Pre-nuptial agreements often conjur up scenarios of the wealthy groom presenting his bride-to-be with a 90 page document on their wedding day that demands she waive all of her rights to receive support from him or any of his assets if they divorce. While this scenario makes your resident family lawyer cringe, this is the image Hollywood has created (and it’s true, this does indeed happen). It’s true that a pre-nuptial agreement can protect assets from being divided in a divorce, and this often benefits the person with more assets. But when drafted well, and when truly discussed between the couple, an agreement like this protects both parties by allowing them to craft their own rules. If you’re currently the lower-earning spouse and you’re discussing a pre-nuptial agreement, there are several reasons why you should consider signing one.
1. You may not always be the lower-earning spouse
: So often couples assume that the financial realities on the day of their marriage will remain the same over 5, 10, or even 20 years. While it does happen, it’s by no means guaranteed. Someone can get into a car accident, or have a severe stroke, or simply become burned out from working the hours needed to maintain a higher income. Sudden disability doesn’t discriminate between who makes more or less money. You may also eventually earn more. Think of a surgical resident: they start out making comparatively little, but their income skyrockets once they become board-certified. Future earnings aren’t always predictable, because life isn’t predictable. This doesn’t mean that the higher-earning spouse gets everything and the lower-earning spouse gets nothing! But it’s worth considering how you would want assets and income to be divided if you ultimately were the higher-earning spouse.
2. You get to create more protections than you would normally have
: Rather than a quick tidbit, I want to explore a scenario that affects numerous families in this day and age. Many, if not most, families assume that someone will have to work part-time or not at all when their children aren’t old enough for school. They also assume that this is temporary and will only last until Kindergarten. “Five years isn’t very long,” is the common thought. The ideal is often very different from the reality. Kids don’t stop needing childcare just because they’re in school. They get sick, there are sudden cancellations, two-hour delays and early dismissals, and sometimes a parent has to drop everything to pick them up early because of behavioral issues. Not every parent works in a career where they can rearrange their work schedule at the last minute to accommodate their children’s needs. Because of this, parents often find that someone has to continue working reduced hours, simply because their children need sudden flexibility. Very quickly, five years of part-time work turns into ten. When the spouse returns full-time, they find that they’re far behind where they would have been had they never left; they certainly lost a decade in contributing to a 401(k).
Pennsylvania doesn’t consistently provide well for this scenario, though. In a child support or spousal support case, if you aren’t working full-time, or you’re making substantially less than you normally would be, the family court can give you an earning capacity. This means that you could be found “capable” of earning $100,000 per year, even though you’re only making $40,000 because you were caring for your children. Of course, a skilled family law attorney will make arguments about why you shouldn’t get stuck with a full-time earning capacity. But having a lawyer advocate on your behalf and possibly prevailing means that you still have to go to court to address it. A pre-nuptial agreement can nail down whether you would be given an earning capacity in this or numerous other situations. This prevents you from having to rely upon a judge or hearing officer’s discretion.
3. It’s not just protecting you:
More and more families are coming together with children from prior relationships. I hear on a regular basis that their children are their first priority. The biggest concern parents express is that they don’t want their assets to be taken away from their children. Of course, this can be accomplished through estate planning. But, again, the Pennsylvania default law is that any assets acquired or accruing value during marriage are considered marital. If something is marital, it can be divided in equitable distribution. Whether it will be divided is a different question entirely. However, if you want to maximize what you can provide your children, then you need an Agreement guaranteeing that your property will not be considered part of the marital estate. Even if you don’t have children from a prior relationship, you can’t guarantee that everything of “yours” will ultimately be available to them unless you separate it at the very beginning.
Signing a pre-nuptial agreement is of course extremely serious and not intuitive, and I don’t recommend anybody do so without the guidance of an experienced attorney (especially) if you’re the lower-earning spouse. But there are several protections this type of agreement can offer you, even if you aren’t bringing in more of the assets and income.