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Prenuptial Agreements

An area that should be addressed by Prenuptial Agreements (that often is omitted from the “off-the-shelf” model) is what happens after death. Generally, parties want to protect each other, but they also want to protect their children from a previous marriage. There is usually some allocation between the surviving spouse and the party’s own children, depending on the surviving spouse’s ability to take care of him/herself after the death.  And if the prenuptial agreement parties are embarking on a first marriage, there should generally be a provision for inheritance at some level to bind the marriage and commitment between the spouses and to provide consideration for the contract.

Mediated prenups are an excellent way to go about it. Laurie Israel and Karen Van Kooy lead our firm’s Prenuptial Agreements practice.  They have had significant experience in drafting them for various factual situations.  Laurie has written in numerous publications on prenups (most recently in the Wall Street Journal), and is a presenter at professional conferences on this topic.  Laurie and Karen are very sensitive to creating as harmonious a situation during the negotiation phase, whether they represents the more-moneyed spouse or the less-moneyed spouse.  Where possible, Laurie and Karen  recommends the mediation process for working out the terms of a prenuptial agreement, and also collaborative practice, which works well.

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For some couples, especially those entering second marriages, Prenuptial Agreements (PNAs)  are an extremely helpful way to take care of financial and estate planning issues. In the past, PNAs were considered legally unenforceable, as creating dissension and strife between the to-be-married couple right before the marriage. It is true that PNAs can be coercive and lead to unfair bargaining and inequitable agreements. Can you imagine a fiancé giving you a draft of a PNA two days prior to the marriage, after a large wedding has been planned and all invitations sent? This has actually happened to people. Most attorneys believe that there is a substantial uncertainty whether a PNA executed under these circumstances would be upheld by a court.

Generally, a PNA is held to be valid if entered into freely and voluntarily by the parties, if each party was vigorously represented by a lawyer as advocate, and if the PNA was fair when executed. It also requires that the terms of the PNA turn out to be fair at the time the parties divorce. See the Prenuptial Cases portion of this web site.

To get a grasp on where the case law in Massachusetts stands on Prenuptial Agreements, read these three cases:

DeMatteo v. DeMatteo, 436 Mass. 18 (2002)

Austin v. Austin, 445 Mass. 601 (2005)

Eyster v. Pechnik, 71 Mass. App. Ct. 773 (2008)

Don’t be too extreme — it will bite you.  The less extreme a PNA is, the more likely it is to be acceptable by both parties and enforceable.  Another way of saying this, is that the fairer the PNA is, the more likely it won’t cause marital strife and would be complied with on the triggering event (divorce or death).  Remember, marriage is not a business deal, it is much more, and a prenuptial agreement is generally the most important contract anyone signs in their life, because it changes the rules of marriage, and often significant amounts of assets and money are involved.

Laurie Israel medWhat prenups generally do.  A PNA usually describes what happens to the parties’ joint and separate funds and assets obtained during marriage.  It is very good for a PNA to explicitly may carve out a “marital enterprise” of joint marital economic venture.   Perhaps all income earned by the parties after the marriage will be shared. Sometimes increases in retirement and other assets after the marriage are shared by the couple, sometimes they are saved for their respective children. If one party moves into the other party’s home as marital residence, there might be provisions regarding what happens to the house and a spouse’s occupancy after divorce or death.  Each prenuptial agreement should be specifically designed for the needs and values of the two parties.

Off-the-shelf Prenuptial Agreements Do a Disservice. “Off-the-shelf” PNAs do a great dissservice to the parties and to the marriage itself.  They apply terms indiscriminately, with no concern to the parties particular circumstances.  They are generally written from the “more moneyed” side of view, but do disserve to the “more moneyed” spouse also, because they serve to harm the marriage.

Tread carefully when embarking on a prenup.  So if you are going to be married, and think you need a prenuptial agreement, tread carefully.   See Laurie’s articles on Prenuptial Agreements. 

Possibility of disappearing or lessening provisions to reflect the length of marriage.  PNAs also (generally) have provisions on how to divide property if there is a divorce. Sometimes there are disappearing or “sunset” provisions so that the longer one is married (e.g., 5, 10, 15, or 20 years), the more intertwined the couple’s financial resources are allowed to be. This comports with Massachusetts divorce law, and reflects real-life emotional and economic facts: the longer people are married to each other, the more committed they become. Their increase in connection and loyalty also generally spills over into a growing love and affection between each party and the children of his or her spouse.

Why an entrepreneurial aspect of the marriage is important.  Some PNAs purposely leave out some issues in the Agreement. This is to allow the couple to build an area of “marital venture” that is uncertain and almost entrepreneurial. These areas tend to positively feed a marriage. And if there is a divorce, absent agreement, these issues are left to the agreement of the parties to resolve.   In the rare cases they cannot, the very intricately-developed Massachusetts equitable divorce law steps into play.  This law (and the judges interpreting it) generally resolve complex problems with wise solutions.

Karen Van Kooy-medDon’t forget about the death provisions.  Another area addressed by PNAs is what happens after death. Generally, parties want to protect each other, but also want to protect their children from the previous marriage. There is usually some allocation between the surviving spouse and the party’s own children, depending on the surviving spouse’s ability to take care of him/herself after the death.  The PNA can contemplate credit shelter trusts and QTIP (Qualified Terminal Income Property) estate planning techniques to permit one spouse to essentially provide a tax shelter for the deceased spouse.  This allows all or part of the assets of a party to go to the deceased spouse’s children  upon the surviving spouse’s death.

Laurie Israel and Karen Van Kooy draft Prenuptial Agreements with keen insight and sensitivity to the upcoming marriage.  They draft prenuptial agreements, mediate prenuptial agreements, and serve as reviewing counsel for mediations of prenuptial agreements.