If you’ve decided to get a pre- or postnuptial agreement, you’ve made a smart decision that will protect you and your assets in the case that things don’t work out quite as planned.
That said, if the prenup isn’t executed properly, there is a chance that when the time comes to use it, the Court may invalidate it if the other party brings a challenge. Today let’s look at some factors that could potentially nullify your pre- or postnuptial agreement.
Full and Complete Disclosure
I always emphasize that any prenup or postnup have several conditions: one of them is that the parties have very full and complete disclosure of their financial situations. Every bank account, every asset, every debt, everything must be disclosed to your spouse when moving through the process of signing a prenuptial or postnuptial agreement.
If you don’t share all this information, the other party can come into Court and say, “He or she didn’t tell me about this, and, had I known about it, I never would have signed the agreement.”
Because of this, you should not only list current financial situations, but also uncertain ones. For example, if you expect to receive a sizable inheritance when your parents pass, you’ll want to include this in the prenup or postnup. It can essentially read, “I don’t know that I’m going to receive anything, but there is a possibility that I will inherit a significant amount of money when my parents pass.” The agreement will probably stipulate that you and your spouse have your own separate property, and you don’t want a situation where your spouse says, “if I had known that he or she was going to inherit this money, I never would have signed…”
In sum: make as much disclosure as you can. If in doubt, disclose. Carry it to extremes. You don’t have to mention that you bought a Powerball ticket today and there’s a one in 300,000,000 chance that you’ll strike it rich, but include things that have a realistic probability of occurring.
By the way, the same goes for negative things. If you were in a car accident that was your fault two years ago and the case is ongoing, with the other side asking for $10 million in damages but you only have $50,000 in insurance, this should be listed in the agreement as well.
Essentially, you want to avoid any situation where the other side can say, “If I had known this, I wouldn’t have signed.”
Understand the Legal Ramifications
Next, you want to avoid any inference that the other person didn’t have the opportunity to understand the legal ramifications of the pre- or postnuptial agreement. This means that both sides should have their own legal counsel in order to ensure that the prenup or postnup cannot be successfully challenged.
In my practice, I refuse to do a prenup if the other side doesn’t have an attorney. If the other side can’t afford an attorney, I tell my client to pay for one for their spouse to make sure that they have legal representation. [I tell my client that he/she should not have any input as to the selection of the attorney.]
Here’s a war story to help you understand why this is so important. Years ago, I was working on a divorce where the husband, a man in his 50’s, was a trust fund baby. He had never worked a day in his life, but received hundreds of thousands of dollars annually from his trust. At some point, he married a waitress who was much younger than him, and they had two children together. She quit her job. During the marriage, the only work she did was to spend his money.
When they decided to get divorced, he thought it would be easy because they had signed a prenuptial agreement. Not so. The wife came back saying that the prenup was invalid because it had been prepared by his attorney. She claimed that when it was time for her to meet with her own attorney, the husband had sent her to meet with someone in a Starbucks who didn’t even look at the agreement before signing off on it. Her argument was that she hadn’t had proper legal guidance.
Eventually, this got worked out (and we untangled some lies in there), but it took time and cost money to get things sorted. The moral of the story is to always make sure that both sides receive sound legal advice.
Operate Consistently with the Contract’s Guidelines
Finally, you have to follow the guidelines in the prenup or postnup in order to ensure that the conditions will be enforced. This means keeping separate property separate for the duration of the marriage.
I had one client who came to me with a really great prenup. It said that all the assets she owned when she got married would stay hers in the case of divorce. Unfortunately, a few years after she got married, when she discovered that she was pregnant, she liquidated her investments and put them into a joint account that was intended to remodel part of the house that would eventually become a nursery. In the end, they didn’t end up remodeling and the money just sat in the joint account for years.
When it came time to get divorced, she wanted to claim that it was separate money because of the prenup, and I had to break it to her that she had nullified the prenup when she put the funds in a joint account. Had she kept it separate for all those years, it would have been her separate property. By commingling the money, she expressed a desire to make it marital property.
Remember, there are essentially three rules to make sure your prenup or postnup holds up:
- Full and Complete Disclosure
- Understand the Legal Ramifications
- Operate Consistently with the Contract’s Guidelines
Follow these rules and you should be in the clear.
Are you preparing to go through a divorce? Do you need a prenup or postnup? Call our office at 303-449-1873 to set up a complimentary consultation.