Negotiating Your Prenuptial Agreement– Posted by Christopher J. Yoson
If a prenuptial agreement is on your wedding planning checklist, you should ensure that you begin the process well in advance of your wedding date to leave enough time to thoroughly negotiate all of the terms that will be included. A thoughtful and unhurried negotiation can help ensure that the agreement you eventually sign will be enforced years later.
Washington courts use a two-prong analysis to determine the enforceability of prenuptial agreements. The analysis asks first whether a particular agreement was “” fair – i.e., whether it made reasonable provision for the spouse not seeking to enforce it at the time it was executed. If the court finds that the agreement was substantively to the spouse not seeking enforcement, the court will proceed to the second prong of the analysis, which asks whether the agreement was fair. If the court determines the second prong is satisfied - i.e., the agreement was entered into by both parties with a complete understanding of their rights after advice from independent counsel – then even an otherwise unfair distribution of property is valid and binding.
Courts consider several factors in determining whether an agreement fairly provides for the spouse not seeking enforcement, including:
(1) the proportional benefit between the parties;
(2) restrictions on the creation of community property;
(3) prohibitions on the distribution of separate property upon dissolution;
(4) the economic means of each spouse;
(5) preclusion of common law and statutory rights to both community and separate property upon dissolution;
(6) limitations on inheritance;
(7) prohibitions on awards of maintenance; and
(8) limitations on the accumulation of separate property.
The courts generally consider whether (1) each spouse entered into the agreement freely and on advice from independent counsel; (2) full disclosure was made by each party of the assets each owned prior to marriage; and (3) each spouse had full knowledge of their property rights that were altered by the agreement.
It is critical to the enforceability of a prenuptial agreement that the procedural fairness prong of the analysis is satisfied. Each of the parties must take the time to truly understand and negotiate how: (1) current and future property will be owned and allocated; (2) income (including wages) and expenses will be shared; and (3) assets will be divided in the event of a future divorce. Engaging in this process will go a long way in demonstrating to a court that both parties entered into the agreement with full knowledge of the facts and their rights – and the compromises each party made to get to a final “meeting of the minds.”
A thorough negotiation of a prenuptial agreement can provide significant peace of mind and mutual understanding on financial matters before the trip to the altar. Financial disagreements are a significant source of marital friction and divorce.* If financial issues can be resolved and respective priorities understood before the marriage, it may increase the chance of marital success - and decrease the need for an enforceable prenuptial agreement. Either way, taking the time to negotiate and understand all of the terms that will be included in the prenuptial agreement at least three months prior to the wedding is essential.
*See “Divorce Study: Financial Arguments Early in Relationship May Predict Divorce” (Huffington Post, July 12, 2013). http://www.huffingtonpost.com/2013/07/12/divorce-study_n_3587811.html