Prenups have a bad reputation. They shouldn’t.
Prenups tend to be a loaded topic, in large part because a marriage can end in one of only two ways: divorce or death. Prenuptial agreements are meant to define and protect non-marital property in either event. And since all marriages must come to an end, every engaged couple should consider whether a prenup is appropriate for them.
Understandably, many couples and their families are uncomfortable with the thought of planning for the end of a marriage, especially one they have yet to celebrate. For example, some fear that asking for a prenup will offend a loved one or have a chilling effect on family relations. Others find the financial-disclosure requirement is too much to ask.
Notwithstanding the discomfort, it’s always wise to make important decisions when things are good, as opposed to in times of crisis. Here are some points to consider:
State law matters
Absent a prenuptial agreement, the laws of the state where the parties are domiciled at the time of divorce (or death) will dictate what happens to their incomes, assets and liabilities. Laws vary from state to state with respect to:
• The definition of marital versus non-marital property
• How and when to value and distribute marital property
• The treatment of income derived from and appreciation in value of non-marital property
• A surviving spouse’s rights to the decedent’s estate at death.
Even if the laws of the state where a couple is domiciled at the time of marriage are favorable to one or both spouses, life moves on and ZIP codes change. The laws of another state may be less favorable.
A prenuptial agreement allows two people to contract around state law to better control the outcome in the event of divorce (or death while happily married), regardless of where they land on the map.
Timing is everything
When deciding whether to proceed with a prenup, each party should consult with independent, local legal counsel. Seek guidance from both trusts and estates and matrimonial lawyers well in advance of the wedding date to allow for plenty of time to draft, negotiate, review and sign.
A conversation with benefits to last a lifetime
While the terms of a prenup may ultimately favor one spouse over the other, the terms should benefit both parties. A truly collaborative process allows for all parties to feel heard. Open communication and solution-focused discussions are touchstones of any healthy relationship. Clarity around how each party sees the future can only help smooth the road ahead.
Rick Barragan is the Managing Director,
Los Angeles Market Manager, for J.P. Morgan Private Bank.
[email protected] | (310) 860-3658
privatebank.jpmorgan.com/los-angeles
Source: J.P. Morgan Private Bank, March 14, 2024. “Prenups have a bad reputation. They shouldn’t.” By Erika Shaw, Matrimonial Specialist and Emily Brunner, Wealth Advisor, J.P. Morgan Private Bank.
