The business plans of marriage

Craig Cowley

 

• Predictability concerning the division of gifts and inheritances

• Definition of interest in family businesses

• Preservation of separate assets to care for parents or children of previous relationships or the support of the parties

• General avoidance of the uncertainty and expense of a judicially imposed outcome

If a couple signs a valid pre-marital agreement, marries and is later divorced, it is relatively simple and inexpensive to determine what will separately belong to one, what will separately belong to the other and what belongs to both together. Typically the agreement will direct that each be awarded their own separate property, and that common property be divided equally. Without such an agreement, the court is charged to divide all of the property justly and equitably, giving due consideration to its separate or community nature (as defined by law).

If a couple signs a valid pre-marital agreement, marries and one of them later dies, the terms of the agreement, rather than the laws of the state, can direct any inheritance and determine the rights of the survivor.

By signing a valid pre-marital agreement, the couple can alter the legal consequences of acquiring property, incurring debt, receiving inheritances or gifts, investing time and energy, earning money, having property increase in value; and these changes are effective even while they both continue to live happily married together.

Such agreements are contracts, enforceable through the court. If the agreement is substantively fair (makes a fair and reasonable provision for each party) or if it is procedurally fair (both parties fully disclosed their property interests, had opportunity for independent advice, knew their legal rights and freely chose to enter into the agreement), then the parties can expect their agreement to be upheld as to creditors, the probate court and each other.

Ideally, the agreement belongs to both parties, and each of them has helped to create it, participated in negotiating the terms, given full disclosure, acted honestly, respectfully and in good faith; both parties will know what they are getting in exchange for what they are giving up; and both of them will want their agreement to be enforceable, even if one of them (or someone else) later challenges it.

Pre-marital agreements have gained favor since the days when they were seen as encouraging divorce, and were thought to be sought only by the wealthy. A pre-marital agreement will still serve to protect the wealth of one party from the other, but these agreements do more than that, and are now sought to serve the larger purpose of allowing a couple to vary from the rules the state would otherwise impose, to make their own rules for each other and those with whom they deal. Many states have adopted the Uniform Premarital Agreement Act. Other states, such as Washington, have through case law established ways to recognize, interpret and enforce such agreements.

The basic structure of a pre-marital agreement is simple, but the drafting is complicated and requires care and should only be attempted by an experienced lawyer with expertise in this area of law. Fortunately, pre-marital agreements are inexpensive insurance compared to the risk and costs they avoid.

 

Craig Cowley is a attorney in the family law firm Gevurtz Menashe Larson & Howe P.C., with offices in Vancouver and Portland. He can be reached at 360.823.0410.

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