Prenuptial Agreements

A prenuptial agreement is a contractual agreement between two individuals, established prior to marriage or civil union, which specifies the division of assets upon the termination of the union, whether by divorce or by death. Without such an arrangement in place the laws of the state in which you reside will dictate how property is divided at the conclusion of a marriage or civil union. Prenups should be considered in light of your larger financial planning, and we encourage you to consult your legal and tax advisors.

 

Best Practices

 

While the specific requirements for prenuptial agreements, commonly called “prenups,” will vary from state-to-state, there are certain practices that should be considered and, in some states, must be abided by in order to avoid any issues regarding their enforceability: 

Always hire Independent Counsel: Each party should be represented by their own separate attorney; independent representation ensures that both parties’ interests are properly accounted for and that nuances in the relevant state law have been considered.

Properly Time your Prenup: Signing too close to the date of union may prompt one spouse to claim that he or she was misled or coerced into signing the document.

Disclose all Assets & Liabilities: Points of contention may arise in the event that false or misleading information is provided or if information is knowingly and willingly withheld. Each party must not only disclose their assets (financial holdings, properties, businesses, etc.), but their respective liabilities and potential sources of inheritance as well.

Non-Disclosure Agreement:  Some couples incorporate an NDA into the premarital agreement due to the sensitive nature of disclosing one’s financial standing. Some attorneys will require this step to be taken as the prenup is drafted.

 

Topics Addressed

 

Typically, prenuptial agreements will focus on a handful of topics related to the identification of property (separate vs. marital), the division of financial and tangible holdings, spousal support and potentially more distinct considerations in the event that children, business(s) and/or more unique circumstances are present.

Division of Assets/Liabilities

Prenuptial agreements may tackle this topic in a broad manner, focusing on all of the assets and debts of each spouse, or through a more concentrated approach wherein a single asset, such as a family business, is the focal point of the agreement.

Alimony 

Alimony or “spousal support” is, at times, included in the drafting of a premarital agreement. If the topic is not addressed either party could seek support from the other in the event of divorce. However, if alimony is waived within the contract, there is a chance that neither party will be able to seek payment if the couple is to end their marriage.

Children from Prior Relationship

If either party is remarrying and/or has children from a previous relationship it may be worthwhile to consider how these children will factor into the division of assets in the event of a death.

 

Child Care/Support

 

Although prenuptial agreements may address a child’s inheritance, they will not govern custody or child support. Custody and child support will typically be agreed upon by the involved parties or determined by a court following an evaluation of what is best for the child or children at the time of divorce. 

 

Postnuptial Agreement

 

If you are married and have not previously established a prenuptial agreement, it is not too late to put an agreement in place to protect assets and income streams through the creation of a postnuptial agreement. Such a contract will allow a couple to agree upon asset division even after they are already married. These agreements share a number of characteristics with their premarital counterparts; however, they may come with their own set of challenges related to the union of a couple predating the drafting of the marital contract.

 

Conclusion

 

A premarital agreement can be an advantageous tool for those seeking to plan for a multitude of marriage outcomes and their financial future; however it is certainly a delicate topic that may not be appropriate for all couples. It is recommended that any individual or couple seeking to establish a prenuptial or postnuptial agreement discuss their factual situation with experienced legal counsel.

 

Disclosure

Goldman Sachs does not provide legal, tax, or accounting advice, unless explicitly agreed upon between the client and Goldman Sachs. Clients of Goldman Sachs should obtain their own independent legal, tax, or accounting advice based on their particular circumstances.

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