In the age of transient people, it is important to consider the likelihood that the parties to a prenuptial agreement will move to another geographic region beyond Pennsylvania. An agreement that is perfectly reasonable and enforceable under Pennsylvania law may not be treated the same way in another state.
A prenuptial agreement is meant to provide a roadmap should the marriage end for whatever reason. That roadmap is only useful if it holds up wherever the parties end up. With that in mind, here is a look at what a prenuptial agreement covers and how to protect it if the parties relocate.
Who needs a prenuptial agreement?
There is a misperception that only wealthy people need a prenuptial agreement. To the contrary, prenuptial agreements are becoming more and more common among all facets of wealth. If you are looking to limit financial exposure when entering into a marriage, then a prenuptial agreement is right for you.
While estate attorneys often draft these agreements, it is imperative to have family lawyers review them since, more often than not, they are the attorneys who will be the ones implementing them, and estate lawyers and family lawyers draft differently.
What does it protect?
There are a variety of provisions which may be included in a prenuptial agreement, and there are a variety of reasons why a party may want one. She may want to protect a business. He may want to protect an inheritance. They may both be divorced with children from a prior marriage that each wants to protect. Neither may want to pay support. The possibilities are endless.
- Property. A prenuptial agreement will likely define the property that is excluded from distribution upon a divorce, if ever. That could include a business or an inheritance. Generally, the principal of an inheritance or a gift to one of the parties individually, or a party’s premarital property, is excluded from distribution, but the increase in those categories of assets is not. A prenuptial agreement may exclude that increase. Some agreements distribute property by title and provide that the only marital property is that titled in the parties’ joint names. Conversely, the agreement may define exactly what property is subject to distribution and provide that all other property is excluded.
- Spousal support. A prenuptial agreement may also address the support of a spouse upon divorce. Generally, any provisions relative to child support are not enforceable. When determining spousal support, two components must be considered: amount and duration. A party can limit the amount of spousal support by defining what is attributable as income and what is excluded, or simply provide a formula or amount. Duration can be a formula based upon the length of the marriage or a period agreed upon by the parties. The parties may not wish to address support at all, which is permitted. If they are not addressing it, a practice pointer is to include a statement that they are not addressing support and are not limiting its amount or duration by the terms of the agreement.
- Counsel fees. The final economic claim to be considered is counsel fees. This claim is often waived in a prenuptial agreement; however, some agreements fail to address it, either accidentally or purposefully. Counsel fees can be waived, limited or not addressed.
The agreement should be tailored to accomplish the goals of each party. Each of these provisions reflects a choice the parties made together, which is why it matters whether the agreement will be honored if they leave Pennsylvania.
When does it apply?
A prenuptial agreement most often is thought of as applying in the context of a divorce. The agreement, however, will likely also apply on death, meaning that if one party dies during the marriage, the agreement will prevail over any rights that might otherwise apply, except an estate plan, which may trump the agreement. In this regard, the prenuptial agreement may contain differing provisions that apply on death depending on whether the parties are separated or still happily married.
This is another reason to plan for a move. The agreement may need to be enforced years after it is signed, in whatever state the parties call home at that time.
How do I make sure it’s valid?
Generally, for an agreement to be valid, it must have a fair and reasonable financial disclosure. A full disclosure of all assets, liabilities and income of both parties is best practice. The statute does permit a waiver of disclosure, but this should be done in rare circumstances. It might be best to include a waiver but also add the disclosure. That way, if something is missed, you may be covered.
Planning for a move
If it is known where the parties will be moving, then it is important to engage counsel in that state to review the agreement to ensure that it is enforceable there. Regardless, always include a choice of law provision, providing that Pennsylvania law will apply no matter where the parties live in the future.
I generally add a choice of forum provision to my agreements. In doing so, I advise my client that it may not be enforceable. This is an attempt to limit another state from invalidating an agreement which might be perfectly reasonable and enforceable under Pennsylvania law.
That said, taking steps to make an agreement enforceable in Pennsylvania can strengthen its position elsewhere. In summary:
- Make a full disclosure of all assets, liabilities and income of both parties, even where a waiver of disclosure is included.
- Address every economic claim expressly. If the parties are not addressing spousal support or counsel fees, the agreement should say so rather than stay silent.
- Have a family lawyer review the agreement, since family lawyers are, more often than not, the attorneys who will be implementing it.
A well-drafted prenuptial agreement anticipates the end of a marriage and where the parties may be when that day comes.
