This article originally appeared in the November 2015 issue of 425 Business.
McKinley Irvin attorney Jennifer Payseno is one of the best-regarded family lawyers in the area. She has been practicing family law since 1992 and has been affiliated with the firm’s Bellevue and Seattle offices since 1999. Payseno has served as an officer and trustee of the King County Bar Association and is known for her integrity and courtroom skills. We caught up with her to talk about a subject not many want to broach: prenups.
Why should couples arrange a prenuptial agreement?
Although there is a negative connotation to the word, prenups can be useful tools to protect assets and minimize the cost and risk associated with litigation in the event a marriage doesn’t last. Executing a prenup can establish what property each spouse brought to the marriage, and can make it clear that separate property is to remain separate.
Such an explicit agreement can preclude any claim that the separate property was “gifted” when entering into marriage. A prenup can, by its terms, prevent the court from awarding the separate property of one spouse to the other spouse, which is especially important in family business situations.
Prior to entering marriage, spouses can negotiate and specify what should happen to their property in the event of divorce with the benefit of not having to negotiate while facing the emotional stress of divorce itself.
If engaging in a prenup, what are some factors to consider?
The three biggest factors to consider when engaging in a prenup are fairness, full disclosure with legal representation, and timing. “Fair” prenups generally allow for the creation of community property, provide for fair allocation of community property upon divorce or allow the court to make a fair allocation, and won’t limit a spouse’s ability to request spousal support.
Equally important is full disclosure as to the nature and extent of individual property interests and debts. This is particularly important if you are the spouse with greater assets. The more detailed in your disclosure, the more likely the court will be able to find that both spouses had full knowledge concerning the property involved.
In terms of timing, while there is no set time by which a prenup must be finalized, the time must be sufficient to allow the parties and attorneys to make full disclosure, understand the rights involved, and negotiate the agreement. If you are stopping by your attorney’s office to sign the prenup on the way to your wedding, I would not count on that prenup being enforced by the court.
Are prenups just for the wealthy?
No. Prenups can serve many purposes, some of which have little or nothing to do with the wealth of the spouses-to-be. For individuals who prefer to control risk, prenups can outline what will occur in the event of a divorce.
Such agreements, when fairly executed, can be conducive to marital tranquility. A prenup can be executed to simply preserve the separate character of a home owned by a spouse prior to marriage; this can be even more important when children are involved and the home in question has served as the child’s residence.
Similarly, a prenup can preserve the separate character of a business owned prior to marriage, which, among other benefits, can help shield the marital assets from liabilities incurred by the business.
Frequently, prenups are used to preserve family property — such as family businesses or investments — which were created by a prior generation and are expected to continue for the benefit of future generations.