What Is a Prenup?
A prenuptial agreement, also known as a premarital agreement, is a contract between intending spouses made at a time when they are both competent and able to enter into an agreement. At the time the agreement is made, and before formal marriage vows are exchanged, the parties have discussed the terms of the contract and wish to place those terms in writing for future reference.
The major provisions of any prenup involve how the parties intend to address various issues that will (or even should) arise during the marriage. The primary areas are property ownership, property disposition in the event of divorce, and some important issues such as spousal support or alimony. Unlike post-marriage agreements that have more stringent requirements for enforcement, a prenuptial agreement is very flexible and designed to help the parties address property rights and other issues at a time when tempers are not running high . For example, a couple intending to marry may wish to place their property into a trust for the purpose of identifying what that property would be if the marriage falls apart. Or the parties may have children from prior relationships and do not wish to see that property passed on to spouses who were not in the family.
Under Nevada law, (NRS 123.030), the contract must be in writing and signed by both parties. However, the law requires that both parties are represented by an attorney. If one party does not have an attorney it is up to the party who does to advise the one without counsel that he or she should be represented by counsel (or have an opportunity to hire another attorney) prior to signing the agreement.
Understanding the Benefits of Prenuptial Agreements in Nevada
Prenuptial agreements, or "prenups", in Nevada are not solely designed to divide property in the event of a divorce. Instead, they can serve a variety of purposes that protect both parties’ interests and help avoid potential litigation. According to data from the American Academy of Matrimonial Lawyers, 62% of family law attorneys have seen an increase in requests for prenups from women over the past five years. In Las Vegas, the prevalence of prenuptial agreements has been a topic on the minds of the community for some time now.
One of the main reasons couples in Nevada might consider a prenup is to safeguard financial assets. The concept of asset protection is particularly appealing to those who own a business, or have significant savings or investments. For example, if one party enters the marriage with a substantial estate, a prenup can ensure that estate remains separate in the event of a divorce. Moreover, it can be used to protect spousal support rights by limiting or waiving one’s right to receive alimony.
Another reason why couples in Nevada choose to enter into a prenup is to determine how debt is divided between them. In marriages where there is a disparity in income, one family may be more inclined to enter the marriage with a prenup to ensure that longstanding debts of their spouse are paid off in the event of a divorce. For example, if one party has a large student loan from law school, they may want to ensure that if they were to divorce, their spouse would not be responsible for their outstanding law school debt. Another point of interest to include in a prenup to address how the parties would like to handle their respective debts in the event of divorce.
Finally, the final reason couples in Nevada might find it favorable to enter into a prenup is to protect their children after they have passed away. As touching on the previous point, a prenup can ensure that the decision regarding how to distribute property and assets to their children is done absent of influence from the other spouse.
Nevada does not have any special or unique laws when it comes to prenuptial agreements, but as our culture continues to become more mobile, and people are more likely to marry for a second time, prenuptial agreements continue to be an attractive option to have in place before entering into the marriage. We all know that most marriages do not last forever, so if you are considering marriage, it is a good idea to consider what is in your best interest.
Essential Requirements for Prenamps
With two exceptions, the Nevada Revised Statutes have few legal requirements governing the preparation and execution of a prenuptial agreement. NRS 123.220 defines the basic process.
An enforceable prenuptial agreement must be in writing and signed by both spouses in the presence of at least one witness. Further, each spouse must execute an acknowledgement of the signature on a prenuptial agreement. This acknowledgement must be made before a notary public, or another officer authorized to administer oaths.
The only other prerequisites is that the parties to the agreement must exchange a sworn financial disclosure statement, unless the requirement is waived in writing by all the parties. Nothing in the Nevada inequality of a prenuptial agreement if the requirement to provide a sworn statement is waived.
In summary, a prenuptial agreement is presumed to be valid, so long as the agreement was executed voluntarily by each party to the agreement; the agreement is in writing, and signed by both parties. In addition, there can be no unconscionability at the time of execution, or within a reasonable time, of the agreement. A prenuptial agreement will be considered unconscionable if (1) it does not pass a "fairness test" and (2) if its terms unfairly deprive a spouse of a fair share of property.
Five Basic Terms of a Nevada Prenup
In order for a prenuptial agreement to be enforceable in the state of Nevada, certain provisions must be included. These provisions are: (1) a statement defining their separate property, also called property brought into the marriage; and (2) what rights and obligations exist with respect to the acquired property during the marriage. Typically, the rights of all property will be defined in detail, including provisions for spousal support, such as whether alimony will be paid or whether a waiver of maintenance shall be made. A thorough Nevada prenup will also have a jurisdiction clause. This is important because if the couple should divorce in the future, the court that will hear the case must have jurisdiction. In Nevada, the jurisdiction lies in the state where the person filing for divorce has been a resident for the last six weeks. A Nevada prenuptial agreement may also contain financial statements that are verified and signed, waivers of community property cause, and even tax clauses, though these are optional and not usually required. If the parties wish to prepare a wholesome prenuptial agreement, the assistance of a trained attorney is invaluable.
The Most Common Prenup Myths
Nevada residents have many misconceptions about prenuptial agreements that could impact their decisions to enter into one prior to marriage. These misunderstandings are worth debunking.
A prenuptial agreement cannot protect a couple from everything. During marriage, couples may acquire new assets, such as a vacation home near Lake Tahoe. Problems can arise if the underlying property is not clearly designated as joint property in the prenuptial agreement. Some people think prenuptial agreements are for the rich and famous, but that is not the case. A prenuptial agreement benefits people of all income levels. What matters is not the wealth of the person with more assets, rather that one spouse has significantly less than the other. It is also common for Nevada residents to think that a prenuptial agreement is permanent. No such thing is possible. Nevada courts can amend prenuptial agreements at any time if the terms were unfair. A court can also invalidate or refuse to enforce a prenuptial agreement if the contract was not entered into freely, was signed when one spouse was under duress, or if the terms were unconscionable at the time of marriage. Finally, some people believe that a prenuptial agreement can dictate how a spouse will behave during marriage. This is not true. Nevada courts will not enforce such terms.
How Do Nevada Courts Enforce Prenuptial Agreements
Enforcement issues also arise in the context of marital agreements in Nevada. In general, when asked to enforce a prenuptial agreement, Nevada courts will conduct an inquiry as to whether the agreement is enforceable or invalid. Various circumstances exist where the courts may find an agreement invalid and the result is that the court will not enforce the prenuptial agreement. Some of these grounds are specific to statutory authority while others stem from judicially established case law. For example, NRS 123.220 sets forth several statutory grounds on which a prenuptial agreement may be invalid: 1) lack of proper execution; 2) lack of adequate disclosure; 3) voluntary execution; 4) whether the agreement was unconscionable or inequitable; and 5) failure to offer a fair explanation of the terms. Each of these factors is subject to extensive statutory and case law interpretation.
Example Case: With respect to equitable grounds for enforcing a prenuptial agreement, in Henkel v Fredrick (2005) the Nevada Supreme Court affirmed a finding that certain provisions of a prenuptial agreement were unconscionable. In Henkel, a couple entered into a prenuptial agreement where it was determined that the couple would keep their net monthly income and the arrangement was intended to prevent the contention of spousal support during the marriage. After three years of marriage, however , Henkel filed for divorce. The spouse sought enforcement of the agreement but the trial court found that the prenuptial agreement was unconscionable and inequitable. On appeal, the wife argued unconscionability was found in the prenuptial agreement based on the language of the agreement which stated that "equities of time, effort, labor, difficulties and sacrifices shall be taken for granted and ruled out in the distributing of property." The court found such provisions to be substantially broader than the Nevada statute which allows parties to prospectively waive spousal support and that the breadth of the provision could bar a court from fairly applying an equitable distribution. Thus, since the agreement’s provisions were interpreted as barring an equitable distribution in anticipation of the marriage, such provision was interpreted as unconscionable. However, once a prenuptial agreement has been deemed enforceable, the courts will make a fair and equitable determination of how to allocate and distribute the parties property. This can often result in one spouse receiving considerably less than under, perhaps, a community property framework. Although the precedence of promoting independent private agreements has led to more enforcement of prenuptial agreements in Nevada, the courts will still use discretion to protect any involved party that would be inequitable for the parties to be held within the confines of their contractual agreement.
Creating a Nevada Prenup: Step by Step
A prenuptial agreement between two individuals in Nevada can be a very effective tool to control issues related to the division of property, debt and finances as well as the issue of alimony in the event the parties divorce or legally separate. A prenup has the potential to save both parties money, time and heartache. But, parties should know that there are specific requirements for Nevada prenuptial agreements. If the requirements are not met, the prenuptial agreement can be found to be invalid. Below is a step by step guide that will help both parties to determine if and how to go about entering into a prenuptial agreement.
• Most importantly, both parties should be represented by an attorney. The basic terms and conditions of the agreement should be discussed with an attorney prior to drafting and, importantly, signing the agreement.
• Prior to discussing the potential provisions that may be included in the prenuptial agreement, each party must have a complete and full disclosure of all material assets and debt. It is crucial that the parties not hide or conceal an asset or debt from the other party prior to the execution of the prenup. Concealment or fraud will result in a void or unenforceable prenuptial agreement.
• Once the parties have fulfilled their obligation to provide full, written disclosure of assets, debts and income, then they can begin the process of creating the prenuptial agreement. This will typically involve the exchange of information and documents between counsel and the parties via email and telephone.
• A prenuptial agreement entered into in the State of Nevada must be signed by both parties and notarized. This means that the couple cannot simply sign the agreement without it being notarized. The procedure to notarize an agreement involves both parties scheduling an appointment with a designated notary public.
• A prenuptial agreement is valid or enforceable in Nevada if: (1.) The agreement is in writing, (2.) Is voluntarily signed by each party, (3.) Each party had at least 7 days from date of receipt of each individual’s "full and fair" financial disclosure to consider the terms of the agreement and (4.) Neither party was under duress to enter into the agreement.
• Nevada law also requires that prior to the signing of the prenuptial agreement, the attorney for the individual be licensed to practice law in the state of Nevada. This provision is so that the attorney can then provide advice to the party regarding the provisions of the agreement and how their everyday life could be affected by the prenuptial agreement.
How an Attorney Can Help You Create a Valid Prenup
When it comes to the benefits of hiring legal counsel, my rule of thumb is this: even a bad lawyer will almost always do a better job than a couple of half-baked attempts at DIY lawyering. A properly drafted and negotiated prenuptial agreement can save a great amount of legal expense later if the couple does divorce, and it will greatly reduce heartache and tension if the divorce is not amicable because the spouses know where they stand so that there are no surprises.
The best way to begin the process is to retain an experienced family law attorney to draft a first draft of the agreement. If the client has already begun talking to their fiancé on the general terms of what the prenuptial agreement should say, it can be a good idea to document those discussions (if you’ve reached any agreements) so that the attorney can have a jumping off point (and the client won’t have to pay for the attorney to recreate those conversations). The attorney will then typically issue a draft of the prenup to be read over, and the couple can meet with the attorney and make suggestions. After both spouses come up with their ideas on what the terms of the agreement should be, and the attorney will draft a final version and send it to both parties to review once more. The client’s fiancé should retain his or her own attorney to review the agreement and give advice.
Once the agreement has been finalized and both attorneys have signed off on it, it is then the responsibility of the parties to sign the agreement in front of a notary. Again, each party should have their own attorney present at the signing, or attend to a notary public alone. Vows and other romantic pre-nuptial activities should be avoided on the same day the prenup is signed, and the parties should plan ahead so they have time to deal with this important and serious component of marriage.
Options Other than a Prenuptial Agreement
There are alternatives to prenuptial agreements in Nevada, most of which involve creating a binding legal contract after the marriage takes place. The most common is a postnuptial agreement. Although postnuptial agreements have no effect on the state’s community property doctrine during the marriage, they can be useful if one or both spouses have been granted substantial property, or if a spouse was granted a portion of a deceased relative’s estate prior to the marriage.
A property settlement agreement, also called a marital settlement agreement, is a different option for couples that wishes to have a property distribution agreement without a premarital or postnuptial agreement. Nevada law requires the disclosure of assets between spouses in the context of a divorce contested proceeding. When the parties have the financial disclosures in hand , they can either have an attorney draft the property settlement agreement to divide their property (without ever going to court) or make expensive mistakes if they do the negotiation by themselves. In any event, and even with the best intentions, the process of list and dividing the couple’s property and assets can reveal facts which will damage the balance of an otherwise amicable relationship. An ancillary proceeding for a property settlement agreement may be filed in court, even without a divorce case being filed, to provide a judicial stamp on the agreement. Thus, the property settlement agreement will be enforceable in the event of a breach by one of the parties.
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