A prenuptial agreement essentially sets out in contract form, prior to a marriage, just what will happen if the relationship breaks down.
There’s nothing new about them. Marriage contracts have been written for thousands of years, although long ago they were primarily written for the wealthier members of society. For example, in the bad old days when women were treated as chattels, an agreement might be drawn up protecting the woman’s right to the property she owned prior to the union.
Even now, the thought of a prenup can conjure up the image of a rich, old guy protecting his pile from a voracious and much-younger gold-digger.
Perhaps that’s still the case in some instances but Lynne Butler, an estate lawyer based in St. John’s, NL, said that “it’s more about the children from the previous marriage than it is about anything else.”
“Their primary motivation is not to prevent their spouse from doing anything or punish anybody. It’s just that (feeling of): ‘I want what I have built up over my life to go to my children and I’m sure you want the same for yours’.”
Beyonce & Jay Z – Beyoncé signed a prenuptial agreement that grants her a nice $5 million for every child she bears to Jay Z, and if they divorce, she gets $1 million for every year of the marriage. The prenups, according to the rapper mogul, only work in favor of the marriage if they are done in a friendly, cooperative atmosphere. Both of them agree that prenups are not the most romantic thing to start a marriage with, but for those who have already been married and got burned, it’s a very valuable thing. Source: Celebrity Dirt
Dividing up an estate was a lot more straightforward when divorce was rare. But now, a lot of people marry more than once, meaning there can be children from multiple marriages.
“A generation ago, that would have been different,” she said. “But definitely, people are going into second and third marriages. And the other thing that’s happening now is people get married older.”
Prenups, like other contracts, are fairly ironclad.
But that only holds true if both parties get independent legal advice.
“You don’t want to have a situation where one party has more power at the time of negotiating,” said Butler.
“One of the ways you get around that is to have independent legal advice so your own lawyer has nothing invested in the other person.”
Some couples who opt for a prenuptial agreement don’t get around to taking on of the most important steps of estate planning – a will. Yet if you die without one, your estate will be declared “intestate” and the provincial government will be the one to decide the proper division of your assets.
But Butler pointed out that in such a situation, the prenup is still valid.
“When there is an intestacy, the prenup agreement is even more important,” she said.
“Because if there is intestacy there is sort of a default, the wife will get a third or a half or whatever the preferred share is, and then the rest of the kids. But if you have that prenup there that says ‘here is what we agreed,’ then you have a void in the intestacy law but you still have a binding contract. And in a situation like that, a binding contract would supersede the sort of default.”
Kenneth & Anne Griffin – Billionaire Kenneth C. Griffin and his wife were forced to disclose the terms of their prenuptial agreement in divorce court. Mr. Griffin made his wealth founding and running the huge hedge fund Citadel. In all, Ms. Griffin received more than $37 million in cash payments and half of their Chicago $11 million-dollar penthouse. Although Ms. Griffin claimed she was forced to sign the prenup, the judge found it was not an unfair agreement as she has 3 law firms review it prior to signing. Source: New York Times
There is also an emotional aspect. After all, this is an agreement drawn up by two people who want to share their life together and the mere suggestion of a prenup could be upsetting.
So while a prenup can be an important aspect of estate planning, it only makes sense if you actually have assets or kids.
“The prenup basically protects what you had before you got married,” said Butler.
“If you’re 22 years old and your spouse is 22 and neither of you have anything, you don’t have kids, what are you protecting?”