The prenuptial document (prenup) under The Matrimonial Property Act is an agreement made by parties to an intended marriage and which establishes the property and financial rights of each spouse in the event of a divorce. It sets out the terms of ownership of assets, how to treat future earnings between the parties, control of the property and how the properties will be divided in the unfortunate event of a divorce. This pre-marital agreement on its own takes precedence over other principles of subdividing matrimonial property.
A prenup is deemed to be a tool that addresses the inherent financial risks associated with a divorce. Prenups enable parties to pre-characterize their current and future properties and any related income streams as either marital or non-marital. Non-marital property may include property acquired by gift or inheritance before or during the subsistence of a marriage as well as property that is acquired by one party before a marriage.
Prenuptial agreements cannot be used to:
- Determine custodial arrangements of children
- Define matters of support of children
- Define any personal matters such as relationships with family
Amendment of a prenuptial agreement
Amendment of an already existing agreement can be done by way of addition, deletion, correction or variation. Prenuptial agreements are contracts like any other and conform to the Laws of Contract. This is to say that the amendment must be in writing and the consent of the other spouse must be obtained. In view of the foregoing the fear of the unknown is reason enough for one to opt for a prenuptial agreement.
It operates like an insurance cover whereby one gets a medical cover or accident cover without anticipating that these things will ever happen and in most cases, they do not. The insurance cover however provides peace of mind so that in case of any unfortunate eventuality one is covered. A prenup therefore presupposes how parties shall divide property in case a divorce happens.
When are prenups essential?
Prenuptial agreements are like insurance policy in case of divorce, here are some of the situations when prenups become very essential.
a. When parties have substantial and disparate assets before marriage
Substantial assets are those of considerable value. Parties will sign a prenuptial agreement which outlines that upon separation, these assets will not be divided amongst them, and each party will walk away with their own assets and debts.
b. When there are children from another marriage
One of the most important reasons to have a prenuptial agreement before a second or subsequent marriage is to protect the children who are a product of a previous relationship. A prenuptial agreement could, therefore, specify what type of property or assets will go to the children and to a spouse in case the marriage ends.
c. When either party’s property is subject to inheritance or a gift
The primary goal here is to have effective segregation of the inherited funds. A prenuptial agreement is the appropriate tool for the job. Additionally, a gift made during a marriage can also be dealt with in a prenup agreement.
d. When other parties who are not parties to the marriage are interested in the property
In the event that there is another person who has interests in the property other than a spouse, it is important to list this property as a separate property to avoid contentious matters when it comes to dissolution of a marriage.
Myths and misconceptions about the prenuptial agreements
There are a number of myths and misconceptions that surround prenuptial agreements that are not actually true, some of them are listed below.
a. Prenuptial agreements are for the wealthy
The goal of a prenuptial agreement, aside from protecting wealth, is to ensure that in the event of a divorce the couple can pre-determine the resolution of many of the issues. It allows couples the freedom to write their own set of rules within the limitations set by the law. This can help reduce controversy and litigation, which is bound to be of financial benefit to both parties.
b. Prenuptial agreements are only useful in case of a divorce
Prenuptial agreements an also prove useful in case of one’s demise. It can be used to preserve one’s wishes as would an estate-planning document. Without a prenuptial agreement, it is possible that one’s property upon his/her death will be dealt with differently than was intended. A prenup can avoid this occurrence. Additionally, prenups may be used to clearly outline the parties’ expectations for handling money during marriage, i.e. how to acquire property, whose earnings will be spent for what purposes, etc. It allows parties to have a written understanding of these expectations so that they are on the same page.
c. Only the spouse who will earn the most or with the most assets will benefit from a prenuptial agreement
In the event of a divorce, the prenuptial agreement can provide the non-earning spouse with guaranteed protections that s/he may otherwise not receive upon divorce, or may have to incur expenses and legal fees to obtain.
d. Prenuptial agreements are expensive
In light of the potential cost and time that it can take to complete a divorce action, the cost of obtaining an advocate to prepare a prenuptial agreement is relatively insignificant. With a mutual understanding of how the divorce will be handled, parties may be able to circumvent much of the struggle that most divorcing couples experience, including the complete breakdown in communication and the distress to the children.