In Arizona, two people may voluntarily join in a prenuptial agreement before they marry. You may be familiar with the prenup by its other names, “premarital agreement” and “antenuptial agreement.” As these names indicate, the couple’s agreement must be made in contemplation of their marriage.
Looking to the future, a prenuptial agreement sets forth the spouses’ rights and responsibilities while married and if the marriage ends with divorce or a spouse’s death. The prenup contract must be finalized before wedding vows are exchanged at a religious or civil ceremony. If the wedding is called off, then the premarital agreement is invalid and unenforceable.
Use this article to assess whether a premarital agreement in Arizona might be right for you and your future spouse. If so, then consult with a prenuptial agreement lawyer with the Arizona Law Group who can help. As discussed below, each party should obtain their own prenup attorney as independent legal representation.
Why get a prenup? If done correctly, a premarital agreement offers many benefits. It provides a proactive plan going into the marriage. A course of action on the occurrence of almost any contingency (including who gets the family pet if the spouses separate). Prenuptial agreements can provide certainty if an important event takes place during the marriage, such as divorce, disability, or even a lottery win.
Premarital agreements continue to gain favor with older couples who marry later in life, too. Mature newlyweds often bring substantial assets to the union. Most individuals in their 50s or older are motivated to hold on to their hard-earned assets; to avoid being over-burdened with debt should the marriage end in separation or divorce. Even with mature first marriages, having a prenup adds economic predictability at an age when there is little, if any, room for error. Prenuptial agreements have the unique benefit of addressing any property or asset, whenever acquired and wherever situated, so long as a party has a legal or equitable interest in it.
For a premarital agreement to be valid and enforceable in Arizona, the following requirements must be met at the time it is entered into:
The agreement becomes effective when the parties actually marry each other, but not before.
Under Arizona law, a properly drafted and executed prenuptial agreement is enforceable without consideration. (Consideration is something beneficial or of value given in exchange for a promise or performance – it is the inducement to contract.)
The Arizona Uniform Premarital Agreement Act controls the manner in which these agreements are created and the requirements for legal enforceability. ARS § 25-201. We do not recommend that the soon-to-be-newlyweds attempt to draft their own premarital agreement. Mistakes are easily made and the consequences could be devastating and permanent. Because one party could gain an unfair advantage over the other, there are strict requirements to ensure fairness. Talk to your family law attorney.
If they later divorce, for instance, one spouse may challenge the validity of the agreement. When a prenup is challenged, the court will closely examine the instrument and the circumstances surrounding its execution. If questionable, the judge could set aside the premarital agreement. Divorce proceedings will then commence without the prenup’s influence on the distribution of property, spousal support, and so on.
Both spouses may be disappointed if the judge sets aside the prenuptial agreement. But the set-aside is almost certain to put one spouse in a better position than he or she would have been in had the prenup been enforced or it would not be challenged. If not properly prepared and executed, a prenup challenge is very common and often successful.
Consider this example:
The prenuptial agreement states that upon divorce the wife will forfeit all interest in the Phoenix marital home ($1.4M market value) and, instead, shall receive the Tucson marital condo ($1.0M market value). If the prenup is enforced, then the wife receives community property worth $400,000 less than the husband receives. In this example, the wife could benefit substantially by challenging the prenup. If the challenge is successful, then her community property share should be equal to that of her husband, or 1.2 million. She could exit the divorce with the condo and an equalizing payment of $200,000 to make up the difference in market values.
As this example illustrates, it is crucial that the prenuptial agreement be drafted properly by a lawyer to achieve the parties’ objectives and have the best chance of surviving a legal challenge.
For those marrying for the first time, a prenup may seem pessimistic. (Certainly a discussion about “What if we divorce?” is not very romantic.) But, making false assumptions on how property will be divided or whether someone will receive support can result in much bigger disappointments years later. For the wealthy and for those on a second or third marriage, negotiating a premarital agreement can settle many issues pragmatically before the wedding takes place.
Having a prenuptial agreement can help make the financial complications of divorce less painful. That, of course, assumes the agreement is enforceable when the time for implementation arrives. The judge can set aside a prenuptial agreement for a number of reasons, including the following:
A premarital agreement should be finalized at least a month before the wedding. Springing a prenup on the other party is no way to start a marriage and is a sure way to have it set aside.
Always be mindful that the agreement should be drafted to withstand a legal challenge in the future, particularly in light of divorce. When spouses become adversaries, a dispute over the terms is more likely. The spouse against whom enforcement is sought could claim:
Each party should be represented by a lawyer with both attorneys participating in drawing up the agreement. A premarital agreement should take into consideration the potential imbalance of wealth between the parties. Because an imbalance of emotional and intellectual power can exist, too, each party should hire a lawyer to represent client interests. This assures fairness and full disclosure in the negotiating process. It also eliminates the possibility of one party legitimately claiming they did not understand what they were signing.
One party misrepresented his or her assets and debts or concealed property or liabilities from the other so that disclosure was neither reasonable nor fair.
One party signed the agreement while under the influence of drugs or alcohol, or was mentally incompetent at the time.
The judge will not look favorably on a premarital agreement that attempts to limit child custody rights or that interferes with child support obligations. The court is not likely to enforce a provision that eliminates child support or effectively reduces child support below that required by the Arizona Child Support Guidelines.
Many prenup challenges revolve around spousal support. The prenup may seek to waive spousal maintenance altogether (subject to public policy consideration noted below) or substitute a more certain formula for calculation as opposed to leaving it to the discretion of a judicial officer who is free to consider many different factors.
The prenup cannot modify or eliminate alimony when doing so would make the economically disadvantaged spouse eligible for public assistance. In other words, the person who would be obligated to pay alimony (but for the prenup) cannot totally avoid that responsibility by shifting the financial burden onto the State of Arizona or the federal government. ARS § 25-202. But, they can limit that burden to the amount that would be necessary to keep the other spouse off public assistance.
Formulas for calculating spousal maintenance can be tied to objective standards such as the duration of the marriage and the actual incomes of the parties. If the parties are able to calculate spousal maintenance with certainty, expensive divorce litigation can be avoided.
A prenuptial agreement is meant to make the marriage run more smoothly, but it cannot solve every problem. Arizona law limits the scope of any premarital agreement to:
Arizona prenuptial agreements can also designate responsibilities during the marriage. Some agreements specify the household duties and financial obligations of each spouse, whether there will be children, and how the children shall be raised.
Updating your prenup with a postnuptial agreement after the marriage could help it survive a challenge in case of a divorce in the future. The parties to a premarital agreement are free to amend their prenup by signing a written agreement. They can also revoke the prenup which would terminate it. In either instance, consideration is not needed to make it enforceable. ARS § 25-204.
Some people wonder if can you get a prenup after you get married. The answer is no to a prenup agreement after marriage, but a postnuptial agreement after the marriage could help it survive a challenge in case of a divorce in the future. Contact us to learn more.
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This is Erica Merrell and I’m the founder of perfect legal video, and I am very excited to have with us today attorney Robert Howard and he’s an attorney over at the Arizona Law Group in Phoenix, Arizona. they are a family law firm and today’s topic is one that I’m sure a lot of people wish they had learned more about it before they got married and that is prenups. I want to welcome you to the first time on the show today thank you so much for joining us, Robert.
I’m happy to be here.
Perfect so let’s talk about first defining a prenup. I mean for those that people think they know but I’m sure that there are a lot of misunderstandings about what it is exactly so if you could just define it for us we can get into the nitty-gritty after.
Sure a prenuptial agreement is an agreement signed prior to marriage which generally changes the normal community property laws that apply in the state of Arizona we may make significant changes we may totally throw out the community property laws but it generally deals with what happens in the event of a divorce or death of one of the parties somewhere down the road now what happens if you don’t have a prenup what is it typically in Arizona is it you split everything 50-50 is there another arrangement.
Arizona first characterizes the property as community property or separate property is anything that you own prior to the marriage and anything that you inherit or is gifted to you during the marriage community property is anything you earn during the marriage from actual labor the challenge for most people is that they often want to keep their separate property from being transmuted into community property and there’s a lot of legal concepts and ways that people can unintentionally change their separate property into community property so a good prenuptial agreement can avoid that unintentional result.
Yeah and I’m sure it saves people a lot of headaches later in the unfortunate event of a separation and a divorce.
Yeah absolutely it does and also sometimes in the case of a messy probate if one of the parties dies during the marriage and that’s a really great point people from different walks of life will decide to get married and some people have a lot and some people have a little.
So maybe you could give us an idea of who is a good candidate for a prenuptial agreement.
I would say anybody getting married for the second or third time who has accumulated some property and may have children by a prior marriage they are excellent candidates to do a prenuptial agreement because as I said sometimes there are messy probates and the last thing you want is to have your spouse get in a big fight with your children if you die first or vice versa you don’t want to get into a fight with the other party’s children so people usually going into second marriages bring a lot of property and they may not wish to commingle it all in the same accounts the other type of person that really should be considering a prenup is somebody is getting married maybe for the first time but later in life after they’ve accumulated some assets and again want to preserve or protect those assets from being divided in a divorce it’s even more important if they are self-employed and have their own business because there are a lot of common law concepts in Arizona that can cause that separate business to be transmuted into some sort of community property so it’s even more important when somebody is a self-employed business person than if they’re just a w-2 employee of some other company.
Oh yeah I mean that makes a lot of sense because I know when people are younger they often just have debt so maybe a college loan or some maybe something that their parents gave them to help out but it’s usually not a lot unless they are looking to inherit something or they have a trust set up that they come into at a young age can you tell us what are some of the most critical assets to protect with a prenuptial agreement
it’s usually the business and the house what a lot of people don’t realize is that and this again tends to happen in the second marriages or later in life marriages one party owns the house and the other party moves in with them and that’s fine and a lot of people think that well that house will always be my separate property because I owned it prior to the marriage but they don’t understand that all their earnings after marriage are community property unless they’ve changed the general rule through a prenuptial agreement so the community starts to gather a lien against that property and when or if there’s a divorce they may very well have to pay back some of that money to the spouse that’s leaving so that’s the big issue with homes the same sort of thing applies in businesses even if the business is maintained as a separate business if it goes up in value there is case law in Arizona that will give the new spouse a partial interest in that increase in value and people have spent hundreds of thousands of dollars figuring out how much that interest is worth in very messy divorces so the prenuptial agreement can preserve the business as separate without getting into those kinds of issues.
I know and if you’re hiring people to do an assessment on a business you’re right both sides will have different numbers and they’re going to have to try to meet in the middle and you know then you throw in something like a pandemic and you just don’t know what’s going to happen in the future of a business so I can see where you’re saving them a lot of trouble.
It really is the classic you could pay me now or pay me later having a prenuptial agreement can really reduce the cost of a divorce or a significant probate if people have given some thought to it ahead of time frankly even if you don’t end up getting the prenup anybody getting married should see an attorney and understand how community property law works and how it will apply to their particular situation the best time to know that is before you get married not after you get scared.
It’s so true, well let me ask you this and this is just maybe a fun little detail but when people are coming to you with a prenup do you find that the couples fight about it I mean is it insulting to someone that they get asked to sign a prenup while they’re supposed to be marrying the love of their life.
sometimes it is sometimes it’s a mutual decision usually the later in life marriages where both parties are working already and everybody’s going to continue to work and they have kids by our prior marriage it’s more of a business transaction they understand a little bit more easily often you get cases where the family has assets and the family of one of the spouses is pushing the prenup because they don’t want to have to deal with the other spouse if there’s a divorce and having to pay them out for a family business interest or something like that so sometimes the blame gets shifted to it’s my parents that want me to do this and not necessarily something that I need to have done but yeah there are some people that take offense and that’s probably again probably a good discussion to have before you get married and not after you get married my experience in doing divorce work for 45 years is that the majority of divorces came back to money not enough of it you know one party spends it faster than the other party can make it and they don’t have any agreement about saving spending, etc.
So if nothing else it certainly triggers those discussions.
I can’t say I’ve had a big percentage of people that walked away from the whole thing once the prenup idea was raised to the other party but there’s a small percentage where sometimes that does put an end to the relationship.
I wish when I was younger that someone had explained it to me the way you were explaining it because I had a home at an early age in my 20s and I didn’t you know I didn’t know that I should do that and so you know you’re young and in love, you don’t realize that this is one of the biggest financial decisions that you can make to tie yourself to somebody else and a lot of times they have you don’t even know if they have bad credit or not and you could be tying yourself to someone else who has a lot of debt that you are now partially responsible for and you know possibly you could lose everything and it’s very sad I actually know someone that happened to she’s very responsible and the guy just had a gambling problem and he stole her grandmother’s jewelry that she had inherited and you know she ended up going bankrupt trying to keep up with all the bills that he left behind and I know somebody else that his family took him out of the will because he married the wrong person and the divorce was taken forever and they just wanted to make sure they didn’t lose their multi-million dollar business to this woman that they were married for less than a year I mean so there are so many things that you can’t foresee this is just like an insurance policy.
It really is one of the requirements in Arizona for an agreement to be enforceable is that both parties have to make full disclosure of all their assets and liabilities so think of it as almost applying for a bank loan you fill out a list of everything that you own and what it’s worth when I do them I even go a step further and ask the parties to exchange three years of income tax returns so that no one can come back later and say well gee if I had known that was your income I would have negotiated this differently again you have to have a high level of transparency going into the marriage in order to have a valid prenup so it’s a worthwhile exercise because you’re right there are folks out there that are not playing or they’re playing a little fast and loose maybe is what I should say and they’re not revealing the debts they’re bringing or the liabilities and so forth so a prenup protects both parties in that regard because they’re each disclosing to one another what their assets and liabilities are it’s almost like you’re really showing true love if you can be mature enough to sign one of these prenups and honestly the way you describe it sounds a lot like a divorce but in the beginning and you have to trade numbers and you have to some people are super surprised at the end of their marriage about the assets that they have and sometimes they’re surprised about the debts so yeah I’d rather know ahead of time.
Absolutely that should be a requirement anyway – you know, the legislature is always looking for ways to reduce the divorce rate and frankly I think if they required full disclosure before they issue you a marriage license we’d probably eliminate a lot of unhappy marriages right at the beginning before they ever occurred yeah that along with background checks.
So can you tell me are these prenuptial agreements actually enforceable?
They absolutely are again if you jump through all the appropriate hoops the courts are very much in favor of negotiated settlements and avoiding litigation if they can and so if the agreement is in writing and it’s signed and it has to be signed before the marriage and you’ve made full disclosure of the assets and liabilities Arizona says that they will enforce the agreement unless it is unconscionable so whatever agreement you’ve made would have to literally shock the conscience before the court would even consider throwing it out now along with that there’s a body of case law that talks about not using undue influence or pressure or forcing somebody to sign so of course the classic example is the Friday night before the Saturday wedding the husband brings the wife down to his attorney’s office and says here’s the agreement sign it doesn’t even bother reading it don’t take it to an attorney well those kinds of agreements aren’t going to be enforceable the law very clearly makes allowances for anybody that’s been forced into signing a document at the last minute so we always recommend that both parties have their own independent legal counsel and that they try to start this process early enough that everybody has adequate time to review the documentation and then sign it well before the marriage when they’re not under pressure.
I mean that makes sense I would never want to sign any legal document without having my own attorney look it over and you know this is certainly one of the most important times to do that when you’re about to enter into a giant financial contract basically and who knows what will happen who knows how long it’ll last maybe it’ll last forever and none of it matters but you know what’s the harm in having a little bit of insurance so can you tell us I know you mentioned a couple of the documents earlier what type of information should they provide when you had a production agreement when they come to the attorney we don’t need.
I mean we do take their word for it so if they say they have a house and it’s worth about 150,000 that’s all they need they don’t need to have an independent appraisal they don’t need to bring in a mortgage or any of that documentation but they do need to prepare a list identifying the specific assets and what they think they’re worth we usually put language in the agreement that says all of these are good faith estimates they could be off by a little I mean it’s easy to estimate the value of your bank account or your stock account because you can look it up on the internet every day but the value of your home fluctuates the value of your business may fluctuate so you’re given a little leeway there to put a fair market value on those kinds of assets and that’s really sufficient so that’s really all the client needs to put together is this list of assets and liabilities and as I say some people would use maybe a bank mortgage application as a format to make sure that they’ve remembered every little asset from CDs to IRAs to 401ks to houses and businesses.
I mean and that that makes a lot of sense it sounds like it’s a thorough process and there’s certainly quick fixes for figuring out what your real estate might be worth. I mean gosh. nowadays though you might have something on Zillow. a number on Zillow. but then there’s so little inventory out there people are paying crazy amounts over the asking price and there’s a lot of bidding wars right now so I mean it might be a good idea to do something a little more concrete but at least you’re getting something down on paper and some sort of idea exactly and it really I mean I have advised many clients that they may want to save some of their documentation from right prior to the marriage if they ever need to prove how much was in the 401k prior to the marriage or the IRA account so sometimes there is advice given to preserve some documentation to be able to prove what these assets were worth in case somebody challenges it later.
So you were saying that there really needs to be plenty of time for both parties to look over these prenuptial agreements have their attorneys look it over and make adjustments when needed how much time do you think is necessary to really get this process done thoroughly and correctly before the marriage.
Ideally you would like to sign the prenuptial agreement at least 30 days prior to the marriage now that’s not to say I just signed one today and they’re getting married on Saturday today is Thursday as we’re speaking and this was a rather rushed negotiation but both parties had attorneys and both parties fully understood what they were signing and I negotiated a lot of changes to the first proposal made by the higher earning spouse to the lower earning spouse who I was representing so I do think it’s fair but in the ideal situation you’d like to get all that done maybe a month before the marriage because who wants to worry about running around to sign a prenup 10 days before the marriage when they’re worrying about the caterers and the and the DJ and everybody else for the wedding so if you want to do that I would back it up another 45 days and say you really should start this process maybe two and a half to three months before the wedding date and that should give both sides adequate time to find an attorney and review the documents and negotiate any changes and then get it signed and still have plenty of time every prenuptial agreement says that if for some reason the marriage does not occur it’s not a binding document it only becomes effective upon the actual marriage of the party so there’s no danger of signing something and then for some reason the wedding doesn’t occur and it’s not a binding document on them it only becomes effective on the actual occurrence of a wedding ceremony.
One situation I get sometimes and it’s usually when I’m representing the party who is the wealthier party that’s trying to preserve their assets just to make sure that they’re not unwittingly dividing things up the other spouse is willing to sign almost anything and they don’t even want to get an attorney and in those situations, I have to explain to my client that he or she may want to actually pay for the other attorney because that attorney is their insurance policy that the other party will come back and say gee I don’t know what I signed I have no clue what I’m doing here and then try to throw themselves on the mercy of the court and have the agreement declared unenforceable so again the sooner you start down that road the more time you have to convince people, no you really do need an attorney and if necessary you know I’ll pay for it but both sides should be represented and we need time to fully negotiate out all the specific terms.
That makes a lot of sense.
And like we’ve talked about there are a lot of surprises especially when you start digging through the numbers so you want to have plenty of time to sift through that and deal with whatever surprises come your way so that you are properly protected and that the negotiations are true because you can’t negotiate if you don’t have the real numbers the same thing at the end of the divorce.
Exactly and one common thing that comes up is the one party is moving into the other party’s house and that’s all well and fine but what happens if there’s a divorce filed and the party that moved into the other party’s home how long did they get to stay you know can they be kicked out on a moment’s notice just because of divorce is filed so how do we negotiate how long they’re going to be able to continue at the home of the other spouse or if there’s a death and let’s say husband wants to leave the house to his children well how long does his ex-wife get to stay in the house or maybe she gets to stay until she decides to move or until she dies and if so who pays the mortgage payment during that time and who pays the utility so as you can see there’s a lot of different moving parts that can be negotiated between the parties
even on that one little issue so you know multiply that and you see why we need the extra time to really sit and talk I mean it sounds like there’s a little bit of estate planning going on with all of this discussion.
Actually, there’s a number of estate planners who do prenuptial agreements although a lot of them don’t have any background in family law so they don’t know what happens in a divorce and so I’m not sure if their background is quite as good but very definitely there is there are some aspects of estate planning and sometimes we put provisions in the prenuptial agreement that will require changes to a party’s trust or will after the date of the marriage so that’s a point in negotiation sometimes you know if I die I will make sure that you have x number of dollars or sometimes we negotiate insurance that’s the way around it okay I’m not going to name you my will but I’ll carry a life insurance policy in the amount of x dollars as long as we’re married so that you will be left high and dry if I pass away.
I mean that’s that is good and it’s so hard to think about all of those moving parts and this is where I’ll mention one of the amazing things about Arizona Law Group is that you handle both estate planning and family law so you have that expertise and there’s just decades and decades of experience and strategy behind any attorney that works with you at Arizona Law Group so if anyone out there has any questions themselves or someone they know that might be about to get married they should definitely give the Arizona Law Group a call because I can guarantee you that sitting down with someone and talking about the situation and asking a few questions getting a bit of information is going to open up your eyes to a whole new world of things that you should be doing before you get married to make sure that you’re protected.
Absolutely I have a case right now a former client who I have done a prenup for before and I’m not quite sure how that marriage ended but before he wanted to do the prenup he came to us and revised his estate plan so we’re now waiting on getting the prenup to be done but there’s a lot of crossover our estate planner often sends me cases and vice versa because the two areas do overlap.
Well your clients are lucky to have you and I really appreciate your sitting down with us today Robert it’s really great to meet you first of all and I do hope you’ll come back and speak with us again someday soon.
I’d be happy to do that anytime thank you.
You are so welcome and thank you and thanks to everyone who’s listening today we will look forward to seeing you soon and I hope everyone has a great afternoon.
