Not many things have the ability ruin a romantic moment like the topic of prenuptial agreements – but it really shouldn’t be that way. Prenuptial agreements have unfairly gained a bad reputation as a contract entered into by couples who plan on divorcing, or who are entering into a marriage that they are not confident in. To the contrary, prenuptial agreements are important planning mechanisms, and frequently utilized as a tool of estate planning.
Instead of viewing prenuptial agreements as a plan for a failed marriage, or a setup for a self-fulfilling prophecy, couples should view these contracts as a type of “marriage insurance plan.” The United States continues to experience high divorce rates, and it is certainly not uncommon. Even without mention of such dismal facts, it is generally good practice to plan for the “what if’s” or worst case scenarios. Having a prenuptial agreement in place before marriage does not reflect adversely on the relationship. Rather, it requires upfront and honest communication, and may even be viewed as a practice that strengthens relationships. It is ideal to discuss the topics covered by a prenuptial agreement at a time when couples are most in love and in tune with each other, rather than when they are facing divorce and may resort to arguing over decisions – a route that oftentimes impacts both parties emotionally and financially.
Prenuptial agreements provide protection during death or divorce. They provide certainty and predictability should either of those events occurs. Listed below are some of the many benefits a prenuptial agreement provides:
Benefits of a Prenuptial Agreement
- Protect each spouse’s rights to property owned individually or as a couple. Property ownerships are specified in prenuptial agreements, as well as how such assets should be divided at the time of death or divorce. Absent a prenuptial agreement, property owned by individual spouses could be subject to division at the time of divorce, or jointly owned property could be split up in ways other than intended.
- Address the division of debts in the event of divorce and/or death. Prenuptial agreements can specify what debts will be taken on by the other spouse at time of divorce or death. Many individuals enter marriages with their own debt, such as student loans or credit card debt. Prenuptial agreements can ensure that the non-debtor spouse does not assume any responsibility for debt they did not incur if they do not want to.
- Define whether gifts and/or inheritances will be considered marital or separate property. Any assets obtained during marriage could become marital property, potentially entitling each spouse to half at the time of death or divorce. This could include any inheritances or gifts received by a spouse during the marriage. A prenuptial agreement can determine how gifts and inheritances will be treated at the time they are received.
- Can provide protection in cases of second marriages and blended families. Prenuptial agreements are a powerful tool to protect the inheritance interests of children from prior relationships should death or divorce occur. Absent any estate planning or prenuptial agreement, the death of once spouse may result in many, if not all, of the deceased spouse’s assets being paid to the surviving spouse – and this could exclude surviving children of the deceased spouse. In the converse, the death could result in a majority of the estate being paid to the children, even though the plan was for those assets to support the surviving spouse.
- Potentially reduce conflicts and save money if you divorce. Divorces can be extremely time consuming and expensive. It is not uncommon for divorcing couples to find themselves engaged in ongoing arguments and negotiations during a divorce. It is impossible to predict with certainty how a person will act or react when going through a divorce – so do not leave it to chance. Prenuptial agreements can help in determining many factors ahead of time, to potentially prevent a long, drawn out battle in the courts.
- Clarify special agreements. Responsibilities of each party during the marriage can also be included in prenuptial agreements. Such topics can include: retirement benefits, management of household bills/expenses, management of join bank accounts, savings contributions, arrangements where one spouse is putting the other through school, management of credit card spending and payments, separate business arrangements – just to name a few.
- Establish procedures and ground rules for deciding future matters. A prenuptial agreement can address settlement of potential disagreements – such as using mediation or arbitration.
- Provides additional support to your estate plan. Prenuptial agreements are another factor in ensuring that your estate plan is carried out the way you see fit. However, a prenuptial agreement is not intended to function in place of other documents such as wills and living trusts.
- Requires upfront, honest communication and promotes responsible financial planning. The process of completing a prenuptial agreement requires couples to engage in absolutely honest and open communication regarding financial planning. Not are financial matters an important factor in many people’s lives, but it is oftentimes a high point of contention during divorce proceedings. Planning ahead with a prenuptial agreement not only provides protection for the future, but it fosters important conversations as couples enter into the next important phase of their relationship.
In order for a prenuptial agreement to be enforceable in Minnesota, it must meet a number of requirements. First, it must be in writing and signed by both future spouses. Second, the prenuptial agreement must be signed in the presence of two witnesses and a notary. Third, the prenuptial agreement should be signed before the couple marries in order to be enforceable. If the couple never marries, the prenuptial agreement is invalid.
Under Minnesota law, a prenuptial agreement will generally be upheld if the following circumstances are met:
- Each spouse has disclosed his or her earning, assets and debts fully to each other;
- Each spouse has had the opportunity to meet with legal counsel of his or her own choice;
- Each spouse signed the agreement voluntarily; and
- The agreement is recorded in the county where either of the spouses’ real property is located.
Schromen Law, LLC strives to provide peace of mind to clients by assisting them in planning for the worst, so they can confidently continue living at their best. Couples that retain Schromen Law, LLC to draft their prenuptial agreement will work together to plan for their future, protect their assets, and address the “what if’s” at a time when they are most likely to be fair and equitable to each other.
Having a prenuptial agreement in place can easily be viewed as an act of love towards your partner, and an investment in the future of your relationship – for better, or for worse.
Written by Rachel T Schromen, Schromen Law, LLC
Rachel Schromen, of Schromen Law, LLC, is an estate planning and elder law attorney. She works with clients across the Twin Cities in helping them plan for the worst so they can live for the best. Ms. Schromen was named ‘Solo Practitioner of the Month’ by Attorney at Law Magazine in October 2016 and has had articles featured in Parent Magazine.
600 Marshall Ave, St Paul, MN 55102 651-571-2515 www.SchromenLaw.com