By Shelby J. Anderson
Premarital agreements (a.k.a. prenuptial agreement) get a bad reputation. The term tends to invoke thoughts of divorce and distrust in the relationship. However, premarital agreements in Arizona can actually be a valuable tool that can save couples money and ensure both sides are treated fairly during the marriage and in the event of a divorce. Below are common myths and realities of prenuptial agreements in Arizona.
Myth: A prenuptial agreement creates distrust in the relationship and dooms the marriage to fail.
Reality: Prenuptial agreement is better described as “marital insurance”.
People are comfortable insuring a car in case of an accident and there are health insurance plans for every possible health situation that may arise. Celebrities and athletes even insure their body parts for that worst-case scenario situation. Marriage is one of life’s biggest decisions: an agreement to spend eternity with another person. Recent data suggests that nearly half of all marriages end in divorce. Since 2000, there are up to 1 million divorces every year. It is unlikely that any divorced couple ever thought they would have to cash in on their marital insurance, but couples that take the time and effort to have the difficult conversations necessary for a prenuptial agreement will avoid disputes and misunderstandings that are likely to ensue in a contentious divorce. Further, prenuptial agreements aren’t exclusively for divorce. There are provisions that parties can agree to abide by during the marriage, such as a yearly stipend for shopping expenditures, an infidelity clause, or even social media standards to follow in the event of an argument.
Myth: Prenuptial agreements ruin the romance of a marriage.
Reality: Honest conversations about the realities of the marriage can prevent disagreements during the marriage.
Prenuptial agreements materialize at one of the happiest times of the relationship. The engagement is a point where each party will strive to be reasonable and fair to the other party. A prenuptial agreement can actually prevent a divorce by starting a conversation that is otherwise difficult to initiate without the veil of the prenuptial agreement. Sitting down as a couple and having an open, honest conversation about how to deal with a potential divorce can bring couples closer together because it places major concerns and vulnerabilities out in the open. Each party can lay out expectations and concerns of the relationship, which can start the conversation on how to alleviate those concerns. Further, since financial disagreements are a common reason for divorce, it is important to understand a prospective spouse’s financial perspectives prior to a marriage. The earlier a couple understands their level of financial compatibility, the better off that couple will be in preparing for these difficult discussions. Finally, although romance is a necessary component, marriages share many similarities with businesses: there are financial issues, partnerships, passion, and the potential for a dissolution at any given moment. Thus, it is wise to commit both types of partnerships to an agreement in writing so as to facilitate a smooth transition into the partnership.
Myth: If neither party has significant earnings or assets coming into the marriage, a prenuptial agreement is unnecessary.
Reality: Prenuptial Agreements are important tools for almost every couple.
Arizona law allows for a broad range of topics to be contracted for in a prenuptial agreement. Under the Arizona Uniform Premarital Agreement Act, parties to a premarital agreement may contract for almost any matter. Essentially, any provision that does not involve children and is not in violation of public policy or a statute imposing a criminal penalty can be included in the prenuptial agreement. Thus, the contractual possibilities are nearly limitless. A couple can agree to infidelity clauses, shopping allowances, spousal maintenance (alimony), and even who gets to keep the beloved family pet.
Property, earned income, and debts can be contracted for in a prenuptial agreement. Arizona is a community property state, which presumes that any real and personal property that is acquired during the marriage belongs to the community, owned and shared equally by husband and wife. This includes all income earned during the marriage. However, a valid prenuptial agreement can allow for prospective spouses to control how to split earned income during the marriage and in the event of a divorce. Arizona case law has held valid and enforceable premarital agreement provisions that earnings and interest in property acquired during the marriage would remain the separate property of each spouse. Debts are another important consideration in a prenuptial agreement. Nationally, borrowers owe approximately $1.5 trillion in student loan debt alone. Although it is accepted law in Arizona that debt incurred prior to the marriage is that party’s sole and separate debt, it may be worthwhile to include a provision that will limit each spouse’s liability for the other spouse’s debts incurred before the marriage. This is particularly true when both parties have a significant amount of student loan debt. Although Arizona is a community property state, parties can enter into specific agreements concerning their earnings, assets, and debts acquired during the marriage, notwithstanding Arizona Community Property laws.
Myth: It is too expensive to get a prenuptial agreement.
Reality: The amount of money the prenuptial agreement can save you will make the minimal expense of attorney fees worth it.
A prenuptial agreement is very inexpensive compared to a divorce. Attorneys will usually prepare a prenuptial agreement for either a set fee or an hourly rate. If the attorney has an hourly rate, couples can keep their costs even lower by discussing beforehand with each other what is important to them in the relationship and in the event of a divorce. Minimal attorney participation in back-and-forth negotiations between prospective spouses will significantly lower the cost of the hourly fee. Further, the time during which a couple should be pursuing a prenuptial agreement is already a time when the couple is planning to spend money on a wedding. Most couples spend money on wedding dresses, engagement rings, photographers, a venue, and a reception. It is estimated that the average cost of a wedding in the United States is over $30,000. Thus, a prenuptial agreement can be one of the essential expenses of a wedding. It is much more expensive for couples to wait until the divorce to start negotiations. Today, a divorce is almost as expensive as a wedding; a divorce in the U.S. ranges from $15,000-$20,000. Included in these expenses are attorney fees, court costs, parent education classes, alternative dispute resolution attempts, and costs associated with the disposition of community property and other real estate investments. Some of these costs are accrued unnecessarily due to hostility surrounding the divorce.
Myth: If a couple signs a prenuptial agreement, it can never be modified.
Reality: A prenuptial agreement can be modified or cancelled.
There is always a possibility of unforeseen circumstances. A prenuptial agreement can be amended or revoked after marriage. A.R.S. § 25-204. Therefore, if a couple wants to make changes or even decide they no longer need a prenuptial agreement later in their marriage, they can change it or terminate the contract by a written agreement that is signed by both parties. This can put the couple at ease knowing their agreement can be modified if the modifications are mutually agreed upon.
 Schlaefer v. Fin. Mgmt. Serv., Inc., 196 Ariz. 336, 339, ¶ 12, 996 P.2d 745, 748 (App. 2000); Elia v. Pifer, 194 Ariz. 74, 83, ¶ 48, 977 P.2d 796, 805 (App. 1998)