Do I Need a Prenuptial Agreement?

Question

My fiance and I are getting married this summer. A couple of nights ago, he mentioned that one of his buddies said we should look into getting a prenup before the wedding.  Neither of us have much property to speak of, and my fiance’s small business is still getting off the ground. Is this really something we need?

Answer

A prenuptial agreement (or “prenup”) is a private contract that is executed by a couple prior to marriage. The purpose of most prenuptial agreements is to define exactly what property is or will be the separate property of each spouse, and what property will be considered jointly-owned or “community” property during the marriage. Commonly, the prenup permits the parties to define property that would otherwise be considered community property under Washington law as the separate property of one spouse.

Common examples of property that would ordinarily be considered “community” include a spouse’s income, retirement savings, and real estate.  Under Washington’s community property laws, all of these assets, if earned or acquired during marriage are presumed by a court to be the property of both spouses.  What a prenup allows soon-to-be-spouses to do is define all or some of those assets as separate property of one of the parties.

A prenuptial agreement ultimately comes into effect in one of two ways: the death of a spouse or a divorce. And the impact of most prenups is far-reaching, especially in cases where one of the spouses comes into the marriage with very little property or income, and does not acquire or earn much during the marriage.

Washington case law governs the enforcement prenuptial agreements, and there are some basic principles and/or requirements that all couples should have in mind if they choose to execute such an agreement.

First, if a prenuptial agreement comes before the court in the context of either a divorce or the death of one spouse, the court will first review the agreement to see if it is financially equitable.  If the agreement appears to be fundamentally fair, then the court will not make a further inquiry into the circumstances under which the agreement was executed.

However, if the effect of the agreement is substantially financially disadvantageous to one of the spouses, the court will then look to the circumstances around the agreement’s execution to determine whether it should be enforced.  This inquiry looks to the “procedural fairness” of the agreement’s execution.

Procedural fairness requires both spouses to make an adequate financial disclosure.  This means that each party needs to give the other an accurate description of what property will be defined as separate, so that the other will have a informed understanding of what exactly he or she is giving up. So, for example, if you were to sign a prenuptial agreement which said your fiance’s business is his separate property, your fiance will need to provide you with information about the company’s assets, the income he earns or expects to earn from the business, the company’s current and expected profitability, etc.

A court will not enforce a prenuptial agreement that is substantially unfair to one spouse if there was not an adequate financial disclosure prior to the signing of the document.

The agreement must also be entered into freely, voluntarily, and on independent advice of counsel.  This means both spouses must have the opportunity to consult with an attorney who represents his or her own financial interests, and will explain the meaning and effect of the agreement.  The attorney should be one that each party has selected and met with independently of the other party.

The court will also look to how much time the party had to review the contract; the less time that a party was afforded in order to talk to an attorney or even just simply read the document, the more weary the court will be about its validity.

Other issues, such as domestic violence in the relationship or mental incapacity of one party, may also indicate to the court that one party’s agreement was not free or voluntary.

In addition, courts will look to the timing of the execution of the agreement to determine whether the agreement was entered into freely and voluntarily. The closer to the wedding that the agreement was signed, the more scrutiny the court will give to the agreement. Courts recognize that the pressure and expectations of a pending wedding celebration may affect a person’s ability to make an independent decision about a prenuptial agreement. After all, who wants to potentially blow up an engagement when the invites have been sent, the dress has been bought, and the cake is on order?

In short, the decision to enter into a prenuptial agreement is a very serious one; the advice of an independent and experienced attorney is not just desirable – it’s essential.

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