PRENUPS- TO SIGN OR NOT
To sign a prenup or not to sign a prenup. A very good question.
The starting point in providing an answer is to understand what value a prenup can possibly have to a couple who are in love, enjoying their relationship, and looking forward to a future together filled with happiness and bliss, and perhaps children.
A prenup contemplates separation and possibly divorce. A prenup is the predictor of doom and gloom to a relationship that is usually founded on love, trust and optimism. It is really difficult for many people to get a real grasp on the concept of a marriage contract.
We need to begin with a reality check. Statistics vary from year to year, but the accepted average is that almost one in every two marriages ends in divorce. Half of marriages end within seven years and quite a few more between seven and fourteen years. Then there is the fabled ‘ten-year itch’.
There are many people who enter relationships with no intention to marry, but with a firm intention to cohabit and become ‘common law’ spouses. Many in that type of relationship are also aware of the rate of relationship breakdown and enter into ‘cohabitation agreements’. In fact, even couples who intend to marry but live together before the marriage enter into cohabitation agreements which are designed to automatically turn into marriage contracts once they tie the knot.
In my legal practice I have noted that prenups are mostly requested by the following:
· People who have been extremely financially successful and have a high net worth when entering into the marriage.
· Children of very wealthy parents who insist that the new partner sign a prenup giving up their rights to share in the family wealth in the event of a marriage breakdown.
· Second or third marriages where there are children from prior relationships.
Many people are extremely offended when they are asked to sign a prenup and get extremely upset. In some instances, it is quite easy to empathize with them, but there are a number of points to consider before getting too agitated:
· The agreement is designed to kick in only if your relationship breaks down. Many, many people stay married forever with the marriage contract which is stuck in the bottom drawer after being signed, never again to be seen.
· If properly drafted and if you are properly represented, a prenup can set the foundation for a good result if your relationship breaks down.
· Divorces are messy and costly. If there is no predefined plan about what is to happen to the family assets, you can end up spending tens of thousands of dollars on legal fees that could have easily been avoided if you had negotiated a good prenup.
· This is a financial plan that needs to work for both parties. Do not be bullied into signing something you are not comfortable with and do not fully understand.
Many of my clients who request prenups are stuck in the present. That is a very bad place to be when considering the future.
Someone who asks for a marriage contract to protect existing wealth and the perceived growth in wealth often looks only at the present state of affairs. Let us assume that prior to marriage both have jobs, both have some assets, but one has much more than the other and/or stands to benefit from family wealth.
Give some thought to the future. You will likely have children. One of you will probably elect to stay home and parent those children. How wonderful will it be if the prenup says the other spouse gets nothing and then essentially ends up on the street with the children and no money. It is a lawyer’s duty to think ahead, to contemplate what life will be like down the road, and to craft an agreement that protects both parties.
There are also some important considerations to keep in mind:
· It is essential that both of you make full and complete financial disclosure at the time you enter into a marriage contract or a cohabitation agreement. If you do not, or if you misstate your assets and/or liabilities, the contract will likely be set aside.
· Both of you should have independent legal advice when signing the agreement. The lawyer who gives that advice is obliged to explain the benefits and detriments of the agreement to you, and then to sign a certificate vowing that they gave you that advice and that you understood everything.
· Do not sign anything just before the marriage ceremony. This process needs to be started early so there is plenty of time for discussion, debate and negotiation. Any domestic contract signed under duress will be set aside.
· Think carefully about whether you are being influenced unduly by promises or threats. If that is happening do not sign the agreement and share your concerns with the lawyer who is helping you.
· Make sure you will be getting what you deserve. It is so easy to avoid thinking ahead to how things will be years down the road. Do not sell yourself short just because your soon-to-be spouse has more money and more assets than you.
Marriage or living together without being married is a commitment that is greater than almost any commitment you will ever make in your life. No-one wants to see your relationship end in separation or divorce, but reality is reality and it happens too often.
Protect yourself and protect your soon to be life partner. You should view that as your duty.
Steven M. Bookman, LL.B., Ph.D. is a very experienced family law lawyer who practices in Toronto at Bookman Law PC located at Suite 504, 1881 Yonge Street, Toronto, Ontario, M4S 3C4. Steven can be reached by email at [email protected] or at 416-488-2243 ext 23. Web site: www.bookmanlaw.com