Fill the form to get a Free Consultation

Should You Consider a Prenuptial Agreement Before Marrying?

Why get a prenup? If done correctly, a premarital agreement offers many benefits. It provides a proactive plan going into the marriage. A course of action on the occurrence of almost any contingency (including who gets the family pet if the spouses separate). Prenuptial agreements can provide certainty if an important event takes place during the marriage, such as divorce, disability, or even a lottery win.

• Couples who are planning to marry should consider getting a prenuptial agreement when:
• They have significant assets;
• They have children from previous marriages;
• One of the them is much wealthier than the other;
• One party is much older than the other;
• One of the parties owns all or part of a business;
• One party is bringing substantial debt into the marriage;
• One party is already retired;
• One party will be supporting the other to pursue a degree program; or
• Either party anticipates a significant inheritance.

Premarital agreements continue to gain favor with older couples who marry later in life, too. Mature newlyweds often bring substantial assets to the union. Most individuals in their 50s or older are motivated to hold on to their hard-earned assets; to avoid being over-burdened with debt should the marriage end in separation or divorce. Even with mature first marriages, having a prenup adds economic predictability at an age when there is little, if any, room for error. Prenuptial agreements have the unique benefit of addressing any property or asset, whenever acquired and wherever situated, so long as a party has a legal or equitable interest in it.

What Are The Requirements for a Valid Arizona Premarital Agreement?

For a premarital agreement to be valid and enforceable in Arizona, the following requirements must be met at the time it is entered into:

• The agreement is in writing;
• Signed voluntarily by both parties; and
• Signed following fair and reasonable disclosure of property and financial obligations (unless disclosure was expressly waived in a signed writing).

The agreement becomes effective when the parties actually marry each other, but not before.
Under Arizona law, a properly drafted and executed prenuptial agreement is enforceable without consideration. (Consideration is something beneficial or of value given in exchange for a promise or performance – it is the inducement to contract.)

Enforcing Arizona Prenuptial Agreements and Surviving Challenges

The Arizona Uniform Premarital Agreement Act controls the manner in which these agreements are created and the requirements for legal enforceability. ARS § 25-201. We do not recommend that the soon-to-be-newlyweds attempt to draft their own premarital agreement. Mistakes are easily made and the consequences could be devastating and permanent. Because one party could gain unfair advantage over the other, there are strict requirements to ensure fairness. Talk to your family law attorney.

If they later divorce, for instance, one spouse may challenge the validity of the agreement. When a prenup is challenged, the court will closely examine the instrument and the circumstances surrounding its execution. If questionable, the judge could set aside the premarital agreement. Divorce proceedings will then commence without the prenup’s influence on the distribution of property, spousal support, and so on.

Both spouses may be disappointed if the judge sets aside the prenuptial agreement. But the set aside is almost certain to put one spouse in a better position than he or she would have been in had the prenup been enforced or it would not be challenged. If not properly prepared and executed, a prenup challenge is very common and often successful.

Consider this example:

The prenuptial agreement states that upon divorce the wife will forfeit all interest in the Phoenix marital home ($1.4M market value) and, instead, shall receive the Tucson marital condo ($1.0M market value). If the prenup is enforced, then the wife receives community property worth $400,000 less than the husband receives. In this example, the wife could benefit substantially by challenging the prenup. If the challenge is successful, then her community property share should be equal to that of her husband, or 1.2 million. She could exit the divorce with the condo and an equalizing payment of $200,000 to make up the difference in market values.

As this example illustrates, it is crucial that the prenuptial agreement be drafted properly by a lawyer to achieve the parties’ objectives and have the best chance of surviving a legal challenge.

For those marrying for the first time, a prenup may seem pessimistic. (Certainly a discussion about “What if we divorce?” is not very romantic.) But, making false assumptions on how property will be divided or whether someone will receive support can result in much bigger disappointments years later. For the wealthy and for those on a second or third marriage, negotiating a premarital agreement can settle many issues pragmatically before the wedding takes place.

6 Mistakes People Make with Prenuptial Agreements

Having a prenuptial agreement can help make the financial complications of divorce less painful. That, of course, assumes the agreement is enforceable when the time for implementation arrives. The judge can set aside a prenuptial agreement for a number of reasons, including the following:

The premarital agreement was signed under duress.

A premarital agreement should be finalized at least a month before the wedding. Springing a prenup on the other party is no way to start a marriage and is a sure way to have it set aside.

Always be mindful that the agreement should be drafted to withstand a legal challenge in the future, particularly in light of divorce. When spouses become adversaries, a dispute over the terms is more likely. The spouse against whom enforcement is sought could claim:

• He or she did not sign the prenuptial agreement voluntarily; or
• The prenuptial agreement was so grossly unfair as to be unconscionable when it was executed and should be set aside. Whether the agreement was unconscionable or not is a question of law for the judge to decide.

Only one spouse had a lawyer.

Each party should be represented by a lawyer with both attorneys participating in drawing up the agreement. A premarital agreement should take into consideration the potential imbalance of wealth between the parties. Because an imbalance of emotional and intellectual power can exist, too, each party should hire a lawyer to represent client interests. This assures fairness and full disclosure in the negotiating process. It also eliminates the possibility of one party legitimately claiming they did not understand what they were signing.

Assets and liabilities were misrepresented.

One party misrepresented his or her assets and debts or concealed property or liabilities from the other so that disclosure was neither reasonable nor fair.

Mentally incompetent party.

One party signed the agreement while under the influence of drugs or alcohol or was mentally incompetent at the time.

Interference with child custody or child support.

The judge will not look favorably on a premarital agreement that attempts to limit child custody rights or that interferes with child support obligations. The court is not likely to enforce a provision that eliminates child support or effectively reduces child support below that required by the Arizona Child Support Guidelines.

Omits spousal maintenance.

Many prenup challenges revolve around spousal support. The prenup may seek to waive spousal maintenance altogether (subject to public policy consideration noted below) or substitute a more certain formula for calculation as opposed to leaving it to the discretion of a judicial officer who is free to consider many different factors.

The prenup cannot modify or eliminate alimony when doing so would make the economically disadvantaged spouse eligible for public assistance. In other words, the person who would be obligated to pay alimony (but for the prenup) cannot totally avoid that responsibility by shifting the financial burden onto the State of Arizona or the federal government. ARS § 25-202. But, they can limit that burden to the amount that would be necessary to keep the other spouse off public assistance.

Formulas for calculating spousal maintenance can be tied to objective standards such as the duration of the marriage and the actual incomes of the parties. If the parties are able to calculate spousal maintenance with certainty, expensive divorce litigation can be avoided.

What Is the Purpose of a Prenuptial Agreement?

A prenuptial agreement is meant to make the marriage run more smoothly, but it cannot solve every problem. Arizona law limits the scope of any premarital agreement to:

• The rights and obligations of each spouse regarding separate or community property, whenever and wherever acquired or located.
• The rights to buy, sell, use, transfer, exchange, abandon, lease, consume, expend, assign or create a security interest in, mortgage, encumber, dispose of, or otherwise manage and control the property.
• The disposition of property upon separation or divorce, or when one spouse dies, or upon the occurrence of some other meaningful event.
• The modification or elimination of spousal maintenance.
• The creation of Last Wills and Testaments, trusts, or other legal arrangements necessary to carry out the objectives of their prenup.
• The setting forth of ownership rights in and disposition of a death benefit under a life insurance policy.
• The choice of law governing construction and interpretation of the agreement’s meaning. ARS § 25-203.

Arizona prenuptial agreements can also designate responsibilities during the marriage. Some agreements specify the household duties and financial obligations of each spouse, and whether there will be children and how the children shall be raised.

Can You Modify a Prenup with a Postnuptial Agreement?

Updating your prenup with a postnuptial agreement after the marriage could help it survive a challenge in case of a divorce in the future. The parties to a premarital agreement are free to amend their prenup by signing a written agreement. They can also revoke the prenup which would terminate it. In either instance, consideration is not needed to make it enforceable. ARS § 25-204.

Can You Get a Prenup After the Wedding?

Some people wonder if can you get a prenup after you get married. The answer is no to a prenup agreement after marriage, but a postnuptial agreement after the marriage could help it survive a challenge in case of a divorce in the future. Contact us to learn more.