I. What is a prenuptial agreement?
A prenuptial agreement (sometimes called an antenuptial agreement) is an agreement made between a future married couple. Barron’s Law Dictionary (6th Edition) defines a prenuptial agreement as follows:
“An agreement entered into by two people who intend to marry each other which sets forth the rights of each person in the property of the other in the event of divorce or death. Generally, the entering into marriage constitutes sufficient consideration to make a prenuptial agreement enforceable.”
A prenuptial agreement can address several issues related to property. For instance, a prenuptial agreement can determine whether the surviving spouse will invoke his/right to the spousal share of the deceased spouse’s estate. In addition, couples may agree whether they will waive spousal rights in a qualified retirement plan. The contents of the prenuptial agreement will be different for every couple.
II. What are some instances in which individuals should enter into a prenuptial agreement?
1. Second Marriage: If the upcoming marriage will be a second marriage, then it may be a wise idea to consider a prenuptial agreement. The first marriage might have created property and family issues that need to be addressed by the couple prior to marriage. For example, the future husband may have children by his first marriage. By marrying his second wife, the husband may be concerned that his first wife’s children receive particular property when the husband passes away, rather than the second wife, notwithstanding his love and affection for the second wife.
2. Inheritance: If a future spouse believes that he/she will receive an inheritance during the course of the marriage (whether it is a first marriage or a second marriage), the couple should consider a prenuptial agreement. The default rule in Indiana is that all property acquired during the marriage is marital property. In the event of divorce, the presumption is that a 50/50 split of the marital property is a just and fair division. That would include inheritance. To overcome this presumption, it may be prudent to enter into a prenuptial agreement.
3. Business: If a future business owner will soon be married, a prenuptial agreement should be considered for the same reasons as listed in paragraph 2, above. That is, any ownership of a business that commences after marriage would become marital property, and therefore, it would be subject to division in a divorce. The founder of Amazon, Jeff Bezos, and his wife, MacKenzie Bezos, dealt with this issue in their divorce in 2019. MacKenzie Bezos received $36 billion in the divorce settlement. Food for thought: if you are planning to become the richest person in the world as is Jeff Bezos, and you want to get married, it’s probably sound advice to get a prenuptial agreement.