Monday, February 18, 2013

Be Prepared: Get a Prenup Before Saying "I Do"


Most people like to think that they are prepared for the obstacles that they will face in life.  Like the Boy Scout motto, Americans like to “be prepared.”

And, just in case we are asleep at the wheel, there are people constantly reminding us every step of the way that we should protect ourselves.  It starts early.  For example, a parent might remind us to bring an umbrella – because it might rain.  As we get older, we learn to buy car insurance because we might have an accident.  People buy alarm systems to detect and deter intruders.  Working professionals buy insurance to protect against the unlikely risk of disability.  Most people buy life insurance to hedge against the risk that they might die.  And, if you have a mortgage, homeowner’s insurance is mandatory to protect against risks such as fire and wind.

Americans also like contracts.  Remember the license agreements that you had to accept just to install a game on your computer?  When you went off to college, your first credit card certainly came with a cardholder agreement.  If you wanted to rent an apartment, that definitely required a lease.  Did you want cell phone service?  You needed a contract.  If you go to work at a business, your employer might ask you to sign non-compete agreement.

But, for some strange reason, people enter into marriage with no contract or agreement whatsoever.  They just trust each other.  Remarkably, these are the same individuals who buy the life insurance and disability insurance, even though a 30-year-old man faces a 0.1% chance of dying before age 31 and less than 5% of wage earners are classified as “disabled.”  Yet, they turn a blind eye to the fact that more than 50% of marriages result in divorce.

A prenuptial agreement or “prenup” can protect you against losses that might result from your divorce.  If you don’t have a prenuptial agreement, what do you stand to lose?  You can start with giving away roughly half of the net worth that you worked so hard to accumulate during the marriage.  And, to the extent you earned them during the marriage, you will likely have to divide your pension, retirement benefits, and/or retirement accounts.  You may also have the privilege of paying a large percentage of your monthly salary to your “ex” as alimony.  And, without a prenup, you could be forced to pay off half of your ex’s bad debt.  You could even be saddled with half of your “ex’s” student loans. 

But, there is rarely someone in your corner to remind you about getting a prenup.  Until recently, that is.  Since the Great Recession, 3 out of 4 family law attorneys report that prenups are on the rise.  This may be due to the devastating impact of the financial collapse, which has made people questions how much they can earn in the future and makes them want to keep what they have earned. 

Recently, I have had several parents call my office about prenups for the children.  One retired military officer wanted a prenup for his son, who was about to start flight school.  The father was concerned that his son might lose half of his hard-earned military retirement pay if the marriage didn’t last a lifetime.  A mother recently called me because she had refused to pay for the wedding unless the couple signed a prenuptial agreement.  And, an accountant paying lifetime alimony called me last year in hopes that a prenup might avoid the same fate for his son.

In certain circumstances, a prenuptial agreement can make a marriage more likely to last.  A spouse is more likely to return to work or keep working if that he or she cannot rely on alimony in the event that the marriage breaks down.  And, in some cases, a spouse may be less likely to leave or look around if he or she knows that they will not be able to use the divorce to raid the other party’s retirement pay, pension, assets, and income.

Fortunately, despite what you might have heard, prenuptial agreements are enforceable under Florida law.  In 2007, the Florida Legislature passed the Uniform Premarital Agreement Act.  See Fla. Stat. § 61.079.  Under the Act, a premarital agreement must be in writing and signed by both parties.  Id.  The Act allows Parties to negotiate and agree upon the following issues:  (i) the parties’ rights and obligations concerning any assets and liabilities; (ii) the right to buy, sell, use, transfer, or dispose of property; (iii) the distribution of property upon separation, dissolution, death, or other event; (iv) the right to alimony; (v) the making of a will or trust; and (vi) the disposition of life insurance proceeds.  See Fla. Stat. § 61.079(4)(a).  And, one Florida court specifically held that a prenup may be enforceable to protect a pilot's pension and military retirement pay.  See Gordon v. Gordon, 25 So. 3d 615, 617-18 (Fla. 4th DCA 2009).

Florida courts have held that the parties do not need to attorneys for a prenuptial agreement to be enforceable.  See Casto v. Casto, 508 So. 2d 330, 334-35 (Fla. 1987).  The Florida Supreme court has also held, however, that a prenuptial agreement may not be enforceable if the agreement was procured by as a result of fraud, deceit, duress, coercion, misrepresentation, or overreaching.  SeeCasto, 508 So. 2d at 333.  Additionally, a prenup may be set aside if there is a showing that the agreement is unreasonable on its face for failure to provide adequately for the challenging spouse coupled with a lack of adequate financial disclosure.  Id.  So, even though a lawyer is not absolutely necessary, an agreement is far more likely to be upheld with the assistance of counsel.  

If you have questions about prenuptial agreements, please contact us to consult an experienced Tampa divorce and family law attorney.

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