The stigma is gone when it comes to talking about marital agreements . . . well, almost.
I would like to tell you that the stigma is gone and that society is more open to the idea of a legal agreement when entering into serious romantic relationships. It is getting better, but it still might be an uncomfortable conversation to have with your partner. That is where we can help. How you bring up the topic and approach it is the key. What we want to do is provide a plan and security for the success of your marriage.
It is common for celebrities and high profile individuals to sign legal agreements before even going on dates. Celebrity couples worth hundreds of millions such as Brad Pitt and Angelina Jolie, Kanye West and Kim Kardashian, and Nicole Kidman and Keith Urban have prenuptial agreements to protect their assets, providing for money, property and even basketball tickets in the event their marriage dissolves.
Okay, so you’re not a movie star, but you do have a business or a career. Would it survive if it was cut in half because of a failed relationship?
Besides the legal aspects of a marriage plan, there are financial and emotional issues at play.
Agreements which allow couples to opt out of statutory property rules and create their own rules for the division of their assets are known as prenuptial or premarital agreements if they are entered into before marriage, and postnuptial or postmarital agreements if they are entered into at any time after the marriage. These agreements can be an important part of an estate plan and are usually prepared in conjunction with each spouse’s fundamental estate planning documents, such as their Will or Trust. Here at Dana and Associates, we simply call these agreements marriage plans.
Besides the legal aspects of a marriage plan, there are financial and emotional issues at play. Oftentimes there can be discord between partners because of uncertainties regarding each other’s financial obligations during the marriage or the distribution of assets in the event of the death of one party. These uncertainties can be alleviated when the parties have a marriage plan in place which addresses their concerns and issues. It is important that both parties understand that the purpose of a marriage plan is to provide for the protection of their assets and their well-being. After all, what good is a bulletproof premarital agreement if it causes strain on the relationship?
Who Needs a Marriage Plan?
Marriage plans are most common for adults who are marrying later in life, whether after the death of a spouse or after a divorce or two. They have usually acquired some assets and have less time to recover from the financial loss of a divorce. Oftentimes too, they desire to have marriage plans to preserve their estates for the benefit of their families, not themselves. A marriage plan can also be important for young couples planning to marry. One party may come from a wealthy family or perhaps one of the parties is starting to acquire significant assets. One spouse may be starting a business which he or she wants to protect or, where one person has a disproportionate burden of debt, a marriage plan can be used to shield the other spouse from actions by creditors. All in all, having a marriage plan provides you and your family with peace of mind in having protected yourself and your loved ones.
What About Couples Living Together With No Plans to Marry? There could be possible claims under a theory of contract law when one of the partners leaves the relationship or dies.
In Arizona, community property rules apply to married couples. For couples living together without a marital relationship, there could be possible claims under a theory of contract law when one of the partners leaves the relationship or dies. California has recognized that cohabitating couples can establish implied or expressed contractual agreements, and actions seeking relief in that state are commonly referred to as Heisted petitions. Similarly, Arizona has found that by living together there is an implied contact between the cohabitating couple which supports the division of property. For couples in serious relationships that are buying a home together, living together or sharing assets, it is important to have a plan. In these situations, we call the agreement a cohabitation agreement, or a partnership agreement. Although the legal principles are different in case of death or divorce, the focus is still on the relationship. For this article I will refer to them as marriage plans as most of the same principles apply. However, they may be more important for couples who never marry as there are no default laws to rely on such as the community property rules that apply to married couples.
Who Can benefit From a DANA Marriage Plan?
A good marriage plan will benefit any relationship as it clearly defines how expenses will be paid and finances will be handled. After all, finances are one of the leading causes of divorce. When considering potential legal issues, anyone who is bringing assets into a relationship or has a partner who is coming into the relationship with debt will receive protection from a marriage plan. Even after the marriage has already occurred, couples can enter into agreements to manage their lives going forward. Creating a plan can remove the financial stress a couple may be experiencing and actually revitalize a marriage as future financial plans are clearly articulated.
Not only do marriage plans provide certainty, but they substantially reduce the likelihood of litigation. Both parties know what will happen if the relationship fails or if one of them dies during the marriage.
What Happens to Your Property When You Marry? Arizona Estate PlanningAfter you marry, everything that you earn and all debt that you incur belongs to the marital community.
After you marry, everything that you earn and all debt that you incur belongs to the marital community. Arizona has community property laws which provide that assets and debts a couple acquires during marriage belong equally to both spouses. Even if you brought property into the marriage, it is often “commingled” with community property, so that it loses its nature as separate property and becomes part of the community. See A.R.S. Sec. 25-211. Some of us bring debts as well as assets into a marriage. Arizona law provides that the community is liable for premarital debts or liabilities of one spouse in certain situations and after marriage, either spouse may contract debts on behalf of the community. Without a marriage plan, creditors can sometimes turn to community property to satisfy the debts of just one spouse. If you want to make sure that saying, “I do” does not mean saying, “I owe,” you can use a marriage plan to limit your liability for each other’s debts.
A marriage plan gives you a chance to design a custom plan that works for you and opt out of the standard default rules the government has provided. While fundamental rights given to a spouse under state law can be waived in these agreements, there are some limits on what can be done. No state will honor agreements which limit or give up future child support, custody and visitation rights. Private agreements that would impair a child’s right to be supported or to have a relationship with a parent in the future will not be enforced.
Because property and inheritance laws vary from state to state, a marriage plan can take this into consideration. The plan can provide that in the event of a dissolution of the relationship, the legal action will be filed in a state of the parties’ choice, providing an outcome most beneficial to the parties.
A cohabitation, or partnership, plan for cohabitating couples serves the same purposes as those stated above. It sets forth the terms and obligations of the relationship and handles the resolution of issues if the parties break up or if one party passes away.
What Makes A Marriage Plan Valid. A fundamental requirement of a marriage plan is the full disclosure of each party’s assets and income to the other party.
Any party waiving his or her rights must understand the financial rights they are giving up when the agreement is signed. Besides full disclosure, the agreement will recite the consideration for the agreement which, if entered into before marriage, is the marriage, and if entered into after marriage, generally consists of mutual promises encompassing various rights of the parties. The agreement needs to be formally executed as a testamentary document (i.e. Will) if it contains testamentary provisions and will waive certain statutory rights. Some of these waivers have specific legal requirements in order to be effective.
In 1988, baseball player Barry Bonds married his now ex-wife, Sun. The day before they married, they entered into a written premarital agreement in which they each waived any interest in the earnings and acquisitions of the other party during the marriage. Sun signed the agreement without legal counsel, while Barry had legal counsel. At the time of the marriage, Barry was worth approximately $106,000. Six years later, when Barry was earning substantially more money, the parties filed for divorce. The case went all the way to the California Supreme Court, which held that the parties’ premarital agreement was in fact valid, despite the fact that Sun was not represented by legal counsel when she signed the agreement. Having legal counsel was only one factor among several in determining whether a premarital agreement was entered into voluntarily.
As a result of the Bonds’ case, legislation was enacted providing that both parties to a premarital agreement must be represented by their own lawyers and be given at least seven days to consider the proposal, and the agreement must be explained to the party in his or her native language.
Arizona Law is Similar to California Law
I went to law school in California and am licensed to practice law in California, Arizona and Nevada, which are all community property states. I have studied the community property laws in these states and conclude that, although Arizona doesn’t admit it, they have basically copied California law. Nevada admits to copying the California law and even cites some California cases in explaining its laws.
While getting divorced in Arizona, I got a firsthand education in family law. Also, as an attorney I have worked with clients who have pre-marital agreements and clients who don’t have them. This article has been years in the making as I have interviewed both clients and friends and seen the benefit of these agreements. While it can be uncomfortable to discuss marriage plans, if done properly they can protect both spouses financially without a significant emotional toll on the relationship. In the end, a marriage plan provides each party the security and peace of mind that only pre-planning can give.