Reasons for Premarital Agreements

People intending to marry use premarital agreements for several reasons, some of which may be interrelated. Premarital agreements help clarify the parties' expectations and rights for the future. The agreements may avoid uncertainties and fears about how a divorce court might divide property and decide spousal support if the marriage fails.

A man or woman who wants a future spouse to sign a premarital agreement often has something he or she wants to protect, usually money. One or both partners may want to avoid the risk of a major loss of assets, income, or a family business in the event of a divorce.

People marrying for a second or third time also might desire to make sure that certain assets or personal belongings are passed on to the children or grandchildren of prior marriages rather than to a current spouse.

The less wealthy spouse generally is giving something up by signing a premarital agreement. That spouse (as well as the other spouse) is agreeing to have his or her property rights determined by the agreement rather than by the usual rules of law that a court would apply on divorce or death. As will be discussed later (see chapter 10), courts have rules for dividing property when a couple divorces. In some states (such as California), courts automatically divide equally the property acquired by the husband and wife during the marriage. In most states, courts divide property as the court considers fair, and the result is less predictable. The split could be fifty-fifty or something else.

If one spouse dies, courts normally follow the instructions of that person's will, but under state laws the surviving spouse usually is entitled to one-third to one-half of the estate regardless of what the deceased spouse's will says. If the husband and wife have signed a valid premarital agreement, however, that agreement will supersede the usual laws for dividing property and income upon death. In many cases, the less wealthy spouse will receive less under the premarital agreement than he or she would receive under the usual laws of divorce or wills.

If the less wealthy spouse will receive less under the agreement than under the general laws of divorce and death, why does he or she choose to sign the agreement? The answer to that question depends on the individual.

Some people prefer to control their fiscal relationship rather than to leave it to state regulation. They may want to avoid uncertainty about what a court might decide if the marriage ends in divorce. For some, the answer may be "love conquers all"--the less wealthy person may just want to marry the other person and not care much about the financial details. For others, the agreement may provide ample security, even if it is not as generous as a judge might be. Still others may not like the agreement, but they are willing to take their chances and hope the relationship and the financial arrangements work out for the best.