Tag Archive for: prenup

If You Plan to Marry, and One or Both of You Own a Business, a Prenuptial Agreement Makes Sense

A properly drafted, enforceable prenuptial agreement may greatly reduce, if not prevent, disputes concerning the equitable distribution of marital property if a married couple divorces. Making such an agreement before you marry is not a sign your marriage is doomed. It only means you are smart and preparing for a life-changing event that may or may not happen, especially if one or both of you own a company. 

If you own a business, do not have a prenup, and the business grows, your spouse would be entitled to half of that growth upon your divorce. You could be forced to give up other assets, pay your spouse over time, or, in the worst-case scenario, close the business. However, a well-crafted prenup can protect you and your business.  

What Is Equitable Distribution? 

Part of the divorce process is the equitable division of marital property. The couple’s assets and debts are organized, and their values are estimated. The parties must decide which are separate or personal and belong to the individual and which are marital (normally property acquired during the marriage) and belong to the couple, or a court will do it for them. 

Marital property is subject to fair or equitable division during a divorce. The increased value of separate property could also be divided depending on the circumstances. The parties can agree to this, or it will be resolved at a trial. 

What Is a Prenuptial Agreement? 

What is a prenup? A prenuptial or antenuptial agreement is a contract entered into before marriage. The parties can agree on which assets and debts are personal and which are marital and identify them accordingly. The agreement should include how marital assets and debts will be divided, possibly preventing disputes during a potential divorce.  

Why Is a Prenuptial Agreement a Good Idea? 

Just creating the document can be beneficial. The two of you need to think about your financial lives and assets and your duties and rights during and after your marriage. These agreements may be particularly helpful if one or both parties have significant assets before the marriage, a well-paying job, or a business. One or both parties may feel more at ease if they know what will happen financially if the marriage ends in divorce, and the outcome will be fair and mutually agreed upon. 

If one or both spouses start a business during the marriage and it is not mentioned in the agreement, who ends up owning what can be determined by a contract made during the marriage (a postnuptial agreement), by amending the prenup, through negotiations during a divorce, or at a trial. The issue can also be part of a business ownership agreement covering what will happen if you divorce. 

What Effect Does Business Ownership Have on Equitable Distribution Without a Prenuptial Agreement? 

Consider what would happen if a marriage ends in divorce and one or both spouses own a business but there is no ownership, prenuptial, or postnuptial agreement. One spouse could argue it would be fair and equitable that they should get part ownership (if they do not already have it) and make the case for how much that should be (whether they own part or not.) The outcome would depend on how actively the spouse aided the business and what sacrifices they made so it could be a success, including contributing personal funds, working for the company, or sacrificing their career to help it. 

The fate of family-owned businesses can be a highly charged divorce issue. A prenuptial or other type of agreement would spell out how this would be handled and should prevent these types of conflicts from erupting. 

Karen Ann Ulmer, P.C., Can Help You With a Prenuptial Agreement 

Contact us if you have questions about a prenuptial agreement, want one created, or think you are being forced to sign one. For a confidential discussion with a Doylestown premarital agreements attorney at Karen Ann Ulmer, P.C., call (215) 752-6200 or email us. We can meet in our Doylestown or Langhorne office or speak with you by phone.

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How Do I Use a Prenup If I Divorce?

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A prenuptial agreement, if properly executed, can make a divorce much simpler, so the process consumes less time, energy, and money. If you plan on getting married, it’s something worth considering. Here in Bucks and Montgomery Counties, we make sure that you have an airtight prenup when you get married and also skillfully use your prenuptial agreement should you get divorced.  

What is a Prenuptial Agreement? 

A prenuptial agreement, or a premarital contract or “prenup,” is a contract between two people planning to marry. It’s a written, signed document containing mutual promises. It goes into effect when the two marry. The parties release their rights when they divorce, or one dies.  

It can cover who pays what expenses during the marriage and what will happen if there’s a divorce: 

  • Who will receive how much alimony 
  • How property will be divided 
  • How assets and debts will be divided 

Who will get what kind of child custody and who will pay how much child support are not topics in a prenup. Those agreements will be part of your divorce agreement.   

What Makes a Prenup Valid? 

To be enforceable, the agreement must be: 

  • Written 
  • Voluntarily signed by the parties 
  • Not severely unfair and one-sided (one party will not be left destitute)  
  • A result of both parties fully disclosing their financial information 
  • Free of fraud or duress 

Both parties need to have attorneys help them put the agreement together and review it. This is a significant component in ensuring that the prenup is enforceable.   

Can a Prenup Be Disputed? 

A prenup can be challenged if a party can make a good faith argument that it isn’t enforceable. A court should uphold the prenup unless there’s clear and convincing evidence showing legal requirements weren’t met. A prenup may have been very fair when it was written but due to a change of circumstances, one party is going to now be left destitute.  That will not be allowed.  

What are Potential Complications? 

When a marriage starts, both parties make assumptions based on what they want to do or what they think will happen. But life is complicated: 

  • Both parties may be employed, so the agreement may be made based on that continuing. One or both may be temporarily unemployed at some point. One may suffer a disability, so that person has a lower or no income.  
  • A party may own a business before the marriage or start one after the wedding. The business may do very well, so there’s more income and assets than expected, or very poorly, so the income is much lower than what they planned for, or a spouse (or both spouses) may be deep in debt.
  • The two may have a child and one spouse may become a stay-at-home parent. If they weren’t planning for a child, expenses might be much higher than expected and income much lower 

Prenups should account for many possibilities, not just what the couple plans to do. If they encounter financial challenges that aren’t covered, it can cause conflicts during the divorce. 

Get Help With a Prenup From an Attorney You Can Trust 

If you have questions about prenups, want help creating one, or feel the one you signed shouldn’t be enforced, use our online calendar to schedule a free consultation or call us at (215) 752-6200. 

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Why do I need a prenup for a remarriage?

Prenuptial agreements offer blended families a way of estate planning as well as protecting spouses in the event of a future divorce.

Anyone in Pennsylvania who has been prematurely widowed or divorced at least once knows that sometimes a marriage does not last as long as originally hoped or planned. Many people choose to get remarried and often question whether they need a prenuptial agreement for various reasons.

The American Academy of Matrimonial Lawyers noted in a 2016 survey that the prior three years had seen a jump in the number of prenups created.

Protection in the event of another divorce

The possibility of a divorce always exists and that can spell financial disaster for some. In addition to salvaging some assets, U.S. News and World Report notes that a prenup might even help protect one spouse from getting stuck with the other person’s debt.

Many people go into second or third marriages with children (or grandchildren) from previous relationships whom the parents or grandparents want to protect financially in case remarriage ends in divorce.

In divorce, separate property that belongs only to one spouse because he or she owned it prior to the marriage or received it as a gift or inheritance that continues to be held in that person’s name alone normally remains the property of that spouse, however, the increase in value becomes marital. This can be sheltered by a prenuptial agreement so that the increase in value can also be protected. Marital property, meaning assets accumulated during marriage by either spouse or by them jointly, is divided equitably or fairly in divorce unless a prenuptial agreement determines what assets are distributed and in what percentage. A prenuptial agreement also may be used to determine the level of spousal support or alimony or if there is a payment at all to the other spouse.

In a prenuptial agreement, the parent of a child from a prior relationship could negotiate that part of future marital property go to that child. For example, the parent might want to direct the marital part of his or her retirement accounts or part of the equity in other accounts or assets go to support or benefit the child, rather than becoming part of the marital property subject to division.

If the child has disabilities, the parent might want certain assets of the marriage to go into a special needs trust to protect the child’s future.

A prenuptial agreement entered into before the marriage can set forth the course of what will happen in a divorce and eliminate doubts on motives of the spouse.

Lifestyle provisions

Trying to include some lifestyle provisions might not be reasonable, such as how one spouse should wear their hair. Other matters may well be included in a marital contract. According to Time, use of social media is a topic often referenced in these documents nowadays to prevent one person from publicly humiliating or denigrating the other during or after a divorce.

A prenuptial agreement might also designate who will get the family’s pets if the couple divorces.

Estate planning assistance

Fidelity Investments explains that a prenuptial agreement can aid in a couple’s estate planning, especially when one or both spouses has children from prior marriages.

People may understandably want to take care of their spouses after they die. They also might want to make sure that their children or grandchildren from previous relationships receive certain assets or family heirlooms.

With no prenup directing assets to people outside the marriage, a spouse might automatically inherit certain assets when the other person dies even if there is a will in place as a spouse can elect to take against a will. The surviving spouse could live for quite some time longer in which case there may be little to nothing left of the estate to pass on to the deceased spouse’s children. The surviving spouse might also leave remaining assets to their biological children only and not the children of the spouse who died first. A prenuptial agreement can be used to waive that elective share and allow the will to control in the event of death.

Family businesses

Oftentimes there may be a family business that a spouse wishes to keep separate in the event of death or divorce. The spouse and his or her family may desire to keep the business intact and in the hands of family members or other owners or to avoid expensive and intrusive evaluations of their records. A prenuptial agreement can aid in easing the mind of other family members and creating a better family environment without the threats that may otherwise occur.

Otherwise, if the other spouse has an interest in the business in divorce or as an heir, the business might have to be sold or take on significant debt to pay the other spouse his or her share. In addition, if the business becomes embroiled in a court proceeding, the discovery process to determine its size, value and ownership can be expensive.

Legal assistance

Anyone contemplating remarriage should contact an experienced attorney prior to walking down the aisle for the second time. This will give him or her the insight of a professional to help make decisions about a prenuptial agreement. At a minimum, no potential spouse should sign a prenup before talking to a lawyer about its implications.

The family lawyers at Karen Ann Ulmer, P.C, represent people approaching remarriage in Eastern Pennsylvania and New Jersey, including providing advice about, reviewing, drafting and negotiating prenuptial agreements. The are available for consultations by phone prior to coming in to the office to determine if you would benefit from a prenuptial agreement.

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What Makes a Prenuptial Agreement Valid in Pennsylvania?

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Gone are the days when prenuptial agreements are viewed as contracts on a marriage or a guarantee on divorce. While some religions and cultures still do frown upon them, they can be a great way to talk about finances and strengthen your marriage with clear expectations. If you have children from a previous relationship and significant assets to protect, a prenup can also make everyone feel more comfortable.

What is a prenup? A prenuptial agreement, also known as an antenuptial agreement here in PA is a formal agreement entered into before marriage in which the future spouses agree to provisions for equitable distribution of assets, debts and spousal support in case they divorce in the future or if they wish to provide for what happens to assets in the event of death by waiving a spousal election which is provided for in each state under the state law. In this document you can discuss current financial positions and how finances are going to be handled during the marriage, and whether you wish your will to control in the event of death.

The general purpose is for future spouses to think about and decide, prior to a marriage, their rights and duties concerning financial issues. These agreements can be especially helpful because putting one together forces the parties to discuss financial issues, a topic many of us avoid and is a common reason for divorces. If one or both parties have a substantial income, assets or debts these agreements may be a good option.

If one of you has significant assets or had to pay handsomely in a previous divorce, a prenuptial agreement can put one’s mind at ease that the less well-off party is not marrying for money.

In case a divorce does happen and if the agreement is valid, the issues agreed to in the contract are settled. Whatever issues not included in the agreement need to be worked out or failing that, litigated.

What makes a prenuptial agreement valid?
It is important to note that a prenuptial agreement’s validity is only determined when it comes into question in either a divorce or estate proceeding. This is why the writing of a prenuptial agreement must be done by an attorney who has significant experience in this area. There are a few general requirements to which make a prenuptial agreement valid:

· The agreement is in writing,

· Signed by both spouses, and notarized.

· Accompanied by a statement of assets for both parties and includes an estimated net worth as well as previous tax and salary information.

· The agreement cannot be the result of fraud or duress. It is a good idea to complete the prenuptial agreement and signing far before the wedding to rule out the appearance that it was forced on one party by the other.

· The parties understood and accepted the terms and conditions of the agreement, agreed to it voluntarily and had enough time to think about it prior to signing it. This includes the opportunity for both parties to consult with their own attorneys and make changes to or discuss points in the document.

· The agreement is fair and not “unconscionable,” which it may be even if what one spouse receives is small or disproportionate compared to what the other spouse receives, as long as one spouse is not left destitute.

Prenuptial agreements, like any contract, can be changed with the agreement by both parties.

A valid prenuptial agreement should shorten if not prevent disputes over financial issues if a marriage ends or a spouse dies, but issues they don’t cover are child custody and child support which can be especially contentious depending on the parties. If they can’t reach an agreement these issues would be decided in court, which can be a long, expensive and emotionally painful process.

Whether or not you signed a prenuptial agreement and your marriage is heading for a divorce, contact our office so we can talk about how mediation could bring an end to the disputes between you and your spouse, allowing you to start a new chapter in your life without the emotional and financial trauma that a divorce can inflict.

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