Prenuptial Agreements

What You Need to Know About Getting a Prenup

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Prenuptial Agreements

The Why

Prenuptial Agreements have a stigma that’s been passed down for generations. Times change. This is no longer a luxury for the rich. Most likely, you and your fiancé both work, own your own stuff, have your own credit cards and loans. Even after a short-term marriage, Courts often face a tangled knot in trying to figure out what was yours and what was your spouse’s prior to marriage. Worse, what was yours prior to the marriage can easily be transformed into a community asset if you put money into it during the marriage. This knot can often result in the Court throwing up its hands and diving everything.

Getting a prenuptial agreement isn’t insurance against divorce–it’s insurance against life. It’s a smart decision on multiple levels. A Prenup can protect the stuff you own, help you understand your ‘marital’ financial status before getting married, protect yourself from debts that aren’t yours, and if it doesn’t work out in the end, save yourself thousands in attorney fees.

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Definitions

Prenuptial & Postnuptial

Common Circumstances for a postnup

Separate Finances

To have separate finances while married. Every married couple argues about finances. Many marriages end over financial disputes often when one party worries about the impact the other spouse’s decisions are having on their finances. Postnups may not be a cure-all for those situations, but we have seen them reduce that conflict by separating out the finances. In at least one case, we have even seen the postnup save the marriage.

Prenup Update

To update a prenup. Circumstances change during marriage, and terms in a prenup may become outdated. When life changes, the prenup should be updated.

Inheritance Protection

To protect one spouse’s inheritance. While an inheritance is not community property when it is inherited, it can easily become community property by accident. For example, placing an inheritance into a joint bank account may make it community property. A postnup can set up boundaries to ensure the money one spouse inherits remains their money after a divorce.

What should you have done?

To do what should have been done in the first place. Because of the stigma associated with prenups, some people would rather leave themselves unprotected than have that awkward conversation. But now that they are married, they may find themselves more able to broach the topic of a postnup. Postnups have less social stigma than prenups, and are, therefore, easier to discuss while affording oneself similar protections.

Frequently Asked Questions About Prenuptial Agreements

Why should I get a prenup?

A prenup is like car insurance. You buy it hoping that you never have to use it. But if you have to use it, you are glad you have it. A prenup protects what you’ve accumulated prior to marriage and protect what you earn during marriage.

A prenup guards against long, drawn-out divorce proceedings. In our experience, a divorce case with a prenup almost always takes just a few months. Cases involving the same issues decided in prenup often can take up to a year to decide.

What is the advantage of having a prenup?

A prenup serves several purposes:

  1. It substitutes Arizona’s community property laws (spouses each take half of all assets and debts either spouse acquires during marriage) for a division of property of your choosing.
  2. It significantly reduces the financial risk of a divorce.
  3. It significantly reduces the cost, time, and stress of a divorce, allowing each party to move on more quickly if the marriage fizzles.
  4. It can determine what spousal maintenance, if any, will be paid.

Do I need an attorney before entering into a prenuptial agreement?

No, but we strongly recommend you have one. We have seen very intelligent try to do prenups on their own and make mistakes that cause the prenup to be invalidated.

Can my fiancée and I use the same attorney?

No. Attorneys are prohibited in Arizona from representing both parties.

Should both parties have an attorney?

Yes. We recommend it because if both parties are represented the prenuptial agreement is much more likely to be upheld. We especially recommend this where one spouse is significantly older, more educated, or wealthier than the other fiancé . These are cases where one spouse could in the divorce proceedings claim that he or she did not understand what they were signing.

Is it required that both parties have an attorney?

It is not required, but it is strongly recommended.

If we both agree on everything, why might we need a lawyer?

First, both parties having an attorney makes it more likely a prenuptial agreement will be upheld if challenged in a divorce proceeding. Second, even if when a full agreement is reached beforehand, having lawyers review and negotiate the language of the agreement can protect both parties’ interests.

What do prenup lawyers do?

Attorneys helping with a prenup do several tasks: (1) They meet with the client to determine what the client wants, (2) they disclose their client’s financial information to the other side, (3) they negotiate with the other party or their attorney, and (4) they draft up the prenuptial agreement or review and edit the prenuptial agreement drafted by opposing counsel.

Does Best Law Firm do prenuptial agreements on a flat fee?

We do not because the biggest cost in a prenuptial agreement is the negotiation, including negotiating what language will be used in the agreement. How long negotiation will take is an unknown factor when a fee agreement is signed. For this reason, Best Law Firm works on an hourly rate.

Is it more expensive to hire an attorney to do my prenup or to hire an attorney to do my divorce?

It is far more expensive, on average, to hire an attorney for divorce litigation than it is to hire an attorney for a prenup. In our experience, prenups cost anywhere from one-third to one-tenth the cost of litigating these issues in a divorce.

What if my spouse-to-be refuses to sign the prenuptial agreement?

The key word is agreement. If your spouse-to-be refuses to sign, there is no agreement, which means there is no prenup.

Will my fiancé be offended if I propose using a prenuptial agreement?

We cannot predict how your fiancee will react. You are in a better position to answer that than we are. That said, we believe that taking a tactful approach to asking someone to sign a prenuptial agreement might help them be more open to agreeing to one.

The biggest fear most people when they are approached about signing prenup is a fear that their partner is uncertain about the marriage. When approaching a spouse about a prenup, it is important to reassure them of your love form them and commitment to them.

I am certain my love will last forever, so why I need a prenup?

Most people entering a marriage intend to make a lifetime commitment. It is well-known that half of all marriage end in divorce, yet only ten percent (10%) of the population believes that they will ever be divorced. That means for forty percent (40%) of people, their divorce takes them by surprise.

We may be divorce attorneys, but we want marriages to succeed. But we also believe it is appropriate and smart to plan for the “what ifs” in life. As the old saying goes, an ounce of prevention is worth a pound of cure. Working these differences now saves time, stress, and money should divorce occur.

Do prenups encourage divorce?

No. While a prenup contemplates what will happen in the event of a divorce, it does not mean that prenups encourage divorce. In fact, just the opposite may be true.

A prenup can guard against a divorce filed solely to protect one spouse from the financial consequences of the other. We commonly have people approach us seeking divorces because they are concerned about their spouse’s financial decisions having a negative financial effect on them because of Arizona’s community property laws. Some common instances are when a spouse has gambling addiction, is acquiring excessive debt, or is running a business into the ground. In those instances, we have recommended postnups (a marital agreement, similar to a pre-nup, signed after marriage), much to the relief of the worried spouse. We worry most people in those situations are not advised about the possibility of a postnup and may divorce as a means of protecting themselves financially. A pre-nup, therefore, deals with this question before it even arises in a marriage.

What does it mean that assets acquired prior to marriage can be transformed into assets? Can you provide some examples?

Property acquired before the marriage or property received via gift and inheritance during the marriage are not community property—meaning that property still belong 100% to the spouse who acquired it. But if that property gets “commingled” with community property, it loses a sole-and-separate character and can become community. This, of course, means the property belongs equally to each spouse. There will be an exception if the sole-and-separate property can be “traced.”

Some common examples of sole-and-separate property becoming community property:

  • Aaron receives $100,000 in an inheritance. He puts the money into a joint bank account. That inheritance is now likely community property.
  • Brynn saved up $200,000 prior to the marriage. She keeps her savings in the same bank account where her paychecks are deposited during marriage. That bank account is now likely community property.
  • Charlie bought a house prior to his marriage. When he got married, he had his new wife sign a Disclaimer Deed (a document stating that she has no ownership in the property). Charlie continues to pay down the mortgage from money he earned during the marriage. In this instance, the house does not become community property, but Charlie’s wife will have a “community lien” on the house, meaning she can ask Charlie to reimburse her for the money the community spent on the house during the marriage.
  • Della is a school teacher who has paid into the Arizona State Retirement System for 20 years. She marries Edward, and their marriage last ten years. She and Edward divorce the same year Della retires. Edward has a claim to one-half of one-third (because they were married for 10 of the 30 years Della paid into ASRS) of Della’s retirement.
  • Francine has a bank account prior to marriage. She adds no additional funds into during the marriage, but she transforms the account into a joint account with her husband. This is now a community account.
  • Giselle

What does disclosure mean?

Disclosure means that you provide the other party with the documents they need to be fully informed about your situation.

What should be disclosed?

Disclosure includes, but is not limited to, bank statements, real estate holdings, retirement accounts, pensions, stocks, and earnings, including taxes and pay stubs. There should be a full disclosure.

What if I don’t want my prospective spouse knowing how much I earn?

If disclosure is not complete, your fiancé will have an argument that the prenup should be invalidated because they did not have a full understanding of your assets. Without complete disclosure, they cannot make a “knowing” waiver of their rights in a prenuptial agreement.

Can we put in a prenup that if my spouse leaves me, my spouse gets nothing, and I get everything?

We do not recommend it. Such a provision will likely be found to be unconscionable and may invalidate the prenup.

How close to the wedding can the prenup be signed?

Arizona allows for marital agreements, so the prenup can actually be signed after the wedding. It was just then become a postnup (But postnups may be held to a different legal standard than prenups). But generally, a prenup should be signed a few weeks in advance just to guard against any claims of coercion.

Is a prenup in Arizona valid in other states?

It should be. Generally, if it is valid in the state where it is executed, most states will recognize the prenuptial agreement.

Do all states have the same prenup laws as Arizona?

No. Most states have adopted the Universal Premarital Agreement Act, including Arizona. But even within the states that have adopted the UPAA, the laws vary. For instance, it is our understanding the California law now requires both parties to a prenup to have an attorney and for the prenup to be signed seven (7) days prior to the wedding. Arizona has neither requirement.

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