Many engagements occur around Valentine's Day, and couples start planning their wedding day. They want to make it special. But, as part of the wedding planning, the couple should also consider planning for the marriage and buy emotional insurance through a mediated premarital agreement.
The layperson may see a premarital agreement as a way for one more powerful would-be spouse to undermine the post-divorce rights of the less-powerful would-be spouse. However, that is a narrow view. Premarital agreements can be flexible tools to help clients plan for: (1) post-divorce financial arrangements, (2) financial arrangements if one of the clients dies during the marriage, and (3) financial arrangements during the marriage.
Oregon has adopted the Uniform Premarital Agreement Act (also adopted in more than half the states,) which allows clients to mediate any number of issues before the wedding:
(1) their rights and obligations in their property;
(2) their rights to transfer or encumber their property;
(3) the disposition of property on separation, divorce, death, or any other event;
(4) the modification or elimination of spousal support;
(5) the making of a will or trust;
(6) rights regarding life insurance policies;
(7) choice of law regarding construing the agreement; and
(8) any other matter not in violation of public policy or a criminal statute.
Here, you can consider four benefits of considering premarital agreements when planning your wedding.
First, the Premarital Agreement allows Clients to Have Productive Discussions about Financial Issues before Marriage
Both marriage and divorce are contractual relationships in the eyes of the law. Although the wedding is a romantic and intimate commitment to share one's life with another, the marriage is different – it involves day-to-day, week to-week, and year-to-year decisions about financial arrangements. A premarital agreement allows the clients to talk with each other about their financial expectations during the marriage. Many couples may be surprised that their financial expectations are not aligned until after they get married – and fail to have frank conversations about their finances before the wedding. Mediated conversations before the wedding can set up proper expectations to avoid surprises during the marriage.
Second, a Premarital Agreement Can Protect Assets Meant for Children from a Previous Marriage.
Many older couples who are getting married have children from previous marriages. They also have assets designated for their children. A premarital agreement can protect the assets that are meant for those children. It may come as a surprise to the soon-to-be-spouse that assets are meant for the children.
Third, a Premarital Agreement Protects Clients from Taking on the Other Spouses' Debt
At times, one spouse may come into the marriage with significant debt from student loans. A premarital agreement could ensure that one client does not become responsible for any obligation should the marriage end – even if they pay down the debt together during the marriage. Without a premarital agreement, it's possible that a court could use its equitable powers to have both clients take on some payment of the debt.
Fourth, the Premarital Agreement Allows Clients to Make Decisions Before Emotional Conflict
Before the marriage, clients are often better able to have conversations about their finances and expectations when they are on good terms. Divorce may involve emotional conflict and require that clients make tough decisions about their future in a compressed time frame. The soon-to-be-married couple is better off focusing on the future without the emotional pressure of the divorce.
Clients Must Ensure that the Agreement is Valid
Premarital agreements (or post-marital agreements if circumstances change) are only valid if both clients agree voluntarily and without coercion. In addition, the contract cannot be unconscionable when executed, and both clients must be aware of the other party's property and financial obligations, be provided with "fair and reasonable disclosure" of that property or financial debt, and not waive the right to receive that disclosure.
The agreement cannot be significantly one-sided. It is best practice for both clients to have an attorney review the agreement and for both clients to insist on having time to adequately negotiate the terms of the contract and review the deal. All of these issues should be discussed beforehand between the clients. Clients should consider using a mediator to begin these conversations to ensure that the agreement will not be set aside in the future as unlawful.
If done fairly and appropriately, the premarital agreement can be emotional insurance for both parties. It allows clients to go into the marriage with expectations as to how their life will look moving forward and could be a way to balance financial understanding in the relationship before the wedding.