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By Deron Sugg | Contributor
Navigating the Pre-Nuptial Agreement Conversation
Discussing a pre-nup can feel as awkward as having “the birds and the bees talk.” The mere mention of either topic can evoke discomfort, even though both play significant roles in future planning. Let’s be real: saying, “I love you dearly, but just in case it doesn’t pan out, please sign this document,” isn’t likely to inspire romance or heartfelt sentiments. So how do you approach this topic without appearing to be preparing for failure before the marriage even begins? If wedding plans are on the horizon for your child, consider these aspects when contemplating a prenuptial agreement.
Considering the Reality of Divorce
Statistically, about half of all marriages end in divorce—hence, planning for such an outcome isn’t unreasonable. We purchase life insurance for our families’ protection after we’re gone, even if we don’t gain any benefit from it during our lives. A pre-nuptial agreement can offer both partners a chance to have a clearer understanding and more control should a divorce occur—something that can be very constructive. Moreover, pre-nups can reduce legal costs during a divorce, as couples typically agree upfront on how their assets will be divided, which most would agree is a financial advantage.
Understanding What a Pre-Nup Entails
Before deciding if a pre-nup is suitable for your child, it’s crucial to comprehend its functions and limitations. While they can be tailored to include various stipulations, their core purpose is to clearly delineate property ownership. Essentially, it serves to affirm, “What’s yours stays yours, and what’s mine remains mine. If we separate, this is what each of us will receive.” In Texas, for instance, property acquired before marriage, as well as assets regarded as gifts or inheritances, is considered separate property. Conversely, all income earned during marriage is classified as community property and divided during divorce. This can lead a marital estate to grow substantially over several decades. A pre-nup can simplify asset division, avoiding costly disputes later on.
Assessing Fairness in Property Division
Consider whether it’s fair for all earnings during a marriage to be split equally, regardless of who generated them. If that seems inequitable, a pre-nup might be worth exploring. Take, for instance, the case of your daughter, Suzie, who diligently works through her education and becomes a highly-paid cardiologist with an annual income of $800,000. She marries Steve, a nice guy trying to find his career path, who ultimately becomes an animal photographer earning $30,000 a year. After a decade together, Steve is drawn to someone else and files for divorce. The two have amassed a marital estate worth $5,000,000, with Suzie responsible for over 95% of that wealth. When they part ways, Steve seeks half.
Real-Life Scenarios
Situations like Suzie and Steve’s are more common than one might assume. If you feel Steve shouldn’t receive $2.5 million after his marital indiscretion, it may be time for Suzie to consider getting a pre-nup.
Shattering Pre-Nup Taboos
While there are stigmas surrounding prenuptial agreements, many couples discover that discussing finances leads to stronger marriages. Financial issues are a significant source of marital tension, so why not address them head-on? Interestingly, I’ve had several “Steves” request pre-nups, motivated by a desire to prove that their intentions are genuine and not financially motivated—which is surprisingly romantic.
Safe-Guarding Separate Assets
Pre-nups are not only instrumental in asset division; they can also ensure that separate property remains untouched. This is particularly relevant if your child is set to inherit wealth, has real estate, or possesses other significant assets prior to marriage. During a marriage, keeping separate assets distinct can become challenging, leading to “mixed-character” assets. This complexity can make it hard to separate out individual property during a divorce. A pre-nup can minimize the need for costly asset tracking while also helping to regulate property distribution upon a partner’s passing.
Timing and Enforceability of Pre-Nups
If you decide to look into a pre-nup, be sure to start early. In Texas, pre-nups are generally considered enforceable if they meet specific criteria, but can be invalidated due to issues around voluntariness or unfairness. Presenting a pre-nup to a bride in her wedding dress moments before the ceremony is far from ideal. To enhance the likelihood of a pre-nup being upheld, full disclosure of assets from both parties is essential. Ideally, both individuals will have their own family law attorneys. Formal execution of the agreement should resemble a property closing, ideally with a court reporter present. For additional protection, consider filming the signing, and reaffirming the agreement with both parties’ signatures post-wedding.
Child Custody Considerations in Pre-Nups
Pre-nups can stipulate terms regarding child visitation and custody arrangements in the event of divorce, but it’s important to know that courts will always review these terms for the children’s best interests. Therefore, most pre-nups concentrate on outlining asset distribution.
Conclusion: The Value of Honest Conversations
No one entering marriage anticipates divorce, yet it’s a possibility for anyone who exchanges vows. Prenuptial agreements may not suit everyone’s taste and can be seen as distasteful. However, for many, they facilitate healthier and more straightforward relationships by ensuring that financial matters are discussed openly before two lives become intertwined. Most clients who opt for pre-nups feel similar to how I felt when my father had the “birds and the bees talk” with me—initially hesitant, but ultimately appreciative for having taken that important step.
Editor’s Note: KoonsFuller attorney Deron Sugg has over 15 years of experience in family law. Licensed in Texas and Missouri, Sugg graduated magna cum laude and was inducted into Phi Beta Kappa at the University of Missouri-Columbia, where he also completed law school. For inquiries, Mr. Sugg can be reached at KoonsFuller.com or 972-769-2727.
