Prenuptial agreements are somewhat of a taboo subject, although, as I explain below, they really shouldn’t be. Before talking about what a prenuptial agreements is, we should take a moment to talk about what it is not...
Terminology note: prenuptial agreements are also known as premarital agreements (the term preferred by Massachusetts courts, and which I put at the top of the agreements I prepare) or antenuptial agreements (outdated, but still sometimes used). I refer to them here as prenuptial agreements because that is still the term most familiar to people.
It is *not* a plan to get divorced.
The most frequent criticism of prenuptial agreements is that they anticipate what will happen if the couple gets divorced. In particular, they set out parameters for alimony and property division if the worst should happen. To many people, this implies that one or more of the spouses expect the marriage to fail. It’s no great secret that statistically, many married couples will eventually separate — but in my experience as a prenuptial agreement attorney and mediator, couples preparing a prenuptial agreement generally do not do so with the expectation of divorce. In fact, the prenuptial agreements that I prepare include the following statement
The Parties affirm their respect for the public policy in favor of the solemnity of marriage and declare that each of them is entering into the marriage with the intention that the marriage shall succeed.
I have yet to work with a client who did not wholeheartedly believe that statement to be true!
It *is* like an insurance policy.
I used to tell people that prenuptial agreements are like life insurance — protection for the absolute worst-case scenario (more on that scenario below). Then I realized that there’s a problem with that analogy: everybody eventually dies, so your life insurance policy will be used one day. Not so with a prenuptial agreement. Ideally, you will never have reason to use it! So instead, I now encourage clients to think of a prenuptial agreement in the same light as disability insurance.
Think about it. Disability insurance is a great idea. In case you are ever seriously injured, it is reassuring to know that you will have the protection and security that the insurance policy provides. At the same time, you sincerely hope that you will never have to use it! Just so with a prenuptial agreement — you hope to sign it and then forget about it for the rest of your life, but at the same time, it’s nice to know it’s there.
It is *not* just about divorce.
Continuing with the disability insurance analogy, a prenuptial agreement is insurance for the worst-case scenario: the end of a marriage. Please note: I didn’t say that that a prenuptial agreement is insurance for divorce. That’s because divorce is only one way a marriage can end. The other way, regretfully, is the death of one of the spouses, and prenuptial agreements (at least in Massachusetts where I practice) also allow spouses to set parameters for what would happen in that situation.
Here are a few important protections that a prenuptial agreement can provide.
Avoiding the tremendous emotional and financial costs of divorce litigation.
Everyone knows somebody who has gone through a miserable divorce, particularly if there were children involved. Lawyers, depositions, subpoenas, hearings, and possibly even trials are all part and parcel with divorce litigation. In addition to being tremendously draining and destructive emotionally, the financial costs of divorce litigation are staggering; it is not uncommon to see middle or upper-middle class couples spending tens of thousands of dollars (even hundreds of thousands in some cases!) to hash out the terms of their divorce. A prenuptial agreement can’t avoid all arguments, but it can take the vast majority of them off the table, at a time when the couple is happy and able to talk about the future with mutual love and respect.
Sequestering particular assets or income.
Sometimes, a couple goes into a marriage intending to form a complete financial partnership, but have concerns about how particular assets or income would be handled in the event of death or divorce. The impetus for this concern might not even come from the couple themselves; sometimes, it comes from family members whose interests are implicated in the marriage. One of the spouses might be part owner in a family business, for example, or in line to inherit an important family treasure (real estate, heirlooms, etc.). A prenuptial agreement can sequester those items and provide assurances that they will be managed as everybody — which might include people other than the couple — expects.
Supporting the couple’s estate planning.
In Massachusetts, when a married person dies, the surviving spouse has an automatic right to an amount of the estate, regardless of what the decedent’s will says. The specific amount or percentage depends on the specific family structure at the time of death (i.e., whether there are surviving parents, children, etc.). For many couples, the default survivorship rules are fine — but sometimes, the couple has other intentions, and wants the freedom to set up their estate plans differently. For example, one of the spouses might want his or her estate to go to children of a prior marriage, or toward the long-term care of a relative with a disability. Whatever the situation, a prenuptial agreement can include language that lays the groundwork for the couple to have complete autonomy in their estate planning, without worry about the default survivorship laws.
These are just a few of the important protections a prenuptial agreement can provide. There are other benefits that I will address in later articles — including benefits to the couple’s relationship at the start of the marriage. For now, I simply hope that this article will help alleviate some of the stigma associated with prenuptial agreements. A prenuptial agreement is not an agreement to divorce. Rather, much like disability insurance, it is an insurance policy for the worst-case scenario — one that has value even though you hope you will never, ever have to use it.