Prenuptial Agreements

Prenuptial Agreements

Prenuptial agreements are becoming de rigueur for many marriages. I don’t want to seem skeptical but along with the “use agreement” of the engagement ring should come a draft of a prenup. The gift of the engagement ring can be made permanent at the marriage ceremony, but the prenup better have been worked on and signed much earlier. Here are some things to be aware of. These are some pointers but you will need to speak with an attorney for a fuller explanation of the uses and benefits of a prenup.

• Both parties need their own attorney, and need to be separately advised
• The agreement must state that it includes everything discussed and that there are no oral arrangements, agreements or concessions
• The prenup should be signed about a month before the wedding, The closer to the wedding date, the harder it could become to defend if it is challenged
• The request to have a prenup needs to be made early on in the engagement period so there will be an absence of time pressure
• There can be no undue force or pressure to execute the agreement. Time satisfies these issues
• There must be full disclosure of assets with realistic current values
• Liabilities, debts and loan guarantees must also be fully disclosed
• Employee stock and options that are an asset or represent a potential asset and should be fully disclosed
• Business buy-sell agreements and restrictive covenants need to be disclosed
• Prior liabilities for divorce and child support must be disclosed
• If there are pending actions that can result in the acquisition of large assets, these should also be disclosed
• Offers of alimony in the prenup should be reasonably based on expected lifestyles
• Time tables with upward adjustments can be included (such as if the marriage lasts two years, five years, ten years and/or twenty years, or if there are children)
• How asset divisions will be paid or funded
• Whether living trusts will be funded and with what. This is particularly important with second marriages
• How inheritances will be done or not done and how the wills or trusts will refer to this
• Whether joint income tax and/or gift tax returns will be filed
• If one party has very large tax loss carry-forwards and it will be utilized by the other on a joint returns, the tax benefit sharing must be clearly documented
• How joint bank and brokerage accounts will be funded, if at all
• How powers of attorney will be executed, if at all
• Note that pension plans cannot be included in the prenup. These must be disclaimed after the marriage. Those with large pension plans must make sure you get the right advice. However, IRAs can be included in a prenup

The reason for the use agreement for the ring is so that it won’t be considered a taxable gift to prospective bride. Gifts between spouses are gifted tax-free; not so for someone getting engaged.