and the children, only to be left with no operating funds and struggling to hire an attorney who will fairly represent them.
For a successful prenup, both parties must divulge all financial information, including all assets, income and debts. We know of spouses who have lost all of their hard earned savings because they were not aware of the other spouse’s debt.
If you’re already married, it’s not too late. Too many times, we meet spouses who have developed their own career paths or businesses during the marriage—and then are at a huge disadvantage through the divorce. Just recently I met with a business owner whose spouse not only had become a physically and sexually abusive alcoholic, but also controlled all of the business assets. When the one spouse started her own business, she should have entered into a postnuptial agreement.
As for same-sex (LGBT) couples contemplating entering into a reunion, given the current state of Virginia law, it is debatable as to whether prenuptial, postnuptial or partnership agreements will be upheld in court (and could very well depend on the court and judge). Therefore, it is recommended to have an “arms-length” agreement that make no reference to the romantic union or commitment between them and that spells out the expectations and assets as between the parties. In addition, it is imperative that same-sex couples address their financial arrangements through wills, trusts, deeds, and lease agreements and also obtain reciprocal advanced medical directives and general powers of attorney. When children are involved, then same-sex couples should seek the entry of a joint custody order.
Finally, remember that any contract or agreement can include incentives or sunset provisions for the spouse who has “stood by” the other spouse for ten, fifteen, or twenty years — to award the success of a long-term commitment!