CLIENT INFORMATION LETTER # 48
PREMARITAL AGREEMENTS --
TEN TIPS FOR A BULLETPROOF "PRE-NUPT"
The purpose of this handout is to suggest some ideas on
the preparation of a solid premarital agreement (often called a "pre-nupt").
Premarital agreements in this state are covered under Chapter 52B of the
General Statutes, the Uniform Premarital Agreement Act. The tips below are
adapted from an article in the October 14, 1996 issue of Forbes magazine.
It is, of course, impossible to cover every issue that might come up in this
area in a short brochure such as this. We want you to ask other questions
of your lawyer at the appropriate time. Take this handout with you; if you
have any comments or suggestions for improving it, please let us know.
|No last-minute agreements!
Three days before the wedding? NO WAY! Avoid the appearance
of making a deal at the last minute. You should sign as far in advance
of the wedding as is possible. "If it's not signed 30 days in advance,
they're taking their chances," warns West Palm Beach lawyer Joel
Weissman. If it's presented later than that, a fiancÚ could claim he
was made to sign under pressure. This could compromise the
enforceability of the Agreement. The North Carolina Court of
Appeals has ruled that just because a pre-marital agreement is signed
the day before the wedding is not enough to constitute duress, coercion,
or undue influence. Nonetheless, despite current case law, having
your pre-marital agreement signed close in time to the wedding, subjects
it to a possible lawsuit that questions the contract's validity.
To avoid this possibility you and your future spouse should execute the
agreement 30 days or more before the wedding.
Be sure there's not even a hint of duress, pressure or coercion. The
single best way to ensure a voluntary agreement is to get a lawyer for your
spouse-to-be. We can provide a referral if that's necessary.
|Full disclosure? Or no disclosure??
Financial disclosure statements are often attached to premarital
agreements, showing the income, debts and assets of both parties. Sometimes
the wealthier party doesn't want to reveal how much he or she is worth. That's
understandable; perhaps balance sheets and fiancÚs don't mix too
well. Stanford Lotwin, a lawyer for Donald Trump, suggests limiting the
disclosure of financial assets by stating merely that you have certain assets
exceeding a certain value. However, it is necessary that each asset be
specifically identified in the contract so there is no question later as
to whether the existence of the asset was disclosed. Make sure you don't lie. If your spouse can prove
you were hiding assets, you will definitely be in big trouble!
Be prepared for a few surprises. Some may be pleasant, some not. Among
the pleasant ones are . . . the fellow who insisted that his fiancÚ sign
a pre-nupt discovered that, after all, she was rich. "She was
worth about four times what he was," chuckles New York divorce attorney
Don't give your fiancÚ the idea that you think your assets are more valuable
than him/her. "The more stringent and self-protective the agreement, the
more likely the marriage is going to blow up in their faces," warns
Beverly Hills lawyer Alexander Leichtner.
|Don't be mean.
Don't add anything vindictive or mean-spirited, like the provision Stan Lotwin
recently saw imposing a $1,000 penalty for every pound the wife-to-be gained.
No court would enforce that kind of provision, and it could lead the judge
to throw out the entire agreement.
|More time, more money.
Consider increasing your fiancÚ's cut over time to make the agreement
fairer. New York divorce lawyer Carl Tunick recalls a telephone call from
a wife who wanted to get a divorce immediately. Tunick pointed out that she
was entitled to an extra $1 million for every year she stuck it out. "Can't you wait until Jan. 1?" asked
Tunick. She did, and they're
still married. Rumors have it that Catherine Zeta Jones signed a pre-nupt
before her marriage to Michael Douglas that stipulated a higher figure for increasing years of marriage
-- $1 million for 1 year, $2 million for 3 years, and $3 million for over
three years . . . etc.
|Where there's a will, there's a way.
See that your fiancÚ stands to get something if you die first -- insurance
proceeds, for example. Without such terms, taxes could consume everything
--- including your retirement plan. "The spouse is the only person
who can roll it over," explains estate lawyer Judith Siege Baum.
Be sure to take advantage of the unlimited marital deduction.
|The Bounty after the Mutiny.
Don't count on escaping alimony payments. In New York and a few other
states (including North Carolina), a spouse-to-be can waive the right
to alimony. But Eleanor Alter (Patricia Duff's lawyer) points out that, if
the judge thinks the deal's unfair, he or she can order you to pay anyway,
no matter what the agreement might say. And in North Carolina there's a further
restriction: if the terms of a "pre-nupt" eliminate spousal support and this
causes one party to the agreement to be eligible for public assistance, the
judge can --notwithstanding the terms of the agreement -- require the wealthier
party to provide support.
|Don't mix assets.
Be careful about mixing premarital and post marital assets. "Commingling
is the kiss of death," counsels New York divorce attorney Harriett
Cohen. Why? Because if you cannot absolutely prove what was yours before
the marriage, you might just lose it!
||Retirement plans are not always exempted.
Retirement plans are not always exempted by a pre-nuptial
agreement. A soon to be spouse cannot waive his/her right to your
retirement plan that falls under the Federal Statute of ERISA.
Federal law requires that for a fiancÚ to waive this right to his/her
future spouse's retirement, he/she must state in the pre-nuptial
agreement that he/she will execute a waiver after the
marriage. Then after the marriage, both parties must
execute a post-nuptial agreement wherein the new spouse waives his/her
right to the retirement plan.
||Just a suggestion . . .
||One technique that is being used to make pre-nuptial agreements
less vulnerable to attack is to videotape the execution of the
agreement. If the issue of validity is ever litigated, a videotape
of the signing can go a long way to show there was no duress or coercion
at the time of signing.
[rev. October, 2002]
What can I do if I have questions about premarital
agreements? Our clients' questions deserve straightforward answers in plain
English, not "lawyer-ese." Feel free to ask your lawyers for help and assistance.
That is why we are here -- to serve you.