Prenuptial Agreements

Key Prenup Principles

1. Avoid it. Prenup it. A prenup offers peace of mind. Finances are the leading cause of divorce. But prenup can help spouses not to have to fight over finances.
2. A prenup can save you thousands. On average, a person going through a divorce in the U.S. spends $15,000.00. In high-asset divorces, that number can increase several-fold. A prenup costs a fraction of a divorce. Additionally, you can protect significant financial assets.
3. A prenup protects the assets you’ve built up over a lifetime. Whether you want to protect just a pension or an empire, a prenup protects what you’ve worked so hard to build.
4. Prenups are not just for the rich. In fact, a prenup may be more important to a school teacher than it is a CEO because it protects the assets a school teacher is relying on for retirement, and it would much harder for a school teacher to rebuild those assets after a divorce.
5. How the prenup is signed may be just as important as what the prenup contains. In any divorce litigation challenging a prenuptial agreement, the circumstances under which the agreement was signed becomes very critical.
6. If the prenup is not done correctly, it has a high chance of being rejected. It’s imperative that you and your fiancé are as transparent as possible when going through this process and disclosing your assets and debts.  Attempting to hide anything, assets, inheritances, cars, houses, can cause the Prenuptial Agreement to be invalid.
7. Both you and your fiancé should have a different lawyer review the Prenup. This does two things: it protects both sides and it strengthens the validity of the agreement if it gets challenged later.
8. Both parties need to fully disclose their financial debts and obligations to the other party before the prenup is signed. Disclosure is the key fact when a prenup is challenged.
9. Didn’t do a prenup? You can still do a postnup. Arizona law allows for both prenuptial (before the marriage) and postnuptial (during the marriage) agreements.
10. The children’s issues of custody (i.e., legal decision-making and parenting time) and child support cannot be included in a prenup. What is in the child’s best interests gets decided at the time of the divorce. The inclusion of child custody provisions may invalidate the whole agreement.
11. You can use a prenup to pass property to children from prior marriages.
12. You can use a prenup to shield yourself from debts.

Top 5 things that will cause a Prenup to be Invalidated

1. Lack of disclosure: When assets are not fully disclosed, the prenup is almost certain to be invalidated. A full disclosure of all assets is required because both parties need to have a full understand of what rights they are giving up before they can waive those rights.
2. Uneven distribution: A prenup can be invalidated if it is “unconscionable.”  It is “unconscionable” if it is grossly unfair at the time it is signed.
3. Contains children: A prenup cannot decide what happens to the children in the event of a divorce. The decisions of legal decision-making, parenting time, and child support will be decided in the divorce, not in the prenup. The inclusion of those terms could invalidate the whole prenup.
4. If one or both parties don’t have an attorney. A prenuptial agreement can be invalidated if the Court finds that one party had superior bargaining power. This typically includes things like being older, being more educated, or having an attorney when the other party does not. But where both parties have representation, a Court is very unlikely to find there is an equal bargaining power. Note: One attorney (or for that, one law firm) cannot represent both parties. The parties need to hire separate attorneys.
5. Signing too close to the marriage date. A prenup should not be sprung upon the other party. A prenup should be discussed, negotiated, and finalized well ahead of the wedding. While there is no minimum amount of time between signing of the prenup and the wedding—and even a prenup signed right before one walks down the aisle could be valid, the closer a prenup is signed to the wedding, the stronger a challenging spouse’s argument that they were coerced into signing it.

Top 5 Things You Need to Know About Prenuptial Agreements

1. A prenup circumvents Arizona’s community property laws. Arizona’s community property laws automatically apply whenever couples get married. A prenup (or postnup) are the only ways to avoid community property laws. Under Arizona community property laws, anything either fiancé  acquires during marriage, including all assets and debts, belong half to fiancé  and half to the other (with exceptions for items acquired by gift or inheritance). The following are just part of what is community property: houses, bank accounts, businesses, stocks, retirement accounts, pensions, bank accounts, vehicles, credit card debts, and tax refunds/liabilities.
2. A prenup can decide spousal maintenance: Aside from the children’s issues, spousal maintenance is the most heavily litigated issue in Arizona divorces. Arizona law does not provide guidance as to how much spousal maintenance is or for how long it should last. Because of this, spousal maintenance cases tend to be among the most expensive divorce cases. The two of you, though, can decide ahead of time how much spousal maintenance should be paid, if any, and for how long.
3. The circumstances of how the Prenup is signed is important to determining whether the Prenup is valid.  During a divorce, when one spouse challenges the validity of the prenup, the Court will look to the circumstances in which it was signed. One famous prenup case was that of baseball player Barry Bonds. The day before he and his bride-to-be were to fly to Las Vegas to get married, he informed they would be stopping at his lawyer’s office the next day on the way to the airport. When they arrived at the lawyer’s office, Barry informed her he would not marry if she did not sign the prenup. Barry’s bride, who did not have an attorney and was from Sweden, was taken into a conference room where she signed the agreement. When the couple separated, the validity of the prenup was heavily litigated. Someone should not be blindsided with a prenup. Rather, it should be discussed well in advance of marriage, and both parties should have a chance to negotiate the terms and seek the advice of counsel.
4. The best way to ensure a prenup is upheld as valid is for both fiancé s-to-be to have their own attorneys to help negotiate and draft the prenup. When a prenup is challenged in a divorce, the first key fact is almost always whether both parties had an attorney. If both parties had an attorney, it is very likely a prenup will be upheld. This becomes even more important when one prospective spouse is either significantly older or significantly more educated than the other. We understand some people are hesitant to hire attorneys, let alone one for each of you. But think of it as insurance for the prenup. If the prenup is valid, it potentially saves tens of thousands in litigation fees and the assets in the prenup are protected.
5. For a prenup to be valid, both fiancé s-to-be must disclose their assets. Both spouses need to know what rights they are giving up when they sign a prenup. In legal terms, a spouse who is not informed of the other spouse’s assets prior to signing the prenup did not sign the prenup “knowingly and intelligently.” Failure to disclose one’s assets are grounds for invalidating a prenup. See A.R.S. 25-202(C).

Top 5 circumstances in which a prenup is most advisable

While we recommend prenups for all marriages, we think they are most advisable for the following situations:

1. Where a couple plans to have children. While the prenup itself can’t address children, it can aid in the transition from married couple to coparenting. In a divorce with children, parents must make this transition while going through a divorce, and divorce may be the toxic start to a coparenting relationship. A prenup can shorten the time, stress, and money put into a divorce; in turn, lessening the toxicity divorce may have on the transition to coparenting. This can allow the coparenting phase of the relationship to have a much healthier start, which is advantageous to the parents but, more importantly, the children.
2. Where one spouse plans to be a stay-at-home parent. When one spouse has stayed at home, a divorce can be particularly turbulent, as they are faced with significant financial uncertainty. A prenup that thoughtfully divides just the assets but provides for spousal maintenance can help provide that certainty and security as they transition back into the workforce.
3. Where one spouse or both spouses have acquired significant assets acquired prior to marriage. Certainly, where one spouse has built up considerable wealth, a prenup is advisable to protect those assets in the event of a divorce.
4. Where one spouse or both spouses have acquired important assets acquired prior to marriage. While certainly recommend prenups for high-wage earners or individuals with considerable assets, a prenup can be just as important, if not more important, to a middle-class individual. In those cases, it may be that the assets they are trying to protect are important to their future. For example, many people may be relying on funds they built up in an IRA or 401k prior to marriage for their retirement. Entering a marriage without a prenup could put those at risk, as such assets can easily be transformed into community property.
5. Where one spouse has just received an inheritance. Although an inheritance is exempt from community property laws, it can easily become community property if commingled with community funds.