Test Your Pre-Nup IQ

Test Your Pre-Nup IQ
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Q: My parents want me to do a Pre-Nup so my Fiancee has no claim on assets I will, one day, inherit from them. I read somewhere that gifted or inherited assets can’t be touched in a divorce. Who is right?

A: You both are. You are correct that the law provides that gifted and inherited assets are off limits in a divorce settlement. This is the correct answer, IF YOU ARE ON A GAME SHOW! In real life, however, the majority of states are so-called “Equitable Distribution” (as opposed to Community property). This means that the judge has very broad discretion to order whatever he or she deems necessary to achieve their notion of “equity”. It is far better, in my opinion, to deal with these issues on the front end. Going into a marriage, you will certainly be revising your estate planning. Failure to do so would trigger the “default” inheritance rules written into your state law. Creating a Pre-Nup should be no different from your estate planning. They both provide security in the event of a crisis (death or divorce). Proper planning for both possibilities can prevent us from enduring the consequences of “one size fits all” rules created by our state legislatures.

Q: We are on a tight budget. Can we share an attorney?

A: No. Pre-Nuptial agreements have been invalidated by courts when both parties were not independently represented by counsel of their own choosing. A better way to keep costs down is for each party to give some serious consideration to what they would each need in order to remain secure, or to be made whole in the event of a divorce. This can greatly reduce the dreaded “billable hours”.

Q: A Pre-Nuptial Agreement only benefits the wealthy spouse. True or False?

A: False. A good Pre-Nuptial agreement should protect both spouses. A Pre-Nup which is completely one sided, will probably be invalidated by the court. If, for example, one party put his or her career on hold or turned down out of state promotion opportunities for the sake of the marriage, these are factors that should be addressed within the Pre-Nup. Ideally, this document will ensure the financial security of both spouses in the event that the marriage does not work out.

Q: I heard that it is easy to have a Pre-Nup invalidated. If this is true, why should I even bother?

A: It is not likely that a properly drawn Pre-Nup would be thrown out. Pre-Nups subject to challenge, fall into 3 clearly defined categories:

A Pre-Nup is vulnerable if it gives everything to one party and nothing to the other. Any contract is subject to challenge if it is so one-sided as to be “unconscionable”. I have also seen Pre-Nups invalidated by a court when one party was not separately represented by counsel. The third category of weak Pre-Nups are those created under duress or by fraud. Courts are inclined to find duress if the Pre-Nup was signed too close to the wedding. While the law does not spell out a strict time frame, my rule of thumb is that the document should never be signed after the invitations have gone out.

Q: A Pre-Nuptial agreement only deals with financial issues. True or False?

A: False. A Pre-Nup provides a contractual framework to deal with any and all sources of actual or potential conflict. Lifestyle clauses dealing with overspending, gambling, weight gain, substance abuse issues, infidelity, TV time and social media parameters can be addressed within a Pre-Nup. This is why I like to think of a Pre-Nuptial agreement as a couple’s mission statement or Love Contract.

Ann Margaret Carrozza (@mylawyerann) is a renowned Asset Protection and Estate Planning Attorney who served for 14 years as a New York State Assemblywoman. She is a TV legal contributor and the author of Love & Money: Protecting Yourself from Angry Exes, Wacky Relatives, Con Artists, and Inner Demons.

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