For the uninitiated and probably for the unmarried and divorcees too, a prenuptial agreement or more commonly called prenup or prenupt is a contract or agreement entered between two people about to wed! This contract clearly lays down the procedure of how assets and personal liabilities will be shared or distributed or spousal support in the unfortunate event of divorce or death.
What makes a smart financial planning? Well, most of us would say that it is all about investing money in diversified portfolios like mutual funds, stocks, bonds, gold and even retirement solutions! Hold on! Have you heard about prenuptial agreement? Would you even consider it as a smart financial step? You might disagree but legal and financial experts think otherwise. They see a prenuptial agreement as a smart financial step that will protect you during and after marriage! Before we move any further on this let us first see what this prenuptial agreement is all about!
What is prenuptial agreement?
For the uninitiated and probably for the unmarried and divorcees too, a prenuptial agreement or more commonly called prenup or prenupt is a contract or agreement entered between two people about to wed! This contract clearly lays down the procedure of how assets and personal liabilities will be shared or distributed or spousal support in the unfortunate event of divorce or death.
The terms and conditions in the prenuptial agreement can vary but most prenupt agreements carry two most common points: division of assets and liabilities and spousal support. Sometimes a prenupt can include something like forfeiture of assets if a divorce is being sought on the grounds of adultery or certain conditions about guardianship of the wealth.
Just like a prenuptial agreement there is something called a postnuptial agreement that is entered by couples who are already married. Then there is the cohabitation agreement for couples who are not married or live-in couples.
Prenupt has been in existence in Europe and the Far Eastern countries for over a thousand years now in some form or the other. It was basically done in royal or rich families to protect their wealth. But in India prenupt is considered not relevant and hence not practiced at all. But things have started to change! Unlike in India, it is accepted as legal in the U.S while in some countries like England and Wales it is optional. A few countries like Canada, France, Italy and Germany have matrimonial regimes in place of prenuptial agreements.
Why is it uncommon in India?
In India, marriage is an institution that is built on trust and is considered an occasion to bring together two hearts and two different families in the process. No one in India sees divorce on the cards when a marriage happens! In other words having a prenupt before marriage is considered a breach of trust of ’till death do us apart!’ Even Indian matrimonial laws such as the Hindu Marriage Act do not see marriage as a contract but a religious bond between a man and a woman! So there was no social acceptance for prenuptial agreements in Indian marriage, at least till very recently! Yet, the Indian legal system does not officially legalize prenuptial agreements in the country.
Moreover, most matrimonial laws in practice in India like the Hindu Marriage Act have in themselves rules pertaining to cases of divorces. There are certain provisions in the various matrimonial laws for a wife’s maintenance and alimony. On the flip side the alimony would be decided by the court of law based on the income, value of properties and other circumstances of the partner.
Lately things have begun to change and there is social acceptance for prenuptial agreements over the past five years. Prenuptial agreements have been increasing in some metros and in Mumbai in particular, probably because it is the financial capital of India!
According to survey results among top divorce lawyers in the country has revealed that 10 percent of the affluent socio-economic group have prenuptial agreement in place before they say, ‘I do!’ It’s a steep rise experts believe and attribute this changing trend largely to the ambitious, educated and financially independent individuals of today’s world. It is not that today’s youngsters are more money-minded it is more so a reflection a today’s persona that an individual’s lifestyle and finances should not be negatively impacted by a heartbreak following a divorce or death of a partner after marriage. Today, survey claims that around 20-25 percent of couples about to enter wedlock see prenupt as a ticket to marital bliss and freedom from financial and other related troubles after divorce or death of a partner. Prenupt is also seen as a protection against the partner’s debt loads and other financial and legal complications arising out of a divorce.
Ad maker Pankaj and his designer wife Preeti have a prenuptial agreement in place before they married late last year. Preeti hails from a rich family while Pankaj has just started to gain foothold in the ad world. In fact Pankaj signed the prenupt only on the insistence of his in-laws who wanted him to prove that he was not after their daughter’s money. Pankaj had no qualms about the issue and readily did it. For him, signing on the dotted lines before marriage meant a chance to prove that love was above everything else for him!
How prenupt made some celebrities super-rich?
Sometimes the heartbreak caused by a break up could prove very, very costly particularly if you do not have a prenuptial agreement in place! Take the case of former Beatles band member Paul Mc-Cartney. His high profile marriage with Heather Mills fell flat in 2007. And with no prenuptial agreement in place Heather Mills struck gold when she demanded a whopping £24.3 million from him!
On the other hand in the same year Britney Spears who was worth $120 million at that time had a watertight prenupt agreement in place when she married dancer Kevin Federline. This arrangement ensured that Kevin got only $ 1 million following her divorce.
Or take the case of British socialite and screenwriter Tricia Walsh-Smith whose divorce cost her apart from the huge legal costs a $45,000 credit card bill, and eviction notice from her apartment.
Hollywood in 1980s and early 1990s also has recorded history of costliest divorce settlements. Dances with Wolves star Kevin Costner’s divorce with Cindy Silva after 16 years of marriage cost him a whopping $80 million in settlement. Mellissa Mathison got richer by $85 million as settlement money from her divorce to Harrison Ford.
A recent survey by Scottish Widows has made startling revelations about why people prefer to marry in Britain! The survey says that one in seven people marry purely for money. And what more interesting is the fact that the number of married men claiming their wives’ wealth in divorce has doubled since 2008.
More Trivia: Braveheart star Mel Gibson’s heartbreak divorce with Robyn Gibson which is expected to be finalized in a few months time will see Robyn get richer by $500 million as she is legally entitled to half of Mel Gibson’s fortune of $1 billion and further residual checks. This will be the costliest divorce settlement ever made! The other record holders include world renowned basketball star Michael Jordan $168 million settlement with his ex wife Juanita and the $150 million pay out by Neil Diamond, the pop music performer with Marcia Murphey.
What does a prenuptial agreement include?
Contrary to popular misconception prenuptial agreements are more than financials! But for a prenuptial agreement to be legally binding it should meet certain conditions. Prenupt can be flexible to include points tailor-made to the situations and to the couple involved.
Typically, a prenuptial agreement drafted should be fair, and acknowledged by legal experts. That is, the prenupt should carry the certification of an attorney from both parties as well. Most prenupt agreement has a ‘must clause’ that would not treat that entire agreement null and void if any one provision is invalidated. However, if a couple wants to change the terms of a prenuptial agreement after marriage it will be treated as a postnuptial agreement.
In the case of prenuptial agreement mentioning about financial obligations and rights, a separate list of assets and liabilities of both partners should be given in the agreement. The prenupt should in clear terms lay down each party’s assets, liabilities, properties right before the marriage and if divorce or death happens the separate procedures to be followed for settling the division of properties and alimony for spousal support among other things.
The laws recognizing prenuptial agreements also state that the agreement should have all other clauses that the prospective spouses agreed to include, even the history of the proposed alliance.
How does it help you in case of divorce?
A clearly drafted prenuptial agreement could be legally binding on both the parties and could prove very beneficial in the sense that it has been already agreed in clear terms the financial rights and obligations of each partner to the marriage in case of divorce or death of a partner. A prenupt could help cut down the exorbitant divorce settlement costs and also make sure that there is no bone of contention between the partners including a joint account when divorce happens. In fact, a prenupt agreement can also include the custody of a child in the event of divorce.
Having a prenupt can legally protect a partner from the debt loads of the other partner and protect one’s business interests. Either partner will be entitled to spousal support in terms of alimony if the prenupt speaks about it. Also, the prenupt can help in division of properties and if needed and mentioned help in settling the shares in future income sources of the spouse.
Prenuptial agreements are not for the rich and the famous alone. In fact, a middle class man or woman may be more protective of their little savings than a millionaire! After all, it is your money and prenuptial agreement could be the perfect way to marry your honey and your money as well!
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