What is a Prenuptial Agreement?
A well-known phrase is "wearing your heart on your sleeve." In daily life, wearing our heart on our sleeve can be a good thing. The receiver may see our emotions, feel compassion and respond with kindness. In a marriage, the repercussions of wearing your heart leads to many consequences – some good, some bad. If one spouse is a saver and the other spouse is a spender then it may lead to a financial argument during the course of the marriage. Some argue that showing so much emotion in a marriage is a bad thing. Thinking that if you make your feelings known they will be used against you at some point during the relationship. This brings me to prenuptial agreements. Showing your emotions to others is generally deemed something fine. However, do you want people to know where you stand financially? Or do you want your spouse to have a better understanding of where you stand financially? Or is it better not to disclose that information until after the wedding and then when your spouse knows everything, you are bound by a legally binding contract? This means no jilted promises, no "I didn’t know" surprises and no Ah-ha moments. You read that right, I said no surprises. It seems that surprises are the skeletons in the closet that scare people away. When it comes to a marriage, many think of what happens if a marriage fails? This is also why people are not comfortable with the idea of a prenuptial agreement. Prenuptial agreements, post-nuptial agreements and separation agreements are all intended for individuals to recognize what there is before the marriage, what happens if the marriage does not work – all with the goal of having everything defined prior to the marriage in order to avoid litigation and surprise. In fact, a valid prenuptial agreement should cover more than simply the divorce provisions, it should also cover what happens in the event of death. In Louisiana, the definition of a prenuptial agreement is the following: "Pursuant to CC 2328, the general definition of a "prenuptial agreement" is: "A prenuptial or premarital agreement is an agreement between prospective spouses made in contemplation of marriage that is effective on marriage . " A "premarital" agreement … is an agreement made before marriage. These agreements are "not enforceable if the court finds that the agreement was unconscionable when made and that party was not given a fair and reasonable disclosure of the property or financial obligations of the other." CC 2328(A)(2). Seems simple enough, yet "unconscionable" means that party to the agreement had no idea of the extent or value of the other parties’ assets or debts, such that if true the party would have never required the agreement. So, as the question goes, why is getting a prenuptial agreement so difficult? Many would say because it is taboo or a matter that will eventually break down the marriage. Others that it is just too uncomfortable a topic to discuss with a potential spouse. Some people think a prenuptial agreement is not uncommon while others are shocked and surprised. Even the "lucky in love" – people who are part of the 37% of all marriages that are not expected to end in divorce – may seek out a prenuptial agreement. No one gets married believing they will get divorced, yet the reality is that one party or the both of them may have assets or debts and in today’s society there are also many second, third and forth marriages. Some involve children and others are older individuals who have worked hard to build a life. Because the discussion of prenuptial agreements is often considered taboo even discussing finances with each other is often considered taboo. Maybe "discuss" is the word that will get a person to consider the topic of discussing financial matters. Often couples are told when you are living together prior to marriage you need to determine how expenses will be handled. It is the same when discussing a prenuptial agreement. Premier Family Law and Mediators are available to listen and determine how you and your spouse wish to proceed.
Important Clauses in Louisiana Prenuptial Agreements
Under the Louisiana premarital agreement law, R.S. 9:301, the parties to a marriage may contract to do or not do the following:
(1) The rights and obligations of each of them in any of the following:
(a) To manage and control property, or the income or profits derived therefrom, including the right to receive, acquire, manage, sell, encumber, and dispose of property; or the right to rent, lease, use, enter upon, mortgage, or otherwise manage or control real property.
(b) The disposition of property upon separation, marital dissolution, death, or the occurrence or nonoccurrence of other events.
(c) The making or revoking of will, trusts, or other disposition of property.
(d) The ownership rights in and disposition of death benefits from or pensions, retirement plans, annuities, or other employment benefits.
(e) The ownership rights in, and the division, income, distribution, and disposition of, community property.
(2) The modification or elimination of spousal support.
(3) The ownership rights in, and the division, income, distribution, and disposition of, the following property acquired before or during the marriage:
(a) Property designated as separate property by a valid matrimonial agreement or an irrevocable trust.
(b) Property owned separately by one spouse that was acquired by partition, legacy, donation, or bequest or that is, or is to be, acquired by judgment of partition of property owned prior to the marriage of a future spouse.
(c) The right of either spouse to own, manage, and control property owned by them before their marriage or acquired during the marriage by that spouse individually by donation, bequest, devise, or descent. However, the spouses may contract with respect to property the ownership of which is so declared separate.
(4) The choice of law governing the effect of the agreement.
(5) Any other matter not prohibited by law.
However, the parties cannot contract to do or not to do the following:
(1) Affect the care, custody, and control of a minor child of the parties, whether in existence at the time of the agreement or afterward born.
(2) Alter the legal regime of the community of acquets and gains in effect pursuant to Book II of this code, "Of the Different Modes of Acquiring Ownership", Title III of Book II of this code, "Of the Objects of the Different Modes of Acquiring Ownership" and Title IV of Book II of this code, "Of the Effects of Marriage."
Essential Elements for Enforceability
For a Louisiana prenuptial agreement to be enforceable, the law requires compliance with certain legal requirements. These include the voluntary agreement of both parties to the contract, full disclosure by each party, and the absence of any fraud, duress, or misrepresentation. Additionally, a prenuptial agreement must be conscionable, meaning that it is not only fair to both parties at the time of execution but also at the time of enforcement.
A prenuptial agreement may require that it be executed prior to marriage, although this is not a requirement for all agreements. It may also provide for either or both parties to provide for the care of any children of the marriage or other children through the use of trusts, wills, or other arrangements.
One significant addition to the law in 2015 permits non-resident parties to agree to Louisiana law. Simply put, non-residents may now choose for their contract to be governed by Louisiana law and to thereby consent to the jurisdiction of the Louisiana courts over their dispute.
However, this does not necessarily mean that Louisiana law will govern the substance of the agreement. In fact, there are reasons to believe that some substantive Louisiana law will apply regardless of the contracting parties’ agreement or stipulation to the contrary.
Not all marriage settlements qualify as prenuptial agreements. Prenuptial agreements are those which are entered into before marriage. Conversely, postnuptial contracts are entered into after marriage. With the exceptions noted below, postnuptial contracts are generally judicially unenforceable in Louisiana, if otherwise still valid.
Exceptionally, parties may agree to a postnuptial contract dividing property acquired during marriage, if such ownership was acquired as a result of a settlement in partition. Also, if the provisions of a postnuptial agreement do not contravene public policy, the provisions will be enforced as the lawful agreements of the spouses.
Impact of Community Property Law on the Prenup
Louisiana, particularly, the period from the 1970’s until 1989, individuals were free to contract with one another in regards to their assets and liabilities during marriage and the effects of divorce. This included the right to enter into a pre-marital agreement that left certain assets out of the reach of the community property regime and instead categorizes them as separate property. This was not so under Louisiana’s former Civil Code articles governing partnerships.
Prior to 1989, The Louisiana courts sometimes refused to respect premarital agreements entered into by spouses. Essentially, when the spouses entered into a marriage, the concept of a partnership was deemed to supersede any previous agreements on how partnership assets were to be distributed, regardless of whether the agreement was reasonable and entered into voluntarily. That changed in 1989, when Louisiana law began to recognize pre-marital agreements.
Since 1989, Louisiana’s courts have recognized spousal agreements, including pre marital contracts, for couples wishing to address their community property regime, create rules regarding support, and resolve other issues surrounding a marriage. Louisiana similar to other states, has had to address issues with the rules governing the validity of these agreements. One of those issues is which law applied to the validity of the premarital contract: the law in effect when the spouses entered the marriage, or the law in effect at the time of the formation of the agreement.
Further issues the courts have faced are: the extent such agreements can sacrifice or lessen the rights of a spouse; and whether child support provisions could be agreed upon even before the birth of a child.
Louisiana courts addressed these issues and the result was that an agreement signed by the spouses prior to a marriage is governed by the fundamental principles of the law of obligations and agreements as well as the law of property. The underlying public policy behind premarital agreements is to permit a couple to contract out of the community property system in whole or in part. The courts have also addressed some of the rights which cannot be waived under a premarital agreement. For instance, the courts have found that with respect to child support obligations, it is presumed to be contrary to public policy to waive child support while the parties are still married. As such, any provision in a prenuptial agreement which attempts to do so is illegitimate and unenforceable.
Another example occurs in the area of liability for child support. The spouse of a person who is legally compelled to provide his or her child financial support is not liable for that support, unless it is shown that the spouse intentionally caused the primary parent’s financial need, which then caused the child’s financial need.
Parts of a pre marital agreement that are outside the scope of Louisiana’s Civil Code articles, such as those addressing aspects of div Amerada Hess v. Ragasorce and its aftermath, will be governed by the general principles of contract law (rather than civil-code-based property law). In entering into a prenuptial agreement, it is important for the parties to consider the interplay between Louisiana’s community-property laws and the common law, and to draft the agreement accordingly.
How to Make a Prenup
If you are interested in pursuing a prenuptial agreement, it is important that you do not attempt to draft it on your own. Instead, you should meet with a qualified attorney who has experience in representing parties negotiating a prenuptial agreement. Once you have found the right lawyer, the first step in negotiating your prenuptial agreement is determining what types of assets you would like to include in the contract. It is important that an attorney is consulted at this stage, as there may be relevant laws or regulations that you are unaware of. In addition, pro-active planning can help to preserve your wealth, protect your children from prior relationships, and add to your own familial estate.
Once you and your lawyer have created a list of all applicable assets, you must determine which assets will be a part of the prenup. Again, you should consult your legal counsel to understand the ramifications of each decision you make. The best option is to be completely transparent about your assets so that any decisions you make are well-informed.
The next step is negotiating the terms between both parties if there are any contested issues. If either party objects to any provisions that have been suggested , the changes must be negotiated until both parties are satisfied. Once the terms have been agreed upon by both parties, the final document may be drafted. Once the agreement has been drafted, each party should have their own attorney review the agreement before signing. For the best interest of both parties, each spouse should seek independent legal counsel.
Once the agreement has been drafted and signed by both parties, proper notarization must be made. As most financial institutions request for prenuptial agreements to be notarized, you should consult with your CPA for specific guidelines.
Generally, once the above steps have been undertaken, the process of having a prenuptial agreement may be complete. However, unlike most states, Louisiana law requires prenuptial agreements to be approved by a judge. There are several judicial precedents in Louisiana that state that the terms of the agreement are consistent with public policy, even if the parties have not opted for a marriage regime between them.
Common Myths About the Prenup
One of the most common misconceptions is that people think a prenup is something reserved for the ultra-wealthy or stars of the silver screen. The truth is that a prenup is simply a legally binding contract, it can be good for anyone. In fact, a prenup can protect you as the lower earning spouse in a marriage. For example, if your spouse has a large amount of debt already and or significant assets that they bring into the marriage than a prenup is a smart move for both parties. Another common misconception is that they are one-sided. A prenup needs to address any issues that are relevant to both sides. While the most obvious concern is the division of assets upon divorce, there may be other considerations like what happens with your children, if either parent should pass away, and more. These are not just the issues that may be included, but that also could be grounds for invalidating the prenup. If one party doesn’t have a good attorney you, therefore, do not have a fair prenup. Another misconception is that a prenup is only in place for divorce matters. While it is true that it helps settle the issues of divorce so you and your spouse are on the same page should you decide to part ways, there are other good reasons that a prenup may be a good idea, including while you are married, and after you pass away. A prenup can guard against untimely death and disability as well. It is also a great way to protect retirement funds if your spouse were to become disabled, or on their death bed leaving you to manage everything. You might think that because actions of the spouse create problems or loss of assets that you want to protect, that a prenup is not fair. However, during the relationship or marriage it is understood that the spouses can adjust behaviors. A wife who leaves the husband because he spends all of their money at the casino could, for example, provide for an increase in premarital assets should they divorce because she did not create boundaries that protected her. He might argue that his relationship with his brother fell apart in a way that he lost a business that could have increased his assets. You will need to discuss your own ideas about limits in relationships and how you can manage the relationship as a result.
When a Prenup Makes Sense
Prenuptial agreements are often created in response to certain life factors or situations that may suggest a heightened risk of divorce. Such factors do not necessarily mean that there is some kind of guarantee of divorce. Rather, they indicate that one or both parties wish to take steps to protect their individual interests in the event that a divorce occurs. The following are some of the life factors or situations that can lead to prenuptial agreements:
• When persons have been previously married and, based on that experience, want the protection provided by a prenuptial agreement.
• When one or both spouses bring significant assets into the marriage, such as an inheritance.
• When one or both spouses own a business.
• When one spouse will be making significantly more than the other during the marriage or is expected to.
• When prior marriages have included children and child support payments are required.
• When either party anticipates a substantial increase in their income while married, as a result of their career.
• When the individuals want to pre-determine which assets each will own or how assets will be distributed in the event of a divorce.
• When the individuals want to create a spousal agreement that could include alimony and any potential for alimony.
• In the case of older couples, when they have accumulated substantial wealth and want to ensure its protection.
Consulting an Attorney Regarding Your Prenup
As the very life of your marriage and family is a prime consideration, you should find an attorney who is experienced in Louisiana’s marriage law to protect your rights. Ideally, you should both visit the same lawyer once you have decided to initiate a prenuptial agreement. A lawyer’s primary task will ensure that any agreement will not be subject to litigation, as the mere fact that there is an agreement may raise the question of whether it is enforceable. As your lawyer will not be speaking on behalf of the other party to your marriage, they may not be able to fully or even partially represent both people. When each person sees a different lawyer, both can feel certain about attorney client confidentiality.
When visiting your lawyer to draft and discuss your prenuptial agreement , he or she will need to understand your individual financial situation. Prepare for the meeting by gathering your most current financial statements, including bank and brokerage accounts, credit cards and interest bearing accounts. Bring asset statements for your car, boat, real estate, business and personal property. If you have a will or estate planning documents, bring these as well. This information will allow your attorney to consider your options with a firm understanding of your financial circumstances.
Although no one wants to deal with a prenuptial agreement, those who are ready to take that step will find a lot of definition to their lives. Having a prenuptial agreement does not mean that you will face a divorce at some point; however, those who are committed to making sure things are legally clear even before they are married find a lot of peace.