5 Mistakes to Avoid When Drafting a Prenup
While it can be a sore subject between couples planning to marry, there are numerous reasons that a prenuptial agreement is beneficial including, but not limited to, the following:
- One or both parties have substantial assets, which they want to retain as separate property;
- One or both parties have significant debt for which the other party does not want to be responsible;
- One or both parties have children from another relationship, whom they want to leave a portion of their estate;
- One or both parties own a business, which they may want to leave to a third party in the event of their death; or
- One or both parties are expecting a large inheritance.
Whatever the reason, prenuptial agreements can be tricky to navigate, which can result in costly mistakes being made. While most couples believe that their prenuptial agreement is ironclad, there are a vast number of reasons that a prenup could be deemed invalid.
In Massachusetts, a prenuptial agreement is subject to scrutiny upon a couple’s divorce, where the agreement is given a “second look” to ensure that it was fair to both parties at the time of its execution and at the time of its enforcement.
In an effort to avoid those costly oversights, we’ve put together the following list to help you think through the process and whether your prenuptial agreement will stand the test of time.
Mistake No. 1: Procrastination
Let’s face it, you’d much rather plan your honeymoon than discuss the particulars of a potential divorce or eventual death. We certainly understand, but unfortunately, putting this off can only hurt you in the long run.
While Massachusetts law does not cite a specific length of time in which a prenuptial agreement must be signed in advance of the wedding, the agreement is more likely to be unenforceable if a court deems that either party may have been subject to duress or coercion due to an imminent wedding date. To ensure this is not the case, it is important the parties have amble time to negotiate terms, consult with independent counsel, draft and review the agreement, and make any necessary revisions well in advance of the wedding.
To be on the safe side, we recommend that the prenup is signed months prior to the wedding.
Mistake No. 2: No Independent Counsel
While Massachusetts does not require that parties are represented by counsel for an agreement to be binding, it is strongly recommended.
When a party is signing a prenuptial agreement, they are waiving valuable rights that would otherwise accrue at the time of their marriage. As such, it is crucial for both parties to understand those rights and the impact that this agreement will have in the event of a divorce or death.
Prenuptial agreements are supposed to be fair for both parties and if a court feels that one party agreed to questionable terms without being advised by their own independent counsel, that could be cause to find some or all of the agreement unenforceable. It’s also important to note that each party must have their own counsel – they CANNOT share the same attorney!
Further, as was stated at the onset of this article, there are numerous reasons that a court may deem a prenuptial agreement to be invalid. However, having the assistance of experienced family law attorneys is certain to reduce that risk.
Mistake No. 3: Financial Disclosures are Lacking
In order for a prenuptial agreement to be valid, both couples must provide a “full and fair disclosure” of their financial information.
- any and all ASSETS including non-retirement accounts, retirement accounts, pensions, annuities, stock, bonds, real estate, personal property, motor vehicles, business interests, trust interests, life insurance cash balance, judgments/liens, notes held, escrow funds, pending or expected future inheritances, etc.
- any and all DEBTS including student loans, car loans, credit card balances, mortgages, notes, outstanding liens or judgments owed, etc.
- information regarding all of their INCOME, whether it is wages, salary, tips, commissions, bonuses, royalties, business profits, rental income, dividends, trust distributions, retirement benefits, government benefits, worker’s compensation, disability income, alimony and/or child support from a separate relationship, etc.
Couples should be prepared to provide supporting documentation including account statements, appraisals, tax returns, etc.
If either party undervalues, misrepresents, or omits financial information, it is very likely that the agreement will be rendered invalid or unenforceable.
Mistake No. 4: Including Invalid or Unenforceable Provisions
Prenuptial agreements can tackle a wide array of topics – division of pre-marital assets and joint marital assets, how future inheritances will be treated, division of liabilities, future alimony obligations, how expenses will be shared, etc.
A prenuptial agreement can cover just about any financial aspect of the couple’s marriage – regardless of whether it is during the marriage or after.
However, an agreement CANNOT legally waive or limit child support obligations, or set a custody agreement for the parties’ child(ren).
Thanks to celebrity prenups, many couples try to include provisions that restrict a spouse’s actions during the marriage, or even try to control his or her appearance with financial penalties. Provisions such as these are rarely enforceable in Massachusetts and should probably be avoided.
Mistake No. 5: Losing Your Prenup
It’s understandable to want to put this agreement out of your mind, once it’s all said and done. However, PLEASE make sure that both parties maintain a copy of the fully executed document.
While we certainly hope it won’t come to this, should a situation arise where you or your spouse is contemplating divorce, you’ll need to have a copy of your agreement in order to enforce the terms.
Remember, attorneys are only obligated to maintain your client file for six years in Massachusetts, so if you end up needing the agreement ten years down the line, he or she may no longer have a copy.
That’s why it’s so important to make sure you hold onto it. If you have a safe or lock box at home, or if you rent a safe-deposit box, it is a good idea to keep a copy there.
We also recommend having your attorney e-mail your fully executed agreement, so you have an electronic copy. Then, make sure you retain a copy on your computer and don’t forget to back it up, just in case something happens to the original!
The last thing you want is to have gone through all of the hassle of drafting and negotiating a prenup only to have it be a moot point because no one can locate the document.
As we said, prenuptial agreements can be difficult to navigate, but you should not let that deter you from having one, if you feel it is in your best interest.
If you are looking for more information relative to prenuptial agreements, or are looking to have one drafted, please contact our office at 978-263-4160. We are happy to help!