Bruce I. Shapiro, Pecos Law Group
Prenuptial Agreements.
When getting married in Nevada without a prenuptial agreement, one is expressly consenting to be bound by the laws of Nevada upon a divorce. Prenuptial agreements may not be considered “romantic,” but ugly divorces are even less romantic. Approximately one-half of all marriages in the United States end in divorce. It is generally easier to address potential problems or issues before marriage rather than in the context of a divorce. If you and your spouse cannot agree on terms for a prenuptial agreement, what does that say about your prospective marriage? Moreover, prenuptial agreements do not just protect the wealthier party. A properly drafted prenuptial agreement may provide both parties protection under Nevada law. Further, considering the costs of a wedding a potential divorce, the cost of a prenuptial agreement may easily pay for itself.
In sum, it is better to discuss and resolve the “tough issues” before marriage, rather than upon a possible divorce.
Although no prenuptial agreement can possibly address every possible issue, issues that should be considered when drafting a prenuptial agreement include:
- Whether existing property will be retained as separate property or become community property?
- Whether the appreciation of property will be separate property or community property?
- Whether earnings or other income will be considered community property after marriage?
- Whether there will be alimony or other compensation paid by one spouse to the other in the event of a divorce?
- Whether a business owned by one of the parties will remain separate or begin accruing a community property interest?
- Will there be inheritance rights or other benefits upon the death of either party?
- Do the terms of the agreement contemplate possible changes in the law, such as tax law?
Although it is legally possible to have an enforceable prenuptial agreement with only one person having independent legal counsel, it is not advisable, and most experienced attorneys will not participate in the negotiation or drafting of a prenuptial agreement where both parties do not have licensed, Nevada counsel. Further, what you, legally, may do in a prenuptial agreement and what you should do, legally and morally, are different. Additionally, although theoretically a prenuptial agreement may be valid if signed the day before the marriage, it is recommended to begin the process no more than 90 days before the marriage and having an agreement signed at least 30 days before the wedding.
While no agreement can provide “iron-clad” protection, with the proper planning, the appropriate pre-agreement and post-marital conduct, the chances of a prenuptial agreement being enforceable and achieving one’s objectives may be significantly enhanced
NRS 123A, and the Nevada Supreme Court cases of Fick v. Fick, Sogg v. Nevada State Bank and Kantor v. Kantor, contain virtually all Nevada law relating to the enforcement prenuptial agreements. All parties entering into a prenuptial agreement should be familiar with these authorities.
Marriage Planning Without a Prenuptial Agreement
Some of the same techniques that are used to protect one’s assets from a creditor may also be used to protect one’s separate property, even without a prenuptial agreement, in the event of a divorce. The use of entities and trusts not only provide estate planning benefits, but may also provide some financial protection in the absence of a prenuptial agreement. Further, the proper planning using separate bank accounts and avoiding the commingling of post marriage earnings with premarital funds may also afford some protection. While these alternatives may afford some protection, they cannot completely replace the protections provided by a prenuptial agreement.
All parties should be aware of the legal significance of signing a quitclaim or other deed relating to real property. In Nevada, there is a legal presumption that a spouse signing a quitclaim deed to title property either in the name of the community or in the name of the other spouse is a gift of that spouse’s interest in the property. For example, if a spouse owns a home before marriage and chooses to place their spouse’s name on the home after marriage, it can create the presumption of a gift and eliminate the separate property interest that spouse may have had in the home. Alternatively, if a married couple owns a home jointly and one spouse signs a quitclaim deed placing title in the sole name of the other spouse, for example, as part of a refinance, it can create a presumption that the spouse not on the title gifted all of their community property interest in the home to the spouse on the title.
The legal ramifications of signing these deeds is often not discussed during the home-buying or refinancing process, leaving many individuals caught by surprise when they file for divorce and discover they may have waived their interest in a home. Married individuals who are considering changing the title to a home they own should consult with an attorney before doing so to understand what legal effects it may have.
Cohabitation Agreements
Cohabitation agreements are relatively new and have seen increased popularity as more couples live together rather than get married. While there is no “common law marriage” in Nevada, specific financial risks may exist for couples living together who chose not to get married. Cohabitation agreements have not been judicially examined in Nevada and the expense of such an agreement is justified in only limited circumstances. Most people will be better served with a prenuptial agreement because a properly drafted prenuptial agreement provides more certainty in being enforced than a cohabitation agreement.
Marital Settlement Agreements
A marital settlement agreement, often referred to as an “MSA,” is a legally binding contract between two married persons that sets forth the terms and conditions of a divorce. A marital settlement agreement contemplates that the parties will separate and likely divorce in the near future, but it does not necessarily require them to immediately obtain a divorce. The marital settlement may address terms for the custody and support of children, the support of a spouse and the division of property and debts.
The terms of the marital settlement agreement may allow the parties to attempt a reconciliation before immediately obtaining a divorce. Parties who are not absolutely sure they want to divorce may find it helpful to finalize the terms of a potential divorce, without immediately divorcing, in order to remove the uncertainties and pressures that a divorce proceeding present. After the parties sign a marital settlement agreement they may subsequently decide whether to void the agreement and reconcile, enter into a post nuptial agreement, or finalize the divorce. Although there is not a legally specific time as to the “shelf life” of a marital settlement, it will generally remain enforceable for a reasonable period of time. What is reasonable may be determined by the parties continued living together and whether they observed the terms of the marital settlement agreement after it was executed.
Post Nuptial Agreements
Postnuptial agreements are similar to prenuptial agreements but they are entered into after marriage. Unlike a Marital Settlement Agreement that is intended to resolve matters in contemplation of a divorce, a postnuptial agreement presumes the parties will remain married. Therefore, the scope of what a postnuptial agreement may accomplish is more limited than a typical prenuptial agreement and the enforcement is more scrutinized by the courts than prenuptial agreements. Spouses entering a postnuptial agreement have a fiduciary duty to one another that requires a higher degree of disclosure and fairness. It is also essential that both parties have independent counsel when entering into a post nuptial agreement. Postnuptial agreements remain relatively untested in Nevada, but may be useful in certain instances such as estate planning or resolving marital disputes.