Tying the Knot or Tangling the Terms? Prenup Pitfalls to Avoid

What is a Prenuptial Agreement?

            Even if you're only a casual observer of the latest entertainment news, you've likely encountered stories of high-profile divorces, often mentioning prenuptial agreements or “prenups” among the sensational headlines. This can create the misconception that prenuptial agreements are reserved for celebrities or the ultra-wealthy. In reality, prenuptial agreements can be a valuable tool for any couple seeking to maintain control over their property and assets in the event of a divorce.

            A prenuptial agreement is a legally binding contract that dictates how debts, personal property, real property, bank accounts, retirement accounts, gifts, inheritance, and other assets will be shared and divided following a divorce. It becomes enforceable immediately after marriage and can only be revoked or amended by a written agreement between the parties. When considering whether a prenuptial agreement is right for you and your partner, it is important to consult with an experienced attorney familiar with Oregon law. Proper legal guidance can help affirm that your agreement is comprehensive and enforceable, rather than a document that could lead to future costly disputes.

What Law Governs Prenuptial Agreements? Do I Need Specific Provisions?

            For a prenuptial agreement to be enforceable, it must adhere to the requirements outlined in the Uniform Premarital Agreement Act (UPAA), which was adopted in 1987 and is codified under ORS 108.700-108.740. The UPAA specifies certain conditions that must be met for the agreement to be valid and enforceable under Oregon law. A prenuptial agreement must:

1. Be in writing: An oral agreement is not legally binding or enforceable.
2. Be signed by both parties: While a witness is not required to validate the agreement, it must be signed by both individuals involved in creating the agreement.
3. Be executed voluntarily: The agreement must be signed without any form of coercion or duress.
4. Include full financial disclosure of assets and liabilities: Both parties must fully disclose their financial situation at the time of signing, ensuring that each party has a clear understanding of the other's financial status.
5. Not be unconscionable: The terms of the agreement must be fair and not excessively one-sided, as provisions that disproportionately favor one party may lead to the agreement being deemed unconscionable and unenforceable.
6. Must not include provisions relating to child custody, child support, or parenting time. An agreement that contains these provisions will often be deemed invalid

Beyond these statutory requirements, the provisions of a prenuptial agreement can vary significantly based on the specific financial circumstances of the parties and their objectives. Common provisions often include, but are not limited to:

• The rights of each spouse to separate or marital property
• How assets will be divided in the event of divorce
• Spousal support provisions
• Treatment of inheritances acquired during the marriage

            While the list of requirements for enforceability is relatively concise, the range of provisions that may be included in a prenuptial agreement is much broader. It is important to be mindful of potential pitfalls that could undermine the enforceability of the agreement.

What Pitfalls Arise in Prenuptial Agreements?

Time

            A rushed process can create opportunities for coercion, incomplete financial disclosures, unfair terms, and other legal challenges that can render the agreement unenforceable. Adequate time allows both parties to reflect, negotiate, and consult with independent legal counsel to ensure that the agreement is comprehensive, fair, and legally sound. By allowing sufficient time for the creation of a prenuptial agreement, couples can avoid potential pitfalls and create an agreement that effectively protects both parties' interests and stands up to legal scrutiny.

Statutory Requirements

            Adhering to statutory requirements when drafting and executing a prenuptial agreement is critical for guaranteeing its enforceability and preventing costly disputes and litigation in the future. When provisions—such as those related to spousal support—are not explicitly and properly included, they may not be recognized by a court. Often, you will find these issues with online forms that fail to include Oregon specific language that satisfies the statutory requirements. To avoid disputes, maintain fairness, and protect both parties' interests, it is crucial to follow all legal requirements and consult with an experienced attorney when creating a prenuptial agreement. This assures that the agreement will be honored in the event of a divorce, safeguarding the intentions of both parties and reducing the risk of future issues and the potential for additional expenses.

Estate Planning and Prenuptial Agreements

            A prenuptial agreement is not a substitute for a will, nor does it replace one. While it can be used as a tool to determine a party's intent, it does not govern decisions about guardianship, healthcare directives, powers of attorneys, or trusts – all of which can ensure comprehensive protection for one's estate and loved ones. Without comprehensive estate planning, conflicts may arise between the terms of a prenuptial agreement and the provisions outlined in a will, potentially resulting in confusion or significant legal challenges regarding asset distribution. A prenuptial agreement typically addresses matters in the event of a separation or divorce, but once the parties are married, it is necessary to finalize all relevant estate planning documents to ensure consistency and avoid any potential conflicts.

Taking the time to work with an experienced estate planning attorney following the execution of a prenuptial agreement ensures that both your prenuptial agreement and estate planning documents are clearly written, legally enforceable, and provides peace of mind knowing that your intentions regarding asset distribution and financial responsibilities will be respected, both during your marriage and after your passing.

Full Financial Disclosure and Equal Listing of Assets

            Parties must fully disclose their assets and reasonable estimated value, liabilities, income, and other relevant financial information before executing a prenuptial agreement. The transparency makes certain that both parties have a clear understanding of each other's financial situations, enabling them with the knowledge to make an informed and consensual decision about the terms of the agreement. In the absence of full disclosure, a court may invalidate the prenuptial agreement, as the lack of transparency could undermine the fairness and validity of the agreement. When the parties carefully take steps to address all financial matters upfront, it protects both parties' interests and minimizes the risk of future disputes and costly legal challenges.

Conclusion

            A prenuptial agreement can be a highly effective tool for protecting both parties' financial interests and providing clarity in the unlikely event of a divorce. However, it is imperative to approach the agreement with careful consideration of key factors. With careful drafting, adherence to legal requirements, and full transparency, a prenuptial agreement can provide peace of mind, protect your financial future, and serve as a valuable tool for both spouses. The team at Paulsen, Gilgan, & Cottle is here to help you navigate the complexities of prenuptial agreements and safeguard your legal rights and financial interests. We are committed to answering your questions about prenuptial agreements in Oregon. We offer consultations and will gladly discuss your matter with you at your convenience. Contact us today at 503-625-5529 to schedule a consultation.

Dustin Vergason, Of Counsel

Victoria Sparks, Certified Law Clerk