Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: MONDAY, May 16, 1994 TAG: 9405170029
SECTION: MONEY PAGE: 6 EDITION: METRO
SOURCE: By MAG POFF STAFF WRITER
DATELINE: LENGTH: Long
As unromantic as it sounds at this time of bliss, maybe you should be thinking as well of more distant possibilities such as divorce, death and estate planning. In short, you should be asking yourself whether you need a prenuptial agreement before the big day.
Maybe you are already married. For many of the same reasons, you might want to consider signing a marital agreement. Not everybody requires such a contract, but nearing the traditional bridal season makes this a timely topic.
Although she is a lawyer who specializes in family and divorce law, Cheryl Watson Smith married without signing a pre-nuptial agreement.
Part of her reason was emotional. "You say you do it for life," she said of marriage. "You go into it believing it's forever."
But the primary factor was that she was in the situation where a prenuptial agreement is least needed. That is, a first marriage in which the partners do not yet have major assets and are in approximately identical financial states.
Smith, who is with the Roanoke law firm of Mundy, Rogers & Frith, said a prenuptial agreement is important for widows and widowers entering a second marriage, especially if they have children from a prior marriage to protect. The same is true of people who are divorced.
It's especially advisable in second marriages, she said, because they have less chance of surviving than first marriages. In her law practice, she said, multiple divorces are common.
Young professionals who have established careers also are candidates for prenuptial agreements, Smith said. This is vital where the partners have a disparity in income or assets.
Agreements, she added, are absolutely crucial if one partner has established a business or stands to inherit part of a family business. Pre-nuptial contracts are needed to keep such businesses in the family and prevent their potential fracturing in a divorce.
The Virginia law applying to prenuptial agreements (Section 20-147) went into effect in July 1986, Smith said, although people getting married have drawn formal contracts for years.
Both partners must sign the contract. Smith said it's a good idea to draw the contract well before the wedding. The bride and bridegroom must each have a lawyer, because their interests are potentially in conflict.
A contract signed on the eve of the wedding without proper legal representation might be set aside later on grounds that the agreement was coerced, she said.
The agreement also can be challenged if it can be proved that one of the parties was not honest about his or her financial situation.
Even though it is signed in advance, a prenuptial agreement becomes effective at the moment of the marriage.
The only ban on what can be covered is that people can't contract to do something illegal, Smith said. Nor can people agree to get a divorce. Smith said contracts specifically state that they don't constitute an agreement to divorce.
The contracts do cover what will happen in the case of divorce or death. The contract sets forth the disposition of all existing assets of each party, such as a business, real estate, stocks or bonds.
As a separate item, Smith said, the contract should deal with how to handle assets and income acquired during the marriage. Without these provisions, marital assets will be handled through a divorce court.
This can present complications. One party, for instance, might come to the marriage owning a house at Smith Mountain Lake. Then, during the marriage, the other partner might perform work on the house or even help pay for an addition. How is this to be treated? Most often, Smith said, the contract provides that the house remains with the original owner.
One partner might own stocks, but trade over the years of the marriage so that the portfolio changes completely. How are you going to deal with this change?
Some contracts, she said, provide varying outcomes if the marriage lasts five, 10 or 15 years.
Pensions are another consideration, according to Smith. Does each person retain his or her pension or will they be shared in case of divorce? What happens to a partner - usually the woman - who forgoes an education or career in order to care for children? Retirement is something few young people consider, Smith said.
She urged newlyweds to write agreements that are both tight enough to cover the present situation and broad enough to take care of matters that nobody foresees. Sometimes, she said, terms are so ambiguous that the contract must go before a court, so it's a good idea to be specific.
Death is another situation that must be covered, and the contract usually requires drawing wills with specified provisions. For instance, she said, most people in a second marriage want heirlooms and assets from the first marriage to go to the children of that first marriage. Even in a first marriage, she said, a contract may require a partner to return family heirlooms to the original owners in case of death or divorce without children.
Even people who are already married can sign what is called a marital agreement providing for disposition of heirlooms, assets of a first marriage and the like, Smith said.
by CNB