Monday, July 10, 2006

Even if you are not Bill Gates, Donald Trump or Britney Spears, you could still benefit from a prenup!!

Even the non- mega rich set benefits from a prenuptial agreement – or at least considering it.

Ultimately, not every marriage needs a prenuptial agreement. However, a basic understanding of the financial ramifications of wedded unity, even if the couple ultimately decides against a formal agreement, provides a foundation for financial decisions and can even help newlyweds avoid financial pitfalls.

Marriage comprises love, romance, companionship, trust, children, family and many other heart warming matters. However, marriage also involves the melding of two financial entities, not unlike any business partnership.

Saying "I do" usually also means saying "I will financially support you" and sometimes means "What’s mine is yours, even if I am the only one working, and saving" and can even mean "I will be responsible for your debt."

Although, I would hope, most people walk down the aisle with the sincerest of intentions and noblest of goals, some marriages do fail. As a divorce lawyer, I have had countless conversations with potential and current clients, friends, associates, and other lawyers, wherein a basic tenet of divorce law shocks and surprises. Having a general understanding of the law regarding marriage, prior to becoming Mr. and Mrs. could save a lot of worry and angst. Here are some examples of some common misconceptions about marriage and divorce.

I had my house before the marriage, and it is still titled in my name, so if I get a divorce, I keep the house and will not owe my spouse a thing.

Answer: NOT NECESSARILY TRUE!


In Pennsylvania and New Jersey, marital property is not governed by the title to that property. In the case, of an asset owned before the marriage, the general rule is to include the increase in value in the marital pot. Therefore, if your house was worth $100,000 when you married, and a real estate boom resulted in an appraisal of $300,000 on the day of your divorce, the increase in value ($200,000) might be considered marital property. You could find yourself having to re-finance, just to buy out your spouse’s interest.

We are going to have equal, 50/50 custody of the kids, so I won’t have to pay child support.

Answer: NOT NECESSARILY TRUE!


Child support is based on income in most cases. Therefore, even if the parties truly share custody of the children, the parent who earns more money will most likely pay child support to the other parent, even though they share the time with the children.

We have nothing in joint names so there is nothing to divide.

Answer: NOT NECESSARILY TRUE!


The actual title to the property, whether it is real estate, a bank account or an investment, does not govern how it will be treated in a divorce. Let us say, for example, that a wife does not work because she raises the children. After ten years, the parties file for divorce – and the husband has contributed $100,000 to a 401K account. That account is solely in husband’s name – but is considered a marital asset so wife definitely has an interest in that money.

My spouse has credit card debt but it is in her name so it is not my problem.

Answer: NOT NECESSARILY TRUE!


The title to debt, like the title to assets, does not generally govern how the item will be treated for purposes of divorce. Generally, debt accrued during the marriage will be divided upon divorce, even if it is all in one person’s name.

Divorce can and usually is messy, painful and frustrating. Being armed with the knowledge of how the law works can help couples steer clear of pitfalls and plan accordingly. It is not just the wealthy that need to think about the protections that prenups offer — in fact, the rich can usually weather the financial storms of divorce so that paying thousands of dollars (and sometimes tens of thousands) to lawyers and accountants to unwind the financial entanglements of marriage will not be as financially devastating as it would be to a hardworking individual who faces large legal bills to divide the fruits of your average life: real estate, 401ks, savings and investments. So, even if you are not going to get your intended to sign on the dotted line of a prenuptial agreement, at least be prepared with the knowledge of the legal aspects of marriage - so you can be guided accordingly.

This article is meant to be informative and is not intended, nor can it, provide specific legal advice.