This Week’s Blog by Andrew M. Eliot
A prenuptial agreement is a written contract entered into by two people before they are married. Its purpose is to resolve, in advance, various financial matters that will necessarily arise from the marriage in the event of divorce or death of a spouse. Notably, prenuptial agreements offer parties on opportunity to resolve financial issues in whatever manner they choose, rather than leaving such issues to be determined by the divorce laws of a particular state. While the contents of prenuptial agreements can vary widely, there are certain issues that are commonly addressed in such agreements, three of which are discussed herein.
Property Distribution and Asset Classification:
Prenuptial agreements typically define which types of assets will be subject to division in the event of divorce (i.e., which assets will constitute “Marital Property”), and which types of assets will necessarily be retained by one party to the exclusion of the other (i.e., which assets will constitute “Separate Property.”) While there are many ways to classify assets, it is common for agreements to state that any assets brought into the marriage by a particular party shall constitute that person’s Separate Property, while any assets acquired during the marriage shall constitute Marital Property. It also common for prenuptial agreements to provide that inheritances received by a party during the marriage shall constitute that person’s Separate Property. In addition to classifying assets as Marital or Separate Property, many prenuptial agreements expressly set forth the manner in which Marital Property will be divided between the parties in the event of divorce. For example, Marital Property might be divided equally, “equitably” (as determined at a later time under the laws of a particular state), or in some percentage allocation other than 50/50.
Many prenuptial agreements also address the disposition of assets that are acquired during the marriage with a combination of each party’s Separate Property and/or Marital Property, often referred to as “Mixed Property.” Often prenuptial agreements will be drafted to ensure that both parties will recoup any Separate Property contributions he or she made to the acquisition of Mixed Property.
Generally speaking, there are three options when it comes to addressing alimony in a prenuptial agreement. One option is for the parties to agree to mutual “alimony waivers,” meaning that each party agrees that he or she will have no right to seek alimony from the other in the event of a divorce. A second option is for each party to retain the right to seek alimony from the other, while leaving the issue open for determination at the time of divorce. A third option is for parties to expressly agree upon specific alimony obligations that one party shall have to the other in the event of divorce, which may could include specific provisions regarding the duration and/or the amount of such alimony.
In most jurisdictions, absent a written agreement to the contrary, each party to a marriage will be guaranteed by law to receive a certain minimum share of his or her spouse’s estate (the “elective share”) upon their spouse’s death. For example, the “elective share” in Connecticut is comprised of the lifetime use of one-third of the value of all real and personal property owned by a party at the time of his or her death, after the payment of all debts and charges against that party’s estate. However, a spouse’s right to an “elective share” can be waived in a prenuptial agreement, and it is not uncommon to see estate rights waivers in prenuptial agreements particularly where one or both parties have children from a prior relationship.
At Broder & Orland LLC we have extensive experience throughout Fairfield County and Connecticut negotiating and drafting prenuptial agreements that align with our clients’ circumstances.