Lance J. Nelson, Esquire

Prenuptial Agreements are simply contracts entered into by two people prior to marriage. The purpose of the Agreement is to spell out and define certain economic and other rights between the parties. With Prenuptial Agreements, even couples with modest means can legally protect individual assets like homes, family businesses and estates in the event of separation, divorce or the death of one spouse.

Different people have different reasons for entering into Prenuptial Agreements. Some of the more common purposes served by a Prenuptial Agreement include:

• Protecting and providing for children of a prior marriage, particularly in the event of death;
• Protecting a family business;
• Supporting an estate plan;
• Protecting assets acquired before or during the marriage, in the event of separation, divorce or death;
• Defining the personal and economic relation of the parties during their marriage, including contribution and expenses, child rearing and marriage roles;
• Defining and protecting an anticipated inheritance; and
• Preventing lengthy litigation in the event of divorce.

Obviously, this is not an exhausted list of purposes served by a Prenuptial Agreement. There is essentially no limitation but one's imagination in terms of what can be addressed in a Prenuptial Agreement.

Ensuring the Validity of the Prenuptial Agreement
In 1990, the Pennsylvania Supreme Court in the landmark case of Simeone vs. Simeone upheld the validity of Prenuptial Agreements. The Supreme Court held that Prenuptial Agreements are essentially no different than any other contract.

As part of an overhaul of the Divorce Code, the Pennsylvania General Assembly adopted a new code provision dealing specifically with premarital agreements. New section 3106 applies to agreements executed after January of 2005. The initial reaction to section 3106 is that it simply codifies the Simeone case. It will likely be several years before courts are asked to interpret and apply section 3106. However, due to the intimate nature of the relationship between prospective spouses, certain rules have evolved concerning the validity of Premarital Agreements.

Full disclosure. The single most important factor in determining the validity of a Prenuptial Agreement is whether both parties had full disclosure of the other's assets and liabilities. While it is not necessary to have appraisals of assets done and exact values placed on assets, the disclosure must be precise enough so as not to obscure the general financial resources of the parties. A Prenuptial Agreement will be presumed to be valid where it provides that there has been full disclosure by the parties to one another.

Duress. As with other contracts, Prenuptial Agreements potentially could be invalidated due to allegations of duress. In practice, few Prenuptial Agreements have been invalidated on this basis. In one particularly remarkable case, the wife-to-be was 18 years old, three months pregnant and unemployed. She was told by her husband-to-be that without an Agreement there would be no wedding. Against her attorney's advice, she signed the Agreement, which was later upheld over her allegations of duress.

Fraud and misrepresentation. Prenuptial Agreements will be overturned if one party can prove fraud and/or misrepresentation. In practice, allegations of fraud and misrepresentation are viewed quite similar to the issue of non-disclosure. For example, a Prenuptial Agreement was overturned where the husband had represented the values of certain real estate as being $445,000, when he was negotiating to sell the same property for $800,000.

Prenuptial Agreements: Not Just for the Wealthy
Parties with modest means can benefit from Prenuptial Agreements in many common scenarios. For example, young couples frequently get contributions from one or both of their parents to purchase a house. It is possible through a Prenuptial Agreement to protect a parent's contribution to their child's house.

Another common situation is where one of the two parties has purchased a house prior to the marriage and both parties live in the house after marriage. Several issues – from who retains ownership to who maintains the house to the rights of the non-owner – can be dealt with in a Prenuptial Agreement.

Perhaps the most common situation for a Prenuptial Agreement involves a second marriage. Prenuptial Agreements can be very effective tools in this situation. They can be used to protect the inheritance of the children of the first marriage.

Lastly, those parties involved in a family business can benefit from a Prenuptial Agreement. Divorce can wreak havoc with a family or closely held business. 

Summary
Prenuptial Agreements can be very effective tools in a variety of situations. If handled correctly, both spouses can come away from the Agreement feeling that they have been treated reasonably and fairly.

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