Premarital Agreements

Those about to be married might consider a pre-marital agreement. Nevada has adopted the Uniform Premarital Agreement Act. See NRS Chapter 123A.

Once married, the parties are going to have a contract. The only question is whether they set the terms of their contract or the State of Nevada sets those terms. The state’s contract is not all that bad, but sometimes the parties can draft a premarital agreement that better fits their unique circumstances.

Lawyers who draft pre-nups often disagree about the purpose of that document. Some, probably most, assert that the purpose is simply to deal with issues which arise on divorce of death of one of the parties…to keep the parties out of the clutches of the divorce industry.  This is certainly a salutary goal, particularly since about half of marriages end in divorce.

Other lawyers assert that one purpose of the premarital agreement is to assist the parties in avoiding divorce in the first place.  On one end of the scale are pre-nups which actually encourage divorce.  Those prenups probably won’t stand up in court as they are inconsistent with public polity.  On the other end of the scale, are pre-nups which delve into the mundane aspects of marriage, who fixes supper, who cleans the house, etc.  NRS 123A.050(1) provides that in addition to the listed financial matters, the parties may contract with respect to “(h) Any other matter, including their personal rights and obligations, not in violation of public policy or a statute imposing a criminal penalty.” How far the agreement can go towards structuring these personal rights and obligations is unknown. Still, a frank discussion of these mundane issues is probably a good idea and might show the couple that their marriage is doomed to failure from the outset. In sum, it is not just parties with disparate wealth who can benefit from a pre-nup.

Basically, as to the “during marriage” aspects of a pre-nup, the problem is one of expectations. What are the foreseeable problems?  For example, if she is expecting the kids to be raised Catholic and he Jewish, there could be conflict. If he is expecting his job to be the marriage’s primary occupation, she should know this. If the party holding the primary occupation is promoted out of the area, will the family make the move? What if an elderly parent or relative seeks to move in with the family? What if the husband expects his wife to do the housework? Is that what she is expecting? Following child-birth, how long should one parent be a stay-at-home parent and which parent should that be? What are to be the consequence of infidelity? How are old boyfriends and girlfriends to be dealt with? To avoid later disputes, it may be a good idea for the parties to determine as many of these issues as they can, reduce those determinations to covenants, include their covenants in a written pre-nuptial agreement, and hope that the courts will not find the agreement against public policy.

And, as indicated, a pre-nup also affects matters on termination of the marriage, whether by divorce or death. The statutory Nevada marriage contract structures these issues. If it’s a young couple’s first marriage and they both enter it with nothing, there may be few property issues for the pre-nup to determine. Nevada’s default state-law contract, which says that the earnings of both parties after marriage are community earnings (each party owns half, regardless of which party did the earning) probably fits the parties’ expectations to a “T.” But, as to those entering a second or third marriage, or when one party to a first marriage has significantly greater assets, the parties may want to alter Nevada’s community property laws, if for no other reason that to avoid later, expensive, disputes concerning who owned/owed what on the marriage date. They can do so by a pre-nup, within reason. As just one example, if one of the parties has significant debt, an agreement that the parties’ earnings not be community property may be a good idea. One cannot avoid their debts by getting married, but they can give their prospective partner some protection from their pre-marital creditors with a properly drafted pre-nup.

There are many other items that can be included in a pre-nup to structure the post-divorce situation. Even though the court reserves the right to ensure that the children are supported and cared for (regardless of what the pre-nup says), it does not hurt at all for the parties to set forth their expectations in a pre-nup. For example, during the minority of the children, can the custodial parent move to a distant city? The divorce court, while not bound, would probably be more likely defer to the parties expectations regarding such matters if it knew what the parties had agreed to before they decided to divorce. Likewise the parties can set forth their expectations regarding alimony in the pre-nup. For example, if one of the parties is expected to put the other through school, the pre-nup could provide that in that event, the spouse who worked to put the other through school would have sums set aside for his or her own schooling. However, the divorce/probate court is not bound to enforce the parties’ contract concerning child custody, support and alimony.

One way to view pre-nups, in the context of termination by divorce, is as a “pre-packaged divorce decree.” The parties, or the lawyer for one of them, simply presents the pre-nup to the divorce court and asks that the court use it to determine all issues covered by the pre-nup. The Court can’t be expected to rubber-stamp the agreement, particularly the provisions regarding custody and support. Issues of public policy will almost certainly intervene. Nonetheless, if the parties’ intent is clearly set forth in a pre-nup which was fair at the time it was entered into, and matters of public policy dictate no contrary result, the Courts will generally hold the parties to their agreement.

The prenuptial agreement itself can be, as indicated, about anything the parties want it to be. Some are primarily directed to preventing the formation of community property, either throughout the marriage (see Pre-nup), or during, say, the first 5 years or so of the marriage.  Another common form of premarital agreement provides that the separate property at the time of marriage remains separate property after marriage, but the earnings of the parties after marriage are community property.  This allows the parties to begin to build their own nest-egg. A third form of premarital agreement accepts the state’s definition of marriage, property and the like and does only one thing:  list and value the separate property of each party on the date of marriage.  This form of prenup, provided adequate disclosure is made, eliminates much expense at the time of divorce as the parties are unable to then argue over who owned what and how much that ‘what” is worth at the time of marriage or death. These agreements often attempt to also determine how increases or decreases in the value of separate property are to be handled at the time of divorce/death.

Under the state of the law at this time, both parties to the pre-nup generally need separate counsel for the agreement to hold up in court. The romantic idea of the marriage being an entity worthy of protection in and of itself just doesn’t work here. So one lawyer can’t represent the “marriage.” You need two lawyers. One for the bride; another for the groom.