Pre-Marital and Marital Contracts: Protecting Your Assets
Nearly half of all marriages in the United States end in divorce. With the rise in divorce rate there is also a need persons contemplating marriage and contemplating divorce to protect their assets and interest.
There are two types of nuptial agreements that can be made: prenuptial and postnuptial agreements. Prenuptial agreements (also known as premarital agreements or antenuptial agreements) are agreements entered into by the parties contemplating marriage prior to marriage that set forth the rights and obligations of each party in the event of death or divorce, and during the marriage. Postnuptial agreements (also known as postmarital agreements) are agreements entered into by the parties after marriage that set forth the rights and obligations of each party in the event of death or divorce, and during the marriage. Postnuptial agreements can be used when no divorce is contemplated or when divorce is not imminent. When divorce is imminent, postnuptial agreements are referred to as separation agreements.
Purposes of Nuptial Agreements
There are three main purposes of nuptial agreements. The first purpose is to provide for the protection of assets in the event of divorce of the parties. In property division, Florida follows the theory of equitable distribution. In other words, the court will make an “equitable” distribution of the property and assets of the marriage based on the circumstances of the parties. F.S. §61.075 provides for the equitable distribution of marital assets and liabilities.
A second purpose of nuptial agreements is to provide for the distribution of the parties’ assets in the event of the death of a party. Certain provisions should be included in a nuptial agreement to ensure that each party’s assets are protected in the event of such party’s death.
A third purpose of nuptial agreements is to delineate the obligations of each party during the marriage. For instance, the nuptial agreement may address which party is responsible for certain expenses during the course of the marriage.
Requirements of Nuptial Agreements
Florida statutes and case law provide that nuptial agreements that meet certain requirements will be enforced by a court. The requirements are as follows:
Complete Financial Disclosure — Individuals who contemplate marriage are in a confidential relationship with each other. Florida case law provides that this confidential relationship gives rise to a duty to make a full and fair disclosure of the nature, extent, and value of the assets that each party holds so that the other party may make an informed decision as to what will be relinquished as a result of entering into the nuptial agreement. Notwithstanding the foregoing, F.S. §732.702(2) provides that while disclosure is required in connection with an agreement waiving rights in the event of death that is executed after marriage, no disclosure shall be required for such an agreement, contract, or waiver executed before marriage. It is strongly recommended, however, that each party provide the other with full and fair disclosure in order to avoid a Florida court concluding that the nuptial agreement is invalid.
Consideration — The nuptial agreement must recite the consideration for it. In the case of a prenuptial agreement, the consideration is the marriage.8 In the case of a postnuptial agreement, mutual promises encompassing various rights of the parties, in addition to disposing of property owned by them, have been considered sufficient consideration
Formalities of Execution — If the nuptial agreement contains testamentary provisions, it should be executed in conformity with the requirements for a last will and testament (i.e., it must be signed in the presence of two witnesses who must also sign in the presence of each other).
Waiver of Equitable Distribution of Property and Interest in Marital Earnings and Appreciation of Separate Property — The court must uphold the intent of the parties as expressed in the agreement regarding the waiver of equitable distribution of property. If the parties intend to keep all income and earnings, including such income earned during the marriage, as separate property, such intention must be clearly stated in the nuptial agreement. Otherwise, income and earnings, and the assets acquired with such income and earnings, will be marital property subject to equitable distribution. In addition, if the parties desire to ensure that separate property, including all appreciation thereon, remains separate property, the nuptial agreement must clearly state such desire. Furthermore, the nuptial agreement should specifically refer to active appreciation on such separate property; otherwise, only passive appreciation on such property would remain separate property.
Waiver of Alimony — If intended, the nuptial agreement must expressly waive the party’s right to alimony. The waiver provision should include all types of alimony, such as rehabilitative, permanent, periodic, bridge-the-gap, and lump sum alimony. Note that in Florida, temporary alimony (during the divorce proceeding) cannot be waived.
Waiver of Interest in Homestead Property — A provision waiving a party’s constitutional right to homestead property may only be waived knowingly and intelligently. Accordingly, if each party intends to waive his or her homestead rights in the other party’s homestead property, the nuptial agreement should provide the following: 1) the definition of homestead property; 2) the homestead rights that each spouse would enjoy in the homestead rights absence of the nuptial agreement; and 3) that each party knowingly and intelligently waives such homestead rights.
Waiver of Interests in Retirement Plans — For many clients, the most significant asset is the client’s retirement plans. Accordingly, the preparer of the nuptial agreement must ensure that any waiver of retirement benefits complies not only with Florida law, but with federal law as well.
No Waiver of Child Support, Custody, and Visitation — Rights regarding child support, custody, and visitation cannot be waived under Florida law in a nuptial agreement and, therefore, should not be included in such agreement.
Timing of Execution — In the case of a prenuptial agreement, all meetings with the attorneys, the negotiations, and the execution of the prenuptial agreement should occur well in advance of the wedding in order to make it more difficult for a challenging spouse to assert duress or undue influence.
Separate Counsel — While not required under Florida law, it is recommended that each party obtain separate representation with regard to the nuptial agreement. Separate representation can help refute a claim that the nuptial agreement was entered into under duress or as a result of undue influence. Very often the party who requests the nuptial agreement will hire the attorney to draft the agreement. Sometimes the party will ask his or her attorney to recommend an attorney for the other party. The attorney should not give such a recommendation. Rather, the other party should independently locate and hire his or her attorney.
All in all, if you are contemplating marriage or divorce, contact Puzo Law at 305-428-2220 to create your asset protect nuptial agreement.