Protecting Your Financial Future Through Pre-Nups

Prenuptial and postnuptial agreements can be useful tools for planning your financial estate if they are properly prepared and executed. These agreements can occur prior to the marriage with a prenuptial agreement, or after the marriage with postnuptial agreements. The courts evaluations of the validity of these agreements are essentially the same.

Washington State is a community property state. In most cases this means the property acquired by the parties after marriage will be considered the community property of the parties jointly. Separate property is generally that property acquired prior to marriage or after the date of separation.

The main exceptions to the general rule that property acquired after marriage is community property are inheritances, gifts and personal injury awards, excluding damage awards for damage to community property or lost wages. Upon divorce the parties' community property will be subject to distribution on a fair and equitable basis by the courts.

In order to change the default rules of the state in the determination of separate, or community, property designation the parties need to enter into a contractual agreement, prenuptial or postnuptial, that changes the rules of how their financial assets will be treated upon divorce. The general treatment of these agreements will focus on the same fundamental elements of substantive and procedural fairness.

Procedural fairness is a review of how the parties went about entering into, and completing, the agreement. Substantive fairness is an evaluation of the particular provisions contained with the agreement of the parties.

In order to be accepted as valid by the state courts; the parties need to take steps to ensure the agreement is procedurally, and substantively, fair with transparent disclosure of the parties' financial positions.

To reduce the possibility of the court invalidating the agreement care should be taken to ensure the actions of the parties are in accord with the expectation of the court such action include, but are not limited to:

  1. Preparing a written agreement prior to marriage.
    1. Verbal agreements are not going to be enforced. Put it in writing.
  2. Ensuring both parties have read and understand the agreement.
    1. If one party does not speak English as a first language then it would be advisable to have a translator assist that party and note such help with a statement within the document itself and a certification from the translator; or a document prepared in both languages…or both.
  3. Allowing both parties to enter into the agreement freely and independently without undue pressure.
    1. Duress can take many forms and has no place in any agreement of this kind. Avoid the presence, or even the appearance, of improper coercion.
  4. Ensuring the parties have the opportunity to have the agreement reviewed by an attorney of their independent choosing.
    1. Having each party find their own attorney is the best advice.
  5. Having both parties fully and accurately disclosed their financial assets, debts and overall financial standing to the other.
    1. Be exhaustive; hiding assets, or failing to disclose the parties' financial situation, can be fatal to the validity of the agreement.
  6. Giving both parties have ample time to review the agreement and consider its effects prior to marriage.
    1. Try to avoid marriage within a month of the prenuptial agreement to ensure each party ample time to consider the importance of the agreement and its effects.
  7. Avoiding an agreement that is so unconscionable as to render the agreement invalid.
    1. An example may be when one party is made responsible for all of the debts and obligations with no opportunity to share in the proceeds of the parties union.
  8. Dropping invalid provisions that won't be adopted by the court.
    1. An example would be agreements to limit a modification of child support that would otherwise allowed under the statute.

Failure to properly follow the procedures above are the major reasons the court chooses to invalidate prenuptial, or postnuptial agreements, but the list isn't exhaustive and the factors could vary based on the circumstances unique to the parties. Essentially, efforts should be made to ensure the agreement is procedurally and substantively fair for the parties.

When the courts are making determinations regarding the validity of these agreements the court will review whether the agreement is substantively fair and then determine procedural fairness. The court may find an agreement was substantively unfair and still uphold the agreement if it finds the procedural fairness was sufficient.

One of the best indicators for the court in determining the fairness of the process is the assistance of competent legal counsel for each party. Each party should independently retain their own legal counsel to provide the legal guidance, and assistance, that are so critical in such an important undertaking.

This article is not intended as legal advice.

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