People often think of Pre-Marital Agreements, often based on situation comedies, where one party shows up a few days before the wedding with a “Pre-Nup,” (Pre-Nuptial agreement, also known as a Pre-Marital Agreement). On the situation comedy such a scenario often results in a great deal of drama, that on a television show, may be funny, but in real life that scenario often ends in real drama with relationships being destroyed, weddings being called off or marriages starting off on a very bad note.
In today’s world, Pre-Marital Agreements are often very different from those situation comedies. Couples who are marrying today are often much more sophisticated and know that a divorce can wreak havoc with their finances. Couples how are marrying today are often later in life marriages with each of them having estates that were built by years of hard work, sometimes with a previous spouse, who may be deceased, and they want to protect their estates from any future litigation, including divorce litigation or litigation over their estates if their new relationship ends because of their death. Many people don’t realize that if their relationships ends because one member of a couple dies, then their children and their surviving spouse can end up in litigation over their estate, which in effect, is very much like a divorce.
So today’s marrying couples understand that it is often wise to keep their estates separate. They are not coming to that decision to prevent their new spouse from sharing in their estate but to simplify their lives.
At some point in a relationship, prior to a marriage, it is wise to explore if the two people are both spenders, if both are savers, or if one is a spender and one is a saver. When working on a Pre-Marital Agreement, parties can explore those questions together and determine how they will manage any differences in their philosophies about money. It is much better to have those difficult conversations prior to entering into marriage than after. If their find out their different philosophies are not compatible, it is much better to learn that prior to entering into a marriage. But if they determine that, notwithstanding any differences they may have about money and other life decisions, they still want to enter into a marriage, then they are entering into that relationship with a better understanding of who they are marrying and who they are, which can only benefit the marriage.
One of the best processes for creating a Pre-Marital Agreement is through the Collaborative Process. In the Collaborative Process, each party’s attorney prepares them for the discussions by helping them consider what their goals and concerns are (or should be), such as:
- Do they want one of them to stay home if/when they have children?
- If they want one of them to stay home when they have children, what will they do to compensate or protect the person who is staying home and giving up their career, even temporarily, to make sure that that stay-at-home parent won’t eventually suffer from the loss of his or her career advancement?
- If one party has a great deal more income or assets that the other party, do they want to address that in the event there is a divorce or death of the more financially secure party?
- Do they want to put a life insurance policy in place or create and fund an account to assure the party with less income of assets is financially secure if there is a divorce or the other party dies?
These are just a few of the questions marrying parties can and should consider.
More and more couples are deciding to live together for a short time or a long time prior to marrying. Each of the questions that marrying couples should consider are also important for co-habiting couples, but there are also some questions that should be considered that are specific to co-habiting couples, such as:
- If one party moves into the home of the other party and they pay the mortgage or other bills together, what provision, if any, should be made to compensate the non-owner party for their part of the payments toward their living expenses?
- If the couple purchases property together and they end their relationship, how will that property be divided?
The Collaborative Process enables couples to explore these and other questions which help them get their new relationship off to a healthy start and, if they stay together, later they can modify those agreements to better fit their relationship through the years. Or, if they do not stay together permanently, the creation of an agreement of how to end their relationship will result in less expense and less hard feelings down the road.