Prenuptial agreements are uncomfortable.
Because few people adequately plan for the inevitability of death, it is no surprise that even fewer plan for the possibility of divorce. Other factors contribute to this: Many believe that planning for a failed marriage increases its likelihood; many feel that planning for divorce is inconsistent with their marriage vows (“Until death do us part”, right?); and many view prenuptial agreements as merely for selfish people and inconsistent with the idea of marriage as team endeavor of shared benefits and responsibilities. However, having represented my fair share of clients in painful, drawn-out divorces, I’m convinced these ideas are mostly misguided. In this article, I hope to dispel some of the stigma of prenuptial agreements, point out their benefits, and briefly explain their requirements under Arkansas law.
Done thoughtfully and transparently, a well-drafted prenuptial agreement can do more good than you might think.
Misconceptions and Benefits of Prenuptial Agreements
To begin, it is crucial to understand, as Erik Newton points out, you already have a prenup. As he puts it, “The laws covering marriage and divorce in every state are nothing more and nothing less than premarital agreements. So the question is not whether you should have a prenup, but whether you want your state’s default version of one.”
Few people marry expecting to divorce. While the divorce rate thankfully is declining, divorce still remains common. And many couples believe they set themselves up for failure by planning for it. It is true that lack of commitment is one of several major causes of divorce. But commitment and planning for the possibility of failure is a false dichotomy. And as for your marriage vows, executing a prenuptial agreement does not mean you plan to break them. You might be faithful until the day you die, but your spouse might not. And if your spouse one day decides to leave you, you can find yourself in a host of terrible situations.
The idea that prenuptial agreements hinder spouses from giving themselves to each other is misplaced. Prenuptial agreements do not in themselves prevent sharing bank accounts, jointly owning property, or co-signing mortgages or notes. Further, they absolutely cannot affect the custody and support of your greatest shared possession—your children. Courts have the final say in directing the support of your children and cannot be thwarted by a prenuptial agreement. Prenuptial agreements do not take away the consequences of divorce. And they do not make divorce easy.
Prenuptial agreements are not just about you. You may have elderly parents who rely on your financial support. A divorce could take with it your means to support them. You and some partners may own a business. Because your business equity is a marital asset, a divorce could entitle your spouse to half the value of your shares in the company. If you don’t have other assets to satisfy your wife’s share of the value, you may have to liquidate your shares, and, depending on your ownership agreement, this could be a total disruption to the business for you, your partners, and your employees.
Prenuptial agreements are not merely for selfish people. I like to point out that prenuptial agreements are free to award additional assets to a spouse when the divorce is caused by infidelity (or anything else). I once heard of a man who was prepared to give his wife “everything” in the event that he cheated on her. Fortunately, he was talked out of going quite to that extreme, though he eventually agreed in the event of infidelity to forfeit most of his interest in the marital estate. What was his motivation? He wanted his wife to be assured that he would remain faithful and that she was more important than his things. Still think prenuptial agreements are pure selfishness?
Lastly, I cannot overemphasize the benefit of certainty. The losers of divorce are always the children, but this is even more so in bitter, hard-fought divorces. Children are resilient when they see their parents cooperate with each other through the process, but can be affected permanently when they see their parents engaged in a drawn-out fight over property, debt, and spousal support. The certainty of prenuptial agreements hastens the divorce process and eliminates much potential for conflict.
Prenuptial Agreement Law in Arkansas
Prenuptial agreements in Arkansas are governed by the Arkansas Premarital Agreement Act, codified at Ark. Code Ann § 9-11-401 et seq. Both parties need to sign the agreement before a notary. The agreement takes effect immediately upon marriage, but the couple is free to amend the agreement at any time with a subsequent agreement signed before a notary. The following things may be decided by prenuptial agreement:
- the rights and obligations of each of the parties in any of the property of either or both of them whenever and wherever acquired or located;
- the right to buy, sell, use, transfer, exchange, abandon, lease, consume, expend, assign, create a security interest in, mortgage, encumber, dispose of, or otherwise manage and control property;
- the disposition of property upon separation, marital dissolution, death, or the occurrence or nonoccurrence of any other event;
- the modification or elimination of spousal support;
- the making of a will, trust, or other arrangement to carry out the provisions of the agreement;
- the ownership rights in and disposition of the death benefit from a life insurance policy;
- which state’s law governs the interpretation of the agreement; and
- any other matter, including their personal rights and obligations, not in violation of public policy or a statute imposing a criminal penalty.
Unlike most states, Arkansas law does not require that both parties consult separate attorneys, making prenuptial agreements more financially viable in Arkansas than in other states. However, I will mention a few cautions. First, Rule 1.6 of the Arkansas Rules of Professional Conduct does not allow an attorney to represent both spouses, absent informed consent that is confirmed in writing. If the parties agree for the attorney to represent them both, there is absolutely no attorney-client privilege between them. Also, both spouses must to disclose all their assets and financial obligations. This requirement can be waived, but only after consulting with legal counsel.
Either way, I recommend disclosure. Because finances are one of the most frequently cited causes of divorce, the disclosure process can be a great thing for a marriage. This is both a trust-building exercise and a opportunity for financial planning—a step that many couples neglect to their detriment.
I sum, if you still cling to old ideas about prenuptial agreements, I suggest you rethink them. They are not purely motivated by selfishness, they can protect your loved ones even more than yourself, and they can even be good for your marriage.
For more information about prenuptial agreements, contact the Johnson & Vines law firm.