Prenuptial Agreement

For most couples, taking the relationship to the next level involves the commitment of marriage. However, marriage is not only about romance. There are many things to consider when deciding to get married. How intertwined will our finances be? What liability do I now have? How should we divide our property if our marriage terminates, either by death or divorce? Many people are hesitantto step into marriage because of similar concerns. The easiest solution to address these concerns may be signing a prenuptial agreement.

Prenuptial agreement (“prenup”) is a written contract between a couple prior to marriage regarding properties and obligations upon marriage or/and end of marriage (death or divorce). Prenup is commonly accepted in the United States. When a prenup is executed and effective, the signed couple are legally bound to the agreement.

When to execute a prenuptial agreement?

A prenup can be the solution toa lot of concerns, but may be not a good option for every couple. After all, talking about money and obligations with your partner before marriage can be difficult. Here we give some examples of “When a prenup may be necessary”:

There is a significant gap between you and your partner’s incomes. For example, A, a newly collegegraduate, is planning to get married toa successful entrepreneur B. A’s annual income is about $20,000, which is much lessthan B’s annual income of $500,000. A only has $500 in her bank account, but B possesses real properties, stocks, bonds and other assets. It is a wise decision for B to execute a prenup about property ownership and income allocation prior to their marriage.
You will be a housewife/househusband to support your partner’s career after you are married. Being a housewife/househusband is not easy, moreover, without work experience, it will be extremely difficult to re-enter the job market if you need to. A prenup regarding your alimony/spousal support and property division in case of divorce will provide you with more security.
You don't want your spouse to be involved in your business for various reasons. To ensure control of your business in the future, it may be clarified in your prenup that he/she will not inherit your right of voting in business operation.
Oneof you is liable for alimony/spousal support or/and child support from the previous marriage. It is unfair for the party free of such liability to pay for the other party with his/her own income. Furthermore, it is more common for couples with a history of divorce to useprenups than couples who are getting married for the first time.

Brief Introduction of Uniform Premarital Agreement Act (UPAA), Uniform Premarital and Marital Agreement Act (UPMAA) and practices in Washington and Texas

To promote more uniformity and predictability between state laws relating to prenuptial agreements in an increasing transient society, the Uniform Law Commission (ULC) drafted Uniform Premarital Agreement Act (UPAA) in 1983. UPAA is not a codified law or regulation by itself. ULC only drafted it for state use. If a state adopted UPAA, it becomes part of its legislation and will govern prenup-related issues in that state. In 2012, the ULC updated prenuptial agreement in its Uniform Premarital and Marital Agreements Act (UPMAA).

So far, the UPAA has been adopted by 28 states and the District of Columbia. Texas State adopted UPAA in its state family law code. Washington State has not adopt any of the acts. In Washington Revised Code (RCW) Section 26.16.120, it briefly mentions validity of status agreement such as prenuptial agreement. In practice, Washington courts usually decide enforcement of prenuptial agreements on a case by case basis. RCW 26.09.070 further explain that a prenuptial agreement, except for those terms providing for a parenting plan for their children, shall be binding upon the court unless it finds that the separation contract was unfair at the time of its execution.

Requirements of Prenuptial Agreement

Under UPAA and UPMAA, a valid prenuptial agreement must meet the following requirement:

With proper formation: a prenuptial agreement must be in record and signed by both parties. No consideration is required for this kind of agreement.
Specify each party’s right to access to independent legal representation: both parties shall have reasonable time to decide whether to consult with a lawyer and consult with a lawyer. If one party is represented by a lawyer, the other party shall be financially capable to have independent legal representation or the party shall pay for the representation.
With a notice of waiver of right in the agreement with clear language.
With a financial disclosure: the agreement shall have a reasonably accurate description and good faith estimate of value of the property, liability and income information. The parties can waive the right to financial disclosure beyond the disclosure.

As mentioned, Washington State has not adopted a statute governing the enforceability of premarital agreements. Instead, the courts have worked out a case-by-case test. Prenuptial agreements are contracts and their enforceability is judged by rules applicable to other contracts. The agreement must be in writing and fully understood by both parties. In a case, Re Marriage of Matson, adjudicated by Supreme Court of Washington State, the court held that the validity of a prenuptial agreement turns on when: (1) full disclosure has been made by a couple of the amount, character and value of the property involved, and (2) the agreement was entered into fully and voluntarily on independent advice and with full knowledge.

Some common factors that can invalidate prenuptial agreements include: (1) format requirements are not met; (2) either party’s consent to the agreement was involuntary or the result of duress; (3) either party did not have access to independent legal representation; (4) no notice of waiver of rights or an explanation in plain language of the marital rights or obligations is included, unless the less favored party had independent legal representation at the time the agreement was signed; or (5) before signing the agreement, either party did not receive adequate financial disclosure.

What can be subject matters in a Prenuptial Agreement?

Prenuptial agreements can include provisions for a wide range of issues, including but are not limited to:

Rights to properties owned prior to marriage and acquired while married or living together
How each spouse’s income will be characterized after marriage
Asset and debt distribution during marriage, divorce, or death
Business Management
Rights to alimony/spousal support or other payments of money from one spouse to another in divorce or separation
Entitlement to death benefits from life insurance policies
Agreements regarding who will work if the couple has children
Protection for intangible assets, such as patents, special degrees and special abilities of a spouse

According to UPAA’s terms, prenup does not apply to: (1) an agreement between spouses governing marital right or obligation and requires court’s approval to become effective, such as children custody and support; or (2) an agreement between spouses who intend to obtain a marital dissolution or separation signed when a proceeding for marital dissolution or separation is anticipated or pending. Generally, child custody and support should not be agreed to in aprenup.

Influence of Prenuptial Agreement

A valid and executed prenupislegally binding between the couple who executed it. When marriage, divorce or death occurs, the bound party should deal with property and obligations pursuant to the agreement. However, it does not affect a third party’s right to the couple.

UPAA and UPMAA stipulate that the agreement should not affect adverse rights of a bona fide purchaser for value. For example, a couple entered a prenup agreeing that the wife has no right to sell a real property. A third person does not know about the agreement and purchase the property from the wife with reasonable payment. The husband has no right to ask the third person to return the property on the ground of the prenup.

According to the Revised Code of Washington State, prenuptial agreement shall not affect creditor’s right, nor prevent the application of laws governing the community property and inheritance right of slayer or abuser. Community property ownership means a married couple shares their marital property equally, each owning half. Under the rule of inheritance rights of slayer or abuser, if a person’s death was caused by his/her spouse, the spouse shall be deemed to predecease decedent and not able to benefit from the death.

Purpose of Prenuptial Agreement

The general purpose of aprenup is to make arrangements before a couple steps into reality of marriage life. The agreement can be made to be better prepared for the future and to preemptively address potential issues in a fair manner. For some families, community property ownership and common law property ownership for martial properties are not fair. People may want to make more flexible arrangements. Moreover, a good prenup can avoid litigation and the costs associated with it. With most matters negotiated and agreed upon, people do not need to sue each other in court for a solution. It is also practical in terms of protecting one party’s rights that he/she does not want his/her spouse to interfere with. For example, a person has a family business, and he does not want his wife to inherit rights tothe family business.

Prenuptial agreements can be complicated and confusing. If you and your fiancé/fiancée are thinking about it, we suggest you consult with a lawyer to make sure every step is right. At Zhang & Associates, we provide professional drafting, reviewing and consulting services relating to prenuptial agreement. We charge $1000 to $3000 for agreement drafting and reviewing and $300 or $400 for half an hour for consulting services. If you would like to contact us, please email us at info@hooyou.com.

(Updated 07/31/2020 by SZ)

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