What is the common denominator between Jessica Biel and Justin Timberlake, Khloe and Lamar, Tom Cruise and Katie Holmes, and Beyonce and Jay Z? They all have prenuptial agreements in place. A prenuptial agreement, premarital agreement, or commonly referred to as "prenup", is a contract entered into prior to marriage by the people intending to marry. While the content of a prenuptial agreement can vary greatly, common provisions are usually for division of property and spousal support in the event of divorce or breakup of the marriage. Additionally, "payments" in the event of adultery can even be addressed.
Although celebrities are most likely to have a "prenup" in place, these legally binding arrangements are not just limited to the rich and famous. In fact more and more ordinary working class men and women are entering into these agreements. Why? Because as economic times become more and more challenging, individuals want to protect the separate property they already have prior to the marriage. A prenup becomes even more important if this is a second or third marriage and children from previous relationships exist.
Enforceability of Prenuptial Agreements
Tennessee is a state that recognizes prenuptial agreements. The court will consider several factors when determining whether to enforce the agreement. A few of those factors include:
1. Was the contract entered into voluntarily or was there duress or coercion involved? The court will not enforce an agreement if either of those factors exist.
2. Is the prenuptial agreement unconscionable or would a reasonable person sign it?
3. Was there sufficient financial disclosure?
4. Did the other party understand what was being signed?
5. Did the other party have time to consider the agreement or negotiate? For the agreement to be enforceable, you cannot present it to the other party ten minutes before the wedding.
Consider a "Prenup" in these situations:
1. This is not your first marriage and you have significant assets such as a home.
2. You have children from a preexisting relationship and want to ensure that when you pass away your assets will be distributed as you desire to the older children as well as to the future children in the new marriage.
3. You are much wealthier or earn much more than the person you are marrying. A prenup can be used to limit alimony and/or make sure that the other party is marrying you for you and not for your possessions.
4. You are much poorer than the person you are marrying. A prenup can ensure that you are protected financially in the event of divorce or unfaithfulness.
5. You plan to quit your job to raise a family and your spouse will be the primary breadwinner. In this case, professionally you will not be growing and prospering like your partner. So some form of protection may be warranted in case the marriage does not last.
6. You own a business that you had prior to this marriage and want to protect it as separate property.
Prenuptial Agreement Myths
1. Prenups are only for the rich and famous. False. As mentioned before, ordinary working people are beginning to enter into prenuptial agreements in order to protect their real estate, income, or businesses.
2. These agreements encourage divorce. False. Divorce rates are rising with or without a prenup in place. Prenup agreements encourage and stimulate a serious conversation about financial expectations during and after the marriage. Prenuptial agreements can also have a sunset provision which means that it will no longer be valid after a certain number of years. This provision can be used to calm any anxiety that a prenuptial agreement encourages divorce.
3. Prenuptial agreements kill the romance in a relationship. False. Being assured that someone is marrying you for all of the right reasons only increases the romance in a relationship. Unfortunately divorce is the real romance killer.
4. Prenuptial Agreements will not be upheld by the courts. False. Tennessee recognizes prenups when drafted and entered into correctly.
5. Only men want prenups. False. Now that many women are excelling in their careers and businesses, women need a prenup just as much as accomplished men. Women purchase homes, investment property and businesses just as men. Women have children from preexisting relationships as well. A prenup is not limited to a particular gender.
6. Prenuptial agreements are expensive. False. When considering the potential price that will be paid in the event of divorce, a prenup is relatively inexpensive.
(This month we will be reviewing various aspects of divorce as it relates to business including: grounds for divorce, custody, child support and alimony.)