The importance and pitfalls of prenup agreements for seniors
Published: February 19, 2013
Tags: Elder Law
Premarital agreements are not just for the wealthy and not just for the young. Prenuptial agreements are particularly important for persons marrying at a mature age who want to define for themselves various rights and responsibilities that marriage will bring. Otherwise, the law will define it for them in ways they may not expect. Whenever an elderly client marries, a prenuptial agreement should be considered.
Although clients marrying at any age have important matters to address, elderly clients have particular matters at stake. They may have critically needed assets to protect, children from prior marriage, and potential health and long term care issues. They also have enhanced issues of competency and unconscionability.
It is important to address what happens if the marriage ends in death or divorce. Along with their prenuptial agreements, they should be addressing wills, trusts, durable general powers of attorney, and medical powers of attorney. Consideration should be given to how remarriage will affect any existing benefits a client receives, and this should be carefully reviewed.
People of any age can enjoy the intimacy and companionship of a good marriage, and it is never too late to remarry. A client remarrying at a later stage in life may seek the advice of a family law attorney, an estate planner, or an elder law attorney. The attorney should be knowledgeable about the special needs of seniors and the laws which affect them, or the agreement may fail to cover important considerations.
Each person in the couple should have his or her own attorney representing that person’s own interests. Making an agreement is particularly difficult when two people are entering into a union and do not want to dampen the love they have for each other by a discussion of their finances, but it is important that they enter into the marriage with a common understanding and clear picture of what it will mean to them financially and that they legally incorporate the appropriate protections.
In drafting a prenuptial agreement, the attorney will be concerned with understanding the needs and wishes of the client, being alert to issues that could arise in the future, and addressing the issues that are of importance to that marriage. The pros and cons of potential terms should be discussed. The client needs to understand the terms of the agreement.
First of all, the agreement should be in writing. Second, it must be clear that both parties have the requisite capacity to enter into a contract. Next, the agreement must be entered into voluntarily under circumstances that are free of fraud, duress and undue influence.
Fourth, the agreement must not be unconscionable when entered into and, before the agreement is signed, each person should provide the other a “reasonable disclosure” of his or her property or obligations. This should be in writing and is best when it includes a listing with values of all income, assets, and obligations. While the statute permits a party to voluntarily and expressly waive in writing any right to disclosure of the property or financial obligations of the other party beyond the disclosure provided, it is strongly recommended that full disclosure be made and that it be as complete as possible.
Virginia has enacted a premarital agreement act, contained in Virginia Code §§ 20-147 et. seq. It defines a premarital agreement as “an agreement between prospective spouses made in contemplation of marriage and to be effective upon marriage.” It requires that the agreement be in writing and signed by the parties and provides that it shall be enforceable without consideration. It defines what matters may be included in a premarital agreement. This statute also addresses marital agreements.
Any attorney advising a client about a prenuptial agreement should be particularly aware of potential pitfalls to the enforcement or effectiveness of the agreement, including:
1. Carefully evaluating and documenting the capacity of the persons entering into the agreement, as advancing age can promote issues of capacity.
2. Allowing sufficient time between when the agreement is signed and the marriage. At least a month is recommended.
3. Paying close attention to the health of the parties and the potential for long term care costs, recognizing that Medicaid and the Veterans Administration do not recognize premarital agreements and will consider the assets of both parties in awarding government benefits making additional planning appropriate as it relates to possible assisted living or nursing home care in a senior’s future.
4. Recognizing that the agreement should provide for additional documents to be signed after the marriage if a waiver of retirement benefits is involved because to be effective the waiver may need to be made by someone who already is the “spouse.”
5. Recognizing that the couple could move to another state where the laws about enforcing such an agreement may differ, and that laws may change.
There is great variation in various state laws regarding premarital agreements, even among those that have adopted some version of the Uniform Premarital Agreement Act. Attorneys drafting premarital agreements should be aware that this is a changing area of the law and there is a movement underfoot to have a new Act known as the Uniform Premarital and Marital Agreement Act (UPMAA) enacted by the various states.
- By Phoebe P. Hall
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