prenuptial

Prenuptial Agreements in 2013

Many couples feel more comfortable entering marriage with their finances separate, protecting each other from debts, keeping property in the family, and defining who gets what if the marriage ends in divorce. But some judges fear that prenuptial agreements can even encourage divorce if the financial incentive is great. This was not the case for Elizabeth Cioffi-Petrakis, who would have lost everything in her prenuptial case.

Cioffi-Petrakis, was able to overturn her prenuptial agreement, an unprecedented case, according to the New York Post. She testified that her husband essentially forced her into signing a prenup, promising to cancel it after the couple had children. Despite those promises, when the marriage ended in divorce, the prenup was still active. Based on the success of her case, we are curious if we will see more prenuptial agreements voided in the coming years.

Why We’re Asking:

With the universal understanding that about half of marriages end in divorce, we want to learn more about prenuptial agreements. Are such agreements an obvious choice to protect assets? Or do they encourage marriages to dissolve?

How common are prenuptial agreements in 2013?

Are they primarily designed for wealthier marriages?

What are some of the advantages to prenuptial agreements beyond protecting finances?

Do prenuptial agreements have the potential to encourage divorce? Do they provide a financial incentive for divorce?

Are agreements more common in second or third marriages? What about couples with children?

Will Cioffi-Petrakis’ case mark a trend in prenuptial agreements? Will we see more cases turned over?

We look forward to learning more about about prenuptial agreements. Check back next week to see what our family law professionals have to say!

Legal Network members, post your answers in the comment field below!

  • Jeffrey M. Siegel,J.D., LL.M. 03/20/13

    As an estate planning attorney who advises clients in wealth management, I strongly urge prenups in the case of 2nd and 3rd marriages – you need that contract to protect against “electing against” the will and also to protect qualified funds like IRAs, Happy to talk to you about it.

  • Michael Helfand 03/20/13

    They are becoming more common because people are marrying later in life and
    have often accumulated enough that they want to protect it or they’ve
    started a business and their partners require it.

    Prenups certainly are not just designed for wealthy people and they’d be a
    good idea for anyone getting married.

    The biggest advantage I see to a prenup is that it encourages communication
    before the marriage. In the middle of all of that bliss you and your fiancé
    should be talking about finances and what will happen if things don’t work
    out. It’s not romantic, but it’s what smart people do. Prepare for the
    worst and hope for the best.

    I don’t think they encourage divorce, but they do make divorces financially
    easier to accomplish. If everything is agreed upon ahead of time, their
    isn’t much to fight about. It’s similar to a business partnership agreement
    which nobody would say shouldn’t take place.

    Certainly prenups are more common when you’ve been married before or when
    you have kids and want to make sure that they aren’t left in the cold if you
    pass away.

    The Cioffi case is a blip on the radar screen, certainly outside of New York
    where it has no relevance. If it does anything it will just make people
    make their agreements more air tight. But the reason that case is such big
    news is that well written prenups almost always hold up.

  • Scott P. Davis 03/20/13

    Prenuptial agreements can go beyond protecting finances. Clauses can be included to prevent infidelity and set the religion of your future children. However, this should not be used to implement silly demands such as rules for upkeep of personal appearance. These can be used against you and actually hurt your agreement should trouble arise in the relationship.

    Prenups do not have to be permanent, and you can revise your agreement with your attorney down the road. In fact, they should be revised as your situation changes.

    When initially setting up your prenup, make sure you have the document signed and completed at least one month before the wedding.

  • Rosemary Frank, MBA, CDFA, CFE 03/20/13

    Do prenuptial agreements have the potential to encourage
    divorce? Do they provide a financial incentive for divorce?

    As a divorce financial expert, I cannot imagine a prenuptial agreement that
    carries financial advantages to getting divorced. In order for that to be
    the case, the agreement would essentially need to say something to the
    effect that for as long as the marriage is intact, all (or most, or whatever
    is specified) finances and property are separate, but if we get divorced,
    here is how very generous I will be. That’s backwards. The pre-nup provides
    for keeping “what’s mine is mine” in divorce.

    Pre-nups make divorce process easier because, essentially, the financial
    settlement is already specified and agreed to, in advance, in the pre-nup.
    The only financial advantage in such a situation is that the parties will
    not need to pay high legal and court costs associated with negotiating a
    settlement. There is no financial incentive in the terms of the pre-nup to
    divorce, in fact, quite the opposite. While married the parties have the
    advantages of using the other’s resources like big house, luxury cars,
    boats, vacation homes, etc. After divorce, that lifestyle is “kept” by the
    wealthier party as their own and not available for division as part of the
    marital estate.

  • Erik Newton 03/20/13

    When handled gracefully, premarital agreements strengthen marriages. When handled clumsily, the process breaks trust and leads to problems down the road.

    The process of drafting a premarital agreement requires that couples explore difficult topics at the heart of what it means to be in a modern marriage. Financial issues are cited as one of the primary reasons couples split. A prenup allows couples to discuss challenging topics – financial and otherwise – in advance of marriage. This lays the groundwork for a strong relationship going forward.

    An in-artful prenup will cause more problems than it is worth. A carefully considered prenup will make a marriage much stronger than it would otherwise have been.

  • Eboni K. Williams, Esq 03/21/13

    Prenuptial agreements are more popular in 2013 than ever! Contrary to popular belief, these agreements are not just for the wealthy. In fact, it can be argued that people with limited finances are in need of even more protection. Individuals that go into marriage with any real property interest, significant savings, without significant debt, or other financial (or marital structure) concern, might want to consider entering into a prenuptial agreement.

    Prenups are also great for couples that want to live as a unit but keep their finances more separate than their state statues regulate.

    I disagree with the notion that prenups encourage divorce. No one would reasonable believe that financial fear is a good reason to stay in an unhappy marriage. Therefore, a mutually agreed upon prenup allows the couple to agree on what life post separation would like, without the anger and hurt that often accompany the real time moments of divorce. The Cioffi-Petrakis case was largely decided based on the insufficient time the wife had before entering into the agreement. I don’t feel this will be revolutionary, but instead, the courts will continue to look at each case individually and evaluate the facts and totality of the circumstances when determining the enforceability of a prenuptial agreement.

  • Christina M. Scott 03/21/13

    In a study conducted by the American Academy of Matrimonial Lawyers in 2010, 73% of divorce attorneys reported an increase in prenuptial agreements. In practice, however, despite the benefits that a prenuptial agreement can provide, the majority of divorcing couples do not have prenuptial agreements.

  • Lynne Gold-Bikin 03/22/13

    As you know, the legal industry is buzzing with news of a groundbreaking divorce battle that threw out a prenuptial agreement based solely on a verbal promise. While the case is receiving much public scrutiny, family law attorneys are mixed in their reaction.

    I believe that the court was wrong in its decision based on two main factors:

    * Anything that is meant to be included in a prenuptial agreement should be put in writing; otherwise, situations like these merely become a case of “he said vs. she said.”

    * The courts cannot enforce any kind of oral agreement; therefore, the case is baseless.

  • Malcolm Taub 03/22/13

    1. With the universal understanding that about half of marriages end in divorce, we want to learn more about prenuptial agreements. Are such agreements an obvious choice to protect assets? Or do they encourage marriages to dissolve?

    Prenuptial agreements do not only involve assets. They define what constitutes separate property and what constitutes marital property. The agreements also deal with issues such as maintenance. Parties can waive the receipt of maintenance or they can set specific levels of maintenance to be received by a party depending on various variables. The agreement can also require setting up investment accounts and other benefits for the non-moneyed spouse. A properly drafted prenuptial agreement empowers all the parties and provides them with insight into the financial status of the marriage. It is an exercise which is very worthwhile for parties to engage in. This is the most important financial transaction of a couple’s life. It is important that parties enter into it with full knowledge, disclosure and a method for conducting their financial life throughout the relationship.

    A prenuptial agreement also deals with how the parties assets will be handled at the time of death. In most cases it determines the extent to which a spouse will share or will not share in a party’s estate at the time of death. This is also a very important provision of such agreements.

    2. How common are prenuptial agreements in 2013?

    Prenuptial agreements are becoming more and more common at this time. People are getting married later in life and have assets which they wish to protect. Parties are also interested in knowing the full nature of each others assets and dealing with it in a rational and adult manner.

    3. Are they primarily designed for wealthier marriages?

    Prenuptial agreements are helpful in any case where the parties have assets, or there is an anticipation that the parties will have assets in the future. It is helpful where the parties anticipate high earnings in the future so that they can plan for the manner in which this income will be dealt with in the future. Most couples can benefit from a reasonably crafted prenuptial agreement.

    4. What are some of the advantages to prenuptial agreements beyond protecting finances?

    Prenuptial agreements set the stage for a rational marriage. The parties enter into the relationship with knowledge of each others’ assets. Each party is empowered to understand the nature of the financial relationship which will exist between the parties. The agreement determines the nature of what constitutes marital assets and how those assets will be managed during the marriage. The agreement can also establish vehicles for dealing with the parties’ income, investments, gifts, as well as the manner in which the parties’ assets will be disposed of at the time of the death of either of the parties.

    The process of negotiating a prenuptial agreement gives each of the parties’ insight into the manner in which their future spouse will behave towards them in the future. This insight can be priceless. The negotiation of a prenuptial agreement establishes an adult relationship between the parties and empowers the non-moneyed spouse to establish the relationship on equal footing with their moneyed spouse.

    Prenuptial agreements are helpful in many many ways.

    5. Do prenuptial agreements have the potential to encourage divorce? Do they provide a financial incentive for divorce?

    In rare occasions, prenuptial agreements have encouraged divorce. Certain agreements contain “sunset provisions” which means that the agreement will terminate after a period of time. Some of these parties may be encouraged to end the marital relationship prior to the time set forth in their sunset provision. There have been circumstances where Divorces have been initiated in order to avoid the continuation of marriage without the provisions of the prenuptial agreement being in effect.

    6. Are agreements more common in second or third marriages? What about couples with children?

    Prenuptial agreements are certainly more common in second and third marriages. In those situations the parties are more conscious about protecting their assets, income and future earnings. They also wish to preserve their assets for the benefit of children of a prior marriage.

    7. Will Cioffi-Petrakis’ case mark a trend in prenuptial agreements? Will we see more cases turned over?

    In my opinion that case was much to do about nothing. The court found that he had defrauded her in connection with entering into the agreement. The court also found that he presented it to her merely days before the marriage and there was an issue of duress. This has always been the law and the case holds for nothing more then what has been consistently held in the past.

    An agreement which is based upon false promises cannot stand. Agreements must be entered into intelligently and with the free will of the parties. Each party must be represented by counsel and each party must be entering into the agreement freely, not under duress and with full disclosure of the other parties assets. There can be no misrepresentations which would induce the party to enter into the agreement. The agreement must be presented to the other party in adequate time for the party to deal with the agreement in an intelligent manner and not under duress. This has always been the law.

  • Andrew T. Drazen 03/22/13

    1. With the universal understanding that about half of marriages end in divorce, we want to learn more about prenuptial agreements. Are such agreements an obvious choice to protect assets? Or do they encourage marriages to dissolve?

    Prenuptial agreements are an obvious choice to protect assets. That was the idea behind then in the first place. I do not think they “encourage” marriages to dissolve. A prenuptial agreement provides for an allocation of assets (among other considerations) in the event of a dissolution of marriage. In some cases it may discourage dissolution if the agreement is such that one party will end up much better off than the other, but no better off than they were before the marriage. For example, in the highly likely scenario where one party is quite wealthy and the so-called “bread winner” of the family and the other party either does not work or has a much less lucrative job, there would be no inherent incentive in the prenuptial agreement to just dissolve the marriage. The real issue becomes, how is the agreement drafted and what issues does it tackle.

    2. How common are prenuptial agreements in 2013?

    This answer is better answered with #3 below, but I would say they are much more common among those with money and/or a healthy amount of assets to their name than they are with your average American.

    3. Are they primarily designed for wealthier marriages?

    I would not say they are “designed” for wealthier marriages, but they are likely more used by the wealthy who decide to get married. The most obvious reason for this is that the prenuptial agreement is designed to primarily consider how to divide the parties assets in the event of a dissolution. A prenup can obviously take into account much more than just division of assets, but that would likely be the most important aspect of the agreement. An average person will likely not have enough assets when they get married to consider forming a prenup; whereas, a wealthier individual will. More practically speaking, this is a likely circumstance of networking. Wealthier people are generally more likely to be in regular contact with an attorney (for work like estate planning or business matters). If you are in contact with an attorney and mention pending nuptials, that attorney may likely mention consulting a family law attorney about a prenup.

    4. What are some of the advantages to prenuptial agreements beyond protecting finances?

    The advantages are more or less limitless, as a prenup is only governed by the constraints of general contract law. You can’t contract for anything illegal, and you can’t contract with a person who is incapable of doing so. But outside of those, and other, considerations for what a prenup can’t do, an attorney can include most any practical item in a prenup that the parties wish to decide and put down on paper prior to the marriage. The parties could include language that would control a custody schedule for their children, if they have any, in the event of a dissolution. The parties could include payment of maintenance (alimony) in the event of a dissolution.

    5. Do prenuptial agreements have the potential to encourage divorce? Do they provide a financial incentive for divorce?

    This is generally considered above in the first question, but I do not believe they do. Of course, there are certain prenuptial agreement where, if drafted in a certain way, they could create a financial incentive for one party or both to get divorced. But I don’t believe the prenup itself encourages divorce. There is always a reason, whether it be that the marriage is not working out, stress on the relationship, a cheating spouse, or simply one spouse believes they would be happier or financially better off alone. But most states divorce laws include a division of marital property in some way, child support, maintenance and a custody schedule. The state statutes will control how that is done, and if the parties do not have a prenup, there could still be one party that views divorce as having a financial incentive. As always, everything depends on the circumstances of those parties.

    6. Are agreements more common in second or third marriages? What about couples with children?

    Not necessarily. I don’t think second or third marriages make a person more likely to enter into a prenup. Likewise, the fact that couples have children (perhaps from a prior marriage) likely does not influence most decisions to enter into a prenup. I think the decision to approach an attorney to draft a prenup is much more rooted in having an agreement that the parties can agree to when it comes to dividing assets and/or providing for the appropriate division of assets. Parties who have assets and/or money are more likely to want to enter into a prenup. This is especially true with parties who have assets, and are certain they intend on acquiring more assets during the marriage, or increasing the value of assets they acquired prior to the marriage.

    7. Will Cioffi-Petrakis’ case mark a trend in prenuptial agreements? Will we see more cases turned over?

    The Cioffi-Petrakis’ case effect will most likely be judge’s being more willing to rule in a party’s favor that the contract was indeed entered into by coercion. Whereas in the past, a judge may be hesitant to pull that trigger, once it has been done, attorneys now know the type of evidence they will need to present to convince THAT judge (and likely other judges in his jurisdiction or state) of what it takes to invalidate a prenup. Across the country it still may take time. I practice in St. Louis County, Missouri, but I don’t think a judge in St. Louis County will be overly persuaded by a judge from another state simply because case law from another state is not binding on a Missouri judge. One consideration that should be noted is that maybe a prenup had not been overturned in this manner because of the simple fact that the parties entering into prenups are typically savvy and/or well advised by an attorney before they sign such an agreement. The Cioffi case was quite different in that the wife was clearly at a disadvantage at the bargaining table, and there was some very strong evidence that her husband fraudulently induced her to enter the contract and plenty of evidence corroborating his “change of mind” after the parties were married.

  • Martin Kofsky 03/25/13

    Prenuptial agreements are very common and becoming more common. In some cases, the agreement is designed to protect a single asset, such as a pension, in other cases, the documents are comprehensive agreements that provide for the separation and identification of assets,terms of ownership of assets acquired during the marriage, support in the event of a divorce, management of businesses, and payment of attorneys fees.

    Prenuptial agreements are the natural extension of the public’s realization that marriages are an economic as well as a social combination. Moreover, as there are more and more divorces, individuals embarking on second or third marriages then to be a bit more cautious and open to resolving property division and support issues in advance.

    Prenuptial agreements come in all shapes and sizes. They can address a narrow or broad range of issues. For example, a pension may be the single largest financial asset that a person acquires during a marriage. It is not uncommon for there to be a limited prenuptial agreement providing that each person’s 401k, pension or retirement account is beyond the reach of the other person.

    While most people of limited means do not invest in a prenuptial, they can be easily tailored for virtually economic circumstance.

    As a general rule, parties are not free to contract in advance for matters concerning minor children. That being said, the agreements may be used to establish certain presumptions that would have to be applied in the event of a divorce. Therefore, while not defining an issue with certainty, the use of a prenuptial agreement in such a way can limit the prospects and opportunity for conflict in the event of a divorce.

    Prenuptial agreements can be used to determine the ownership and distribution of assets acquired during a marriage. They can be used to provide for certain religious issues between the parties or their children.

    Prenuptial agreements can also be used to define support obligations between spouses, limit or establish certain rights during the marriage regarding the maintenance of household accounts, payment of household expenses, and other similar things. In reality, the use of prenuptial agreements is very broad and each addresses the individual circumstances of the parties.

    Every agreement, prenuptial or otherwise, has to account for the behaviors that the agreement tends to incentivize. I could easily draft an agreement that creates an incentive to divorce. I could just as easily draft an agreement that creates an incentive to cook pot roast on Thursdays. The fact is that the agreement is inert. If the parties to the agreement marry for the wrong reasons are carry the agreement around like an albatross around their neck, they will divorce.

    Prenuptial agreements are not for everyone and in some cases, negotiating the divorce before the marriage becomes too great a burden for a successful marriage to bear.

    I believe that prenuptial agreements tend to be somewhat more common among parties marrying for a second time. As for children, the parties do not ordinarily have children when the agreements are executed. But I have drafted agreements were provisions concerning spousal support are modified in the event of the birth of children.

    In general, New York has a “strong public policy favoring individuals ordering and deciding their own interests through contractual arrangements. However, this right is not and has never been without limitation “[T]he State is deeply concerned with marriage and takes a supervisory role in matrimonial proceedings. . . . Indeed, in numerous contexts, agreements addressing matrimonial issues have been subjected to limitations and scrutiny beyond that afforded contracts in general”. Thus,while “there is a heavy presumption that a deliberately prepared and executed written instrument manifests the true intention of the parties” an agreement between spouses or prospective spouses may be invalidated if the party challenging the agreement demonstrates that it was the product of fraud, duress, or other inequitable conduct.

    If this case had involved a middle class couple fighting over a 401k, it would never have made the news but cases where one spouse seeks to invalidate a prenuptial agreement based on fraud, duress or inequitable conduct are not uncommon. The New York court of appeal made a point of referencing the evidentiary judgments made by the trial court.

    Here, the Supreme Court reasonably resolved credibility issues in favor of the plaintiff, and its determination that the defendant fraudulently induced the plaintiff to execute the prenuptial agreement was supported by the evidence. With respect to the material facts underlying the plaintiff’s claim, the Supreme Court found that the plaintiff’s testimony was “credible,” convincing,” “unequivocal,” and consistent with “additional corroborative evidence,” and that any “inconsistencies” in her testimony related to “insignificant” matters. By contrast, the Supreme Court found the defendant’s “credibility to be suspect,” due in part, to his “patent evasiveness.”

    The case stands for the proposition that evidence wins cases. There was no new groundbreaking law here. The Husband came across as untruthful and the Wife came across as credible. One of the most problematic aspects of family cases is that in the absence of extrinsic evidence, the court is left to deal with the credibility of the parties. With no unique or groundbreaking legal issues to consider, the court believed the Wife’s testimony that she was fraudulently induced to sign the agreement. All the court of appeals said was that the decision of the trial court was supported by the evidence but it did not break any new legal ground.

    The moral of this case is the same as the moral in similar cases.

    1. The more disclosure the better

    2. There must be full and fair opportunity to review and negotiate the agreement and each person should have independent counsel review the agreement

    3. Precision in drafting is critical.

    4. Have the agreement negotiated and signed as far advance as possible. Agreements signed on the eve of the wedding can be viewed with suspicion.

    5. Be honest. If you want a prenuptial agreement ask for it and don not hedge.

    6. Make sure that the agreement is drafted and reviewed by a person familiar with these kinds of agreements.

    7. Draft and sign the agreement with the expectation that if divorce looms on the horizon, the agreement will be subject to a challenge.

    8. There are no “budget” prenuptial agreements. If you want such an agreement, do them
    right and have them done by an experienced professional.

    9. The agreement cannot assume that you know what words mean. If an agreement is litigated, in the absence of defined terms, what things mean will be the subject of a robust argument. Take no chances and define important terms in the agreement.

    10. Negotiating the divorce before the wedding is always difficult. Make sure you know that your rights are under current law so that you know and understand the standard that you are contracting against.

  • Nicole Aeschleman 03/25/13

    With the universal understanding that about half of marriages
    end in divorce, we want to learn more about prenuptial
    agreements. Are such agreements an obvious choice to protect
    assets? Or do they encourage marriages to dissolve?

    Prenuptial and post-nuptial agreements are simply a tool that allows a couple to predetermine the financial division in the unfortunate event that the marriage ends. It is not a petty or selfish act, but rather a practical action that lessens the complications of a divorce. Pre and post-nuptial agreements are not always limited to financial agreements and can allow a spouse to establish specific requirements and behaviors in a relationship. A prenuptial agreement can encourage a marriage to continue. In some cases it serves as a deterrent for a spouse to end the relationship.

    How common are prenuptial agreements in 2013?

    Prenuptial agreements are becoming more common. Though I do not have the statistical data at hand, the frequency of prenuptial agreements entered into has increased steadily on a year by year basis and have become a widely-utilized and socially acceptable tool.

    Are they primarily designed for wealthier marriages?

    Though they are typically considered to be for couples with larger estates they can be helpful to any couple. In fact, a prenuptial agreement is not always solely with regard to financial division.

    What are some of the advantages to prenuptial agreements beyond
    protecting finances?

    Fewer headaches. A prenuptial agreement allows for the organized division of assets in a time of great angst and stress. When both parties understand what the financial division will be ahead of time it adds clarity to a confusing situation.

    Do prenuptial agreements have the potential to encourage
    divorce? Do they provide a financial incentive for divorce?

    Depending on the agreement’s provisions, the prenup can either encourage or discourage divorce. I would argue that the agreement should do neither. The marriage should succeed or fail based upon the couple’s ability to communicate and function.
    There can be arguments made that the financial reward may entice a divorce, but the counter argument can be made that the financial punitive action could discourage a spouse from seeking a divorce.

    Are agreements more common in second or third marriages? What
    about couples with children?

    Yes. Individuals who are entering their second or third are typically older, have acquired more assets, more financial obligations including child support and alimony.

    Will Cioffi-Petrakis’ case mark a trend in prenuptial
    agreements? Will we see more cases turned over?

    A prenuptial agreement is no different than any other legal contract. They can always be challenged in court and when one of the parties feels as though the arrangement is unfair, it likely will be litigated in family court. The effect of the decision will likely encourage attorney’s to implement provisions that make it more unlikely to reverse or nullify the prenuptial agreement.

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