“One is not exposed to danger who, even when in safety is always on their guard.”
I am occasionally asked by clients whether or not they should get a prenuptial agreement in the event that they remarry. Quite frankly, I’m surprised that more people don’t utilize them. I suppose it is because people who are about to get married don’t like talking about the possibility that they will not stay married. Some people are vehemently opposed to the very concept of a prenuptial agreement — usually, the people that express that opinion do not have a great deal to lose or have not been through a messy divorce.
The simple fact is that prenuptial agreements have a number of significant benefits and the mere fact that one or both of you desires to protect yourself in the event of a dissolution of your marriage, does not mean that you expect or plan to be divorced. Sort of like wearing a helmet does not mean that you plan to crash your bike.
Prenuptial agreements are most beneficial to parties who have significant assets to protect. They are also very attractive to parties who have previously been through an unpleasant, contentious and protracted divorce. However, premarital agreements may also be beneficial to parties who do not have significant wealth as the scope of possible subjects to be resolved by prenuptial agreement is broad and can include limitations on spousal support.
Properly crafted prenuptial agreements protect valuable or sentimental premarital and inherited property and clearly define the scope and nature of all premarital property of both parties. A prenuptial agreement can protect assets from the debts of a future spouse and protect your children’s inheritance. They can establish mechanisms for resolving future disputes, streamline and simplify divorce proceedings in the event that they do occur and reduce acrimony and cost.
Montana follows the Uniform Premarital Agreement Act. The UPAA requires that the Court actually enforce the terms of a validly executed a premarital agreement. Note that the same deference is not granted to similar agreements reached after the parties have already married. The UPAA allows parties to a premarital agreement to address a broad range of subjects including:
- the rights and obligations of each of the parties in any of the property of either or both of them, whenever and wherever acquired or located;
- the right to buy, sell, use, transfer, exchange, abandon, lease, consume, expend, assign, create a security interest in, mortgage, encumber, dispose of, or otherwise manage and control property;
- the disposition of property upon separation, marital dissolution, death, or the occurrence or nonoccurrence of any other event;
- the modification or elimination of spousal support;
- the making of a will, trust, or other arrangement to carry out the provisions of the agreement;
- the ownership rights in and disposition of the death benefit from a life insurance policy;
- the choice of law governing the construction of the agreement; and
- any other matter, including their personal rights and obligations, not in violation of public policy or a statute imposing a criminal penalty.
There are, of course, some limitations to what the parties can address in their agreement. For example, a premarital agreement cannot impact support of children. In addition, there are exceptions to the general rule that premarital agreements must be enforced by a Court and certain formalities in the preparation and execution of the agreement must be followed. For example, a prenuptial agreement will be set aside in the event that it was not voluntarily executed, if there was not a fair and reasonable disclosure of the assets at issue or the agreement is otherwise unconscionable.
In January 2012, the Montana Supreme Court decided In Re Marriage of Funk, a case that I believe makes the case for premarital agreements even more compelling. The primary issue in that case was a piece of real property that had been inherited by the husband. The wife was awarded a substantial interest in the property upon the parties’ divorce and the Montana Supreme Court affirmed, stating that the District Court was required to consider the “contributions of a homemaker” to the maintenance or preservation of what would otherwise be considered separate property. The Supreme Court went on to overrule about a bajillion (that’s a legal term) previous cases.
Most attorneys agree that Marriage of Funk did not really change the law. However, those same attorneys will cite to the Funk case when trying to argue in favor of granting a non-acquiring spouse an interest in the other party’s premarital or inherited property. A properly prepared and executed premarital agreement avoids any confusion or doubt.
True, premarital agreements are not exactly the most romantic thing to discuss before your wedding. However, marriage should not be about ownership of property and nothing in a prenuptial agreement prevents both parties from enjoying the benefits of property owned by either party. Opening the lines of communication about issues that are important to you is critical to a happy, honest and successful marriage.