What is a Prenup?
A prenuptial agreement is a legal contract between two people who are about to be married. It typically outlines the division of assets and financial responsibilities during the marriage itself, and addresses distribution if and when the marriage ends. While the term can often be construed as a bit old fashioned, it is deceptively accurate, and yet, misses a critical component: the parties must want to enter into the contract before it becomes effective. The very nature of a prenuptial agreement relies on the existence of a marriage. In general, a prenuptial agreement in Maryland serves three main purposes: Discovery and disclosure of assets at a time when names, property and other interests can be truthfully , frankly and freely discussed; Designation of those assets that may be exempt from personal, joint or equitable distribution during the marriage; and Preservation of the privacy and confidentiality of the parties and their separate estates by outlining, in advance, those provisions required by the parties to move forward with the marriage. In Maryland, and in most states, prenuptial agreements are enforceable when they are determined to be in compliance with statutory requirements, and in view of all the circumstances and surrounding circumstances, for the court, such as execution, timing, lack of coercion, and awareness of assets during negotiations. The agreement must not "encourage divorce" or otherwise encourage the dissolution of the marriage.
Legal Requirements in Maryland
In order for a prenuptial agreement to be considered valid in Maryland, it must meet certain requirements. First, there are specific requirements for who must sign the agreement: For a prenuptial agreement to be valid it must be the voluntary and mutual act of both spouses ( Courts have held there are a number of factors that a court must consider when determining whether a prenuptial agreement was voluntarily entered into by the parties. Courts have held that one party’s lack of an ability to pay an attorney, standing alone, does not show that the prenuptial agreement was not voluntary. Waters v. Stewart, 113 Md. App. 462, 658 A.2d 295 (1995). Second, the prenuptial agreement must be signed by both spouses "in the presence of a competent witness." (Courts have held that a notary public is an "officer authorized to make notations relating to the execution of instruments and for the acknowledgments and proof of deeds." Blumenthal v. Brewer, 228 Md. App. 373, 146 A.3d 1115 (2016). Third, the agreement must be in writing. Maryland courts have held that for the prenuptial agreement to be valid each party to the agreement must have fair and reasonable knowledge of the nature, value, and extent of the other party’s property. (Courts have reasoned that, absent special circumstances, mere lack of knowledge is not enough to set aside an agreement. Jones v. Jones, 324 Md. 159, 596 A.2d 1094 (1991).
Advantages of a Prenup
When entered into voluntarily and with adequate knowledge of their legal significance, premarital agreements are generally enforceable in Maryland. These agreements are important to consider because they can be beneficial in a number of ways. For one, premarital agreements can provide clarity for couples regarding their financial rights in the event of divorce, helping to avoid potential costly disputes down the line. The agreements can also provide dispute resolution so that one or more assets owned by both spouses can be divided a pre-determined fashion in the event of divorce. Agreements can also address certain rights and responsibilities of both spouses during the marriage. For instance, spouses who both work outside of the house may agree to designate particular household chores to each person, or spouses may agree to update any estate planning documents that name each other as beneficiaries of an estate after their marriage has occurred. Finally, prenuptial agreements can help to preserve relationships with children from previous relationships by ensuring that certain assets and property will be held solely for their benefit in the event that both spouses divorce.
Common Misunderstandings
Despite prenuptial agreements being a common and well-trodden path for couples, there are an abundance of misconceptions which surround them. When in fact these documents provide a very sensible and simple solution for ensuring that assets are distributed fairly, they are often treated like a taboo subject which can be emotionally detrimental to a couple. The real issue here is that ultimately even couples who choose to forgo an agreement may need one when the relationship inevitably breaks down. Therefore, they should bite the bullet sooner rather than later, not least because aside from the financial practicalities, the longer they delay the more emotional baggage they carry into the next relationship.
An agreement does not need to be entirely drawn up before you get married. It can be amended after the wedding, as long as both partners are in full agreement.
You do not necessarily need to disclose everything you own. Only assets that are relevant to your marriage need to be included.
Associating a prenuptial agreement with the suggestion that it is in any way disrespectful to sign one would come down to a personal choice fundamentally dependent on the nature of the relationship. While this document could be used as a negotiation tool where needed, if both parties enter into it on amicable terms where all options have been explored and weighed up, the process can be mutually beneficial to both individuals and their assets.
While it can be difficult not to see a prenuptial agreement as an admission that the relationship is on the rocks, and perhaps even a cause of this, this could not be further from the truth. In reality, they can put both parties in a better position should the relationship fail, and can even help improve and develop trust between them.
The relation between an agreement and romance is not necessarily a very close one, and therefore does not need to be seen as a bad thing. While some couples choose to draw one up before entering into a marriage, this is very much dependent on the type of people who are marrying.
How to Prepare a Prenup
When two parties have decided to marry, they should start the negotiation and drafting of their prenuptial agreement before the wedding date. A prenuptial agreement is the binding contract that is signed by both parties prior to the marriage and thus needs to be negotiated and drafted before the actual ceremony. It is important that a prenuptial agreement be prepared after both parties have had legal representation. Although a party does not need to have legal representation, the requirement of representation is a good practice due to the potential enforceability issues that could arise if the proper legal representation is not obtained. The requirement of representation applies equally in Maryland and Virginia. There are various elements of a prenuptial agreement that are important to consider in the drafting process.
Non-Disclosure of Financials
Because of the non-disclosure nature of prenuptial agreements in Virginia and Maryland, both parties will need to exchange net worth statements prior to the preparation of the agreement. The disclosure will include information such as bank statements, tax returns, a statement of assets, debts, credits, items that may be personal (designated for each party), a statement of lines of credit and obligations of the parties. So that this non-disclosure does not hurt the enforceability of the agreement, it is advisable to consult with a legal professional prior to the preparation of the agreement in order to get a better understanding of whether disclosure leaves you vulnerable after the marriage .
Duration of the Agreement
Once the two parties have been married for a certain period of time, it would be practical to unwind or at least amend the prenuptial agreement. In Maryland, the agreement terminates after the death of either party, the nullity of the marriage or divorce. In Virginia, the agreement is enforceable for a reasonable time after separation. After that time, however, it may be difficult to enforce.
Spousal Support
One of the most significant provisions of a prenuptial agreement is that it may waive spousal support. Some states may allow for a waiver of alimony, but Virginia is still uncertain on the ability to waive alimony. In Virginia, that waiver should be discussed with a lawyer prior to making a decision on whether to insert an alimony waiver in your prenuptial agreement.
Amending the Agreement
The agreement can be amended or terminated in writing without any legal action. In cases where one party to the agreement is left out of the transaction (for instance, if both spouses are signing the agreement at the same time, but each has an attorney present to review the agreement, the attorney that represents the other spouse to the marriage will prepare the prenuptial agreement for both parties with the understanding that there shall be no conflict). In these types of situations, the party unaware of the agreement would need to file for divorce and subsequently have the judge nullify the prenup agreement.
Upholding and Challenging a Prenup
In the State of Maryland, prenuptial agreements are governed by the Uniform Premarital Agreement Act, codified in the Courts and Judicial Proceedings Article, § 8-201 et seq. (2017). Generally speaking, marital agreements and property settlements may be enforced like any other contract. That said, Maryland courts will not enforce terms in a prenuptial agreement that contravene the public policy, such as an agreement that waives child support or custody.
A court will typically uphold a prenuptial agreement if both parties were legally represented when the agreement was written and the agreement otherwise satisfies the requirements of § 8-202. These include: (1) general understanding of the basic nature and extent of assets; (2) voluntariness of the agreement; and (3) fairness of the agreement – which includes an examination of whether an adequate financial disclosure was made and whether the terms are unconscionable.
However, there are situations in which a prenuptial agreement may be contested or invalidated. A marital agreement may be unenforceable where it is clearly unconscionable; where it is obtained through duress; if a debtor spouse fails to disclose his or her assets, thereby affecting the contract’s "fairness"; where a party is misrepresented or deceived by the creditor-spouse as to his or her actual net worth, thereby affecting the contract’s "fairness"; or where a party enters into the contract without legal representation.
Alternatives to Prenuptial Agreements
Couples who may be hesitant or unwilling to enter into a traditional prenuptial agreement often explore alternative options. In such cases, it is wise to examine other agreements, such as a postnuptial agreement, or whether a sound financial plan can address their concerns.
One alternative is to enter into a postnuptial agreement, which is essentially the same as a prenuptial agreement, but done after the wedding. Although the parties no longer have the same level of incentive as they do before the wedding to enter into a contract, these agreements can still serve the same protective purpose in the case of divorce or legal separation.
However, in some cases, parties may decide that neither a postnuptial nor a prenuptial agreement is necessary. In other words, many people are able to come to agreements about finances in a more informal manner than a written contract. For example, a couple may be able to discuss their individual assets and debts before marriage, and then create joint bank accounts, credit cards and other assets during their marriage.
It is important to understand that a binding contract does not always need to be in the form of a written document. Even in the absence of a legal agreement, a contract can be formed based on a verbal agreement between two people based upon certain conditions precedent.
If someone agrees to do something only if a certain event occurs, such as the couple having offspring or one spouse receiving a sizeable windfall, then a contract exists. Therefore, it will be important to seek the advice of an experienced Maryland family lawyer to make sure that your interests are protected if you do not want a formal prenup.
Consulting a Maryland Family Lawyer
Given the considerations above, it is vital to speak with a Maryland family lawyer about your rights, obligations and planning, especially if you are thinking about marriage or recently married and thinking about the benefits of a prenuptial agreement. Despite the happiness and excitement surrounding an engagement, the potential for conflict is always present. It is important to approach the process of marriage with a plan to minimize not only the risks , but also to protect the future with a prenuptial agreement. A carefully drafted agreement will cover all important financial matters, including future earnings, assets and debts. Consulting with a family lawyer will guide you through the prenuptial drafting process, to make sure the contract complies with Maryland law. The agreement needs to be carefully prepared. It needs to define property rights, debt and other important issues, especially if one spouse has children.