With spring underway and summer quickly approaching, wedding season is upon us, together with all of the stress and panic of planning every last detail for that special day. Given the time, effort and money that is frequently expended to achieve a perfect event, it is somewhat perplexing that most do not invest more in planning their lives, including their financial affairs in the unfortunate but possible event of relationship breakdown and/or upon eventual death. One possible explanation could be that these are unpleasant topics and difficult conversations to have, which most would prefer to avoid and instead focus on the celebrations of a new life together.
However, it is becoming increasingly common for people to seek prenuptial agreements to determine ownership and distribution of property (assets and debts) and possibly support obligations in the event of separation or death. More people are now seeking prenuptial agreements for first-time, subsequent and later-in-life marriages and likely for a host of different reasons.
For first-time marriages, it’s often parents who are keen for their child to enter into a prenuptial agreement to protect current or future interests in a family business and/or inheritance, whereas for later-in-life marriages prenuptial agreements may be an essential part of an estate plan to reduce the potential for future estate litigation. Whatever the reason for wanting a prenuptial agreement, most are unaware of what planning and preparing a prenuptial agreement entails, nor do they investigate such matters in advance. Rather, it would seem that most typically begin to initiate a process about one month in advance the wedding date, which is usually not enough time even for the simplest of matters. Presently, a standard of best practices should be implemented to maximize the likelihood that a prenuptial agreement will withstand future scrutiny and be enforced or implemented in the event of separation or death. Some of these best practices include:
- DO plan in advance;
- begin discussions with a future spouse and initiate a process about one year prior to the wedding to ensure that there is sufficient time to give matters proper consideration and to address any issues that may arise;
- DO give thoughtful consideration and have meaningful discussions regarding your life goals, including financial, and vision for the future, including in the unhappy events of separation and death;
- having these difficult conversations will be informative and will lay the groundwork for the future;
- DO seek legal advice early;
- having knowledge of the legal framework will inform considerations and discussions, which will likely result in a better agreement;
- DO fully disclose all income, assets and debts;
- this will assist in establishing that future spouses had the relevant information and knowledge prior to entering into the agreement, thereby making the agreement stronger;
- DON’T leave it until the last minute;
- this could make the agreement more vulnerable to scrutiny on the basis of duress, coercion or undue influence;
- DON’T use a template obtained off the internet, even if the website seems credible;
- this form of agreement will almost certainly do more harm than good and is unlikely to withstand scrutiny;
- DON’T hide assets;
- the entire agreement could be set aside on that basis and at the very least the agreement would likely not apply to the hidden assets;
- DON’T enter into an agreement that is patently unfair;
- the agreement could be set aside on the basis on unconscionability.
Although we can never guarantee that a domestic contract, such as a prenuptial agreement, will be enforced if challenged in the future, implementing best practices will maximize that likelihood and at the very least, should result in reasonable expectations for the future.