by Catherine Haynes Fenton, Esq.
Prenuptial agreements, also known as premarital agreements or a prenup, can be a valuable estate planning tool, in particular for second marriages in which either or both parties have their own assets or to protect the interests of children from a prior relationship. No, they’re not romantic. They may even sound selfish. But actually, it’s an opportunity to have an important discussion about finances before marriage.
Absent a prenuptial agreement, the domestic and probate laws in Maine determine distribution of a person’s assets, either in divorce or at death, and those may be very different from what that person wants. In domestic law, the Maine statutes define “marital property” to include all property acquired after the marriage, including income, gains in equity due to marital effort put into to non-marital property (so, contributions of income, active management of investment accounts, improvements to real property, etc.), property acquired during the marriage, and retirement assets created during the marriage. Non-marital property, which must be proven by the party claiming it, is limited to gifts, inheritances, and property owned before marriage, all of which must be kept separate and have no marital funds or effort invested. In addition, the court can award spousal support if it wishes, including transitional, general, and reimbursement support. At death, probate law provides for a spousal claim of an elective share, whether or not the deceased spouse provides in his or her will for the surviving spouse. Without a will, a current spouse is entitled to a share of the deceased spouse’s estate, which can be one-third of the entire estate.
A prenuptial agreement provides a contractual and enforceable vehicle to prevent those statutes from acting on the couple’s property. It can redefine what is separate property and what property is available for division by a divorce court. In addition, a prenuptial agreement can waive rights to an elective share or any spousal rights to the estate of the deceased spouse that would otherwise be available. In this way, a party in a second marriage can preserve assets, whether already owned or anticipated to be owned or earned, to be passed on to his or her children rather than to the spouse. The agreement can also waive or limit spousal support so that the parties are not subject to a judge making that determination. With these assurances, each party can then put together an estate plan that distributes their separate assets exactly as they wish, without fear that an intervening divorce will wipe out assets, or that after death the spouse will claim an elective share and diminish the estate available for the decedent’s children or other devisees.
In the Maine statutes, Chapter 9 of Title 19-A is known as the “Uniform Premarital Agreement Act.” It allows couples contemplating marriage to fix their relative rights to property, income, inheritance rights, and virtually any other aspect of marriage other than custody and child support relating to children born of the marriage. The agreement becomes effective upon marriage, it must be in writing and signed by both parties, and it can only be amended in writing. The agreement must be entered into freely and voluntarily, with adequate time to consider the terms and effect of the agreement prior to the marriage. There must be full disclosure of the income, assets, and debts of each party so that any waiver contained in the agreement is considered “knowing.” Spousal support can still be ordered by a court to avoid public assistance at the time of the separation or divorce of the parties.
Is a prenup right for you? Even if the agreement is not executed, having a frank discussion about money and rights is an important step in any relationship. If an agreement is being considered, each party should have his/her own attorney to help refine the agreement to his/her best interest.
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