What is a Prenuptial Agreement?
When referring to prenuptial agreements, they are also referred to as premarital agreements or antenuptial agreements. It is an agreement that allows the parties to provide for the division of property and other rights and obligations of each party in the event of a divorce.
The Oregon definition of a prenuptial agreement is a written contract entered before a future marriage. The agreement signed by both parties becomes effective upon the anticipated marriage . As with most contracts, there are many issues each party should consider when entering into a prenuptial agreement. Initially, both parties should have counsel to review the agreement. Although this is not required by law, it will protect each party in the event of a divorce and will help prevent later claims of undue influence and lack of understanding.
An important consideration: the agreement must be signed voluntarily.
Legal Requirements for Prenuptial Agreements in Oregon
In Oregon, for a prenuptial agreement to be enforceable, certain legal requirements must be met. First and foremost, Oregon law requires that for a prenuptial agreement to be enforceable, it must be in writing and signed by both parties. Under ORS 90.750, a provision that is otherwise valid will not be unenforceable merely because it is contained in a separate document, such as a will. However, Oregon courts require that the other requirements of a prenuptial agreement discussed here must still be pleaded by the party asserting its validity. The agreement must also be voluntarily executed. The question of voluntariness is primarily for the judge (or jury) to determine, and is often influenced by numerous facts and circumstances such as:
Additionally, under Oregon law, a court may not enforce a provision of the agreement that will cause a party to be eligible for public assistance, or that in effect, leaves one party with significantly less than what they would be entitled to under the laws of the state in which they were married.
An enforceable prenuptial agreement must also be conscionable, or unconscionable, at the time it was executed. ORS 90.740(1). In other words, it must not be so one-sided that no one would think it fair or reasonable, or that would make no sensible person agree to it. Further, the court must find that the waiver was in a voluntary manner. The party who translates the agreement bears the burden of proving conscionability under ORS 90.740(2).
While Oregon courts may not enforce certain provisions in a prenuptial agreement, there are no mandatory provisions for an enforceable agreement. Rather, the basic purpose of a prenuptial agreement is to provide all the necessary provisions that the parties deem appropriate, as long as those provisions do not violate the law, public policy or morals.
Pursuant to Oregon law, full and fair financial disclosure is required. The parties to a prenuptial agreement are required to fully, completely and accurately disclose all financial information concerning their assets, debts and income to each party. ORS 90.700(1). While the disclosure need not be perfect or complete, each party to the agreement has a duty to exercise reasonable prudence under the circumstances. AND a court may not enforce the agreement if one party did not receive a fair disclosure of the property or financial obligations of the other party, did not voluntarily and expressly waive disclosure of any property or financial obligations beyond what was provided, and that the Court finds the agreement to be unconscionable. ORS 90.730. This means that if a party signs the agreement without reviewing it and without knowledge of the terms, the agreement may not be valid and the court may not enforce it. Further, the signing of a prenuptial agreement without the consultation of an independent attorney does not bar enforcement. However, if the party who did not have the benefit of counsel shows that they did not understand the terms of the agreement, or their right to seek counsel, and a provision of the agreement is unconscionable, the court may not enforce it. ORS 90.720.
Advantages of Entering into a Oregon Prenup
A prenuptial agreement is a useful tool for many couples entering into a marriage, but especially so if one or both parties have considerable assets or property holdings. There are a number of benefits to having a prenup that go beyond simply protecting assets.
Assets and properties – The most significant benefit of many prenups is protecting investments that one or both parties own prior to getting married. While laws vary from state to state, in general assets owned by one spouse before marriage are not marital property. But in the event of a divorce or death, proving the separate nature of those assets can be difficult. Signing a prenuptial agreement protects assets and properties and ensures they will not be affected by any future marital conflict.
Debt – Just as it is important to protect assets going into a marriage, it is important to protect a party from debt going into the marriage. For example, if one party owes money to the IRS, or has educational debt such as medical school loans, the debt could eventually be transferred to a spouse without a prenup, which would open that spouse up to a considerable burden. A prenup will not protect a spouse who is the victim of a fraudulent debt, but it can help protect them from marital debts that are not their own.
Retirement and health savings plans – The courts in Oregon consider retirement accounts earned during a marriage as marital property. This can be a good incentive for a party to have a prenuptial agreement that ensures pensions or IRAs acquired prior to the marriage are protected.
Clarity – Having the issues concerning property and finances spelled out well in advance of a divorce opens up the opportunity for the divorce to be conducted quickly and with relative ease. The earlier the divorce can be settled, the better it is for both parties, as dragging it out means expensive legal fees and emotional turmoil.
Common Provisions in Oregon Prenuptial Agreements
Prenuptial agreements in Oregon typically contain clauses that address property division, spousal support, and estate planning. Within these three broad categories there are a myriad of specific clauses that will be tailored to the individual needs of the parties.
Property Division
The provisions within a prenuptial agreement that address property are typically divided into several categories: separate property, joint property, and commingled property. Separate property generally refers to property that is owned by one party prior to the marriage that they wish to keep their spouse from receiving during a divorce or death. Joint property refers to property that the parties purchased during the marriage that they agree to split equitably. Commingled property is property that starts out as separate but gets commingled with joint property and it becomes difficult to distinguish between eventually.
Spousal Support
Spousal support provisions typically provide for the payment of spousal support within a certain range. For example, the parties may agree that neither party will receive more than $2500.00/month for 5 years for spousal support. Without a prenuptial agreement the court has discretion to award the amount and duration of spousal support. With the prenuptial agreement the parties can decide for themselves what they feel is appropriate.
Estate Planning
The estate planning provisions are important because during the life of the parties these will almost always be superseded by the will or trust that the parties have. However, while these provisions are normally unenforceable during the life of the parties they will endure after the death of one of the parties or the dissolution of the marriage. These provisions usually restrict the parties from making changes to their wills that are not mutually agreed upon.
Limitations and Considerations
The law does impose certain limitations on prenuptial agreements. These can be broadly categorized as (1) matters that cannot be addressed in a prenuptial agreement, and (2) issues that can be included but may ultimately be difficult to enforce.
For example, terms that are contrary to public policy are simply not enforceable. In Oregon, among other things, this includes any discussion regarding naming custody of minor children, or an agreement to limit child support. These types of terms are simply unenforceable no matter how carefully crafted, because the welfare of minor children always trumps the parties’ autonomy given the children’s best interests.
Also, an agreement to waive the right to alimony in the future, while technically enforceable, is a disfavored term in a prenuptial agreement . A complete waiver of alimony is problematic because it can place one spouse in a position of financial hardship years after the marriage comes to an end. This problem can be addressed by limiting the duration of alimony, or placing a cap on the amount of support. Any of these considerations are up for negotiation between the parties, and must be taken into account when drafting a valid agreement.
As is true for most contracts, an enforceable prenuptial agreement does not guard against fraudulent or coercive behavior. If a party to the agreement can show that there was an improper influence over the contents of the prenuptial agreement, then it may be found invalid. The challenge here is that many of these influences are difficult to identify or describe. For this reason, an attorney who is familiar with Oregon prenups will be very helpful at this juncture.
Steps to Creating a Valid Prenuptial Agreement in Oregon
One of the most commonly asked questions about prenuptial agreements is how does the process work? How do you draft and vet a prenuptial agreement before you sign it?
Initially, a couple should discuss and agree to the general topics to be included in a prenuptial agreement. A couple can prepare a prenuptial agreement on their own, or with the help of a mediation or collaboration professional.
If a couple decides to consult an attorney about the drafting of a prenuptial agreement, two things are critical: full and complete disclosure by both parties and representation by separate attorneys. A prenuptial agreement does not need to be prepared by an attorney, but a couple should consider the pros and cons of hiring an attorney before deciding.
Disclosures are contained in a prenuptial agreement because a court must determine that there was full possibility and consideration for both parties before an agreement is valid. In order to determine whether this requirement is met, disclosure of each party and joint property, bank account, securities, and income is necessary. Full disclosure allows for a determination that a potential agreement was entered into freely by both parties and that no one party was in a position to take advantage of the other.
Representation by separate attorneys allows for the attorneys to review the agreement with clients before signing. Because separate representation is important to the process, attorneys will prepare and send drafts back and forth until both parties are satisfied with the final product.
It is common for an attorney to be retained by only one party, especially in the beginning. The attorney’s fees for a prenuptial agreement are bid by the hour and a retainer is paid upfront. In some situations, an attorney is brought in to finalize a draft, in which case a retainer is not needed. However, it is best to have an attorney review the document immediately before signing to ascertain potential issues.
Once a prenuptial agreement is signed, it can be filed with the county clerk where the marriage will take place or simply kept in a safe place like a safety deposit box or with your accountant. Keep in mind, a prenuptial agreement is effective immediately after it is signed. Consult an attorney for additional questions about specific terms and conditions contained within a prenuptial agreement.
Enforcing and Challenging a Prenuptial Agreement in Oregon
Enforcement of prenuptial agreements in Oregon is generally governed by ORS 90.700-90.850. Those statutes incorporate parts of the Uniform Premarital Agreement Act from the 1983 version of the Uniform Premarital Agreement Act. Despite this being the version of the statute that is incorporated into Oregon law, much of the caselaw pertaining to prenuptial agreements in Oregon come from the 1990 version. This was due to the fact that the earlier version was not in effect long enough to develop considerable caselaw. To be enforceable, a party seeking to enforce the terms of the agreement must establish that: The party signing or resisting the enforcement of the agreement was represented by independent legal counsel at the time of signing; or, The party signing or resisting the enforcement had independent legal counsel, and was informed of the terms and effects of the agreement, and a copy of the agreement was provided in written form to the party seeking to enforce the agreement not less than 30 days before the date it was signed, notwithstanding the party’s voluntary and uncoerced waiver of this requirement; and, The agreement was not unconscionable when made, and after considering the following factors: (1) Inadequate knowledge of the other party’s property or financial obligations; (2) Lack of knowledge of the rights or facts relating to such rights; (3) Time available to study the agreement; (4) Opportunity to consult with financial or legal advisors or both; (5) Either party not being represented by an independent legal counsel when the terms of the agreement were explained; (6) Whether the party had previously engaged in business and prepared the agreement; and (7) Whether the terms of the agreement were expressed in a language in which the party generally reads or speaks in: (A) The language of the agreement; or (B) The second language in which the party generally reads or speaks. The enforcement of common law. A prenuptial agreement may be enforceable as a contract if the requirements of the statutory law are not met, notwithstanding other issues with the prenuptial agreement itself. If a prenuptial agreement is not enforceable, the court treats the issues arising out of the prenuptial agreement as if it were never entered into at all. Challenging a prenuptial agreement Challenging an agreement is more difficult than establishing its validity as there are fewer grounds for challenging an agreement than entering into one. Comparison with the contracts in the last section of the article, the primary grounds for challenging an agreement are as follows: Failure to meet the requirements of the statute. ORS 90.650(1). Lack of full disclosure of either party’s income or assets. ORS 90.655(1)(a)(A)-(B). Unconscionability. ORS 90.660; ORS 90.665. Statute of frauds. ORS 90.675(2). Lack of capacity or consent due to duress, fraud, or incapacity. ORS 90.680; ORS 90.685. Factual issues. ORS 90.690. Additional procedural issues have been described with regard to challenging prenuptial agreements but they tend to be more focused on how the court believes challenges should be handled on a case by case basis. As such, it is more difficult to discuss those challenges and how they should be handled, as doing so directs the reader to a case by case analysis of facts and legal reasoning.
Answers to Common Questions about Prenuptial Agreements in Oregon
How much does a prenuptial agreement cost?
The amount a prenuptial agreement will cost a person is based on how much work goes into the document. If both people know what they want in terms of dealing with separate and community property, and there are not many issues of concern, then the price is likely to be on the lower side. When each party wants advice going into the contract, the cost of the process can be much higher. While this is an investment in the future, if there is disagreement about how assets should be handled, the costs can skyrocket.
Will a prenuptial agreement have any effect on a marriage?
In essence, a prenuptial agreement should have little or no effect on the actual marriage itself. It is meant to be a safety net for the future, should a divorce become inevitable. Since it’s an agreement made prior to the marriage, it really isn’t intended to impact the marriage. A few issues that require ongoing negotiation may have an impact, such as agreeing to keep medical or life insurance policies on one another. The question of whether this will impact a marriage is a personal question that depends on how the couple feels about discussing these matters prior to taking the marital vows. For some couples, having a complete understanding of what might be expected each step of the way brings them closer together beginning on day one of their marriage . For other couples who prefer to take marriage one day at a time, this type of information may not be welcome prior to taking the vows.
Is it true that prenuptial agreements favor the richest spouse?
Depending on how they are written, it is certainly possible that some prenuptial agreements could be written to be very one-sided. However, the truth is that not all prenuptial agreements are created equal, and they do not all favor the richer spouse. Every prenuptial agreement should address unfair terms. An experienced family law attorney understands how to draft a prenuptial agreement fairly based on the financial, emotional and practical issues of the parties involved. While not every agreement may seem fair, if they are drafted lawfully by competent attorneys, they should not be.
Will a prenuptial agreement reduce child support obligations?
As a general rule, child support is much harder to reduce or avoid. Child support is a matter that the courts have a vested interest in for the sake of the children. As a result, prenuptial agreements will not normally touch agreements that pertain to child support.
What if I’m married, but I really need a prenuptial agreement?
It is not uncommon for a person to have been married once, divorced, and then married again. For these individuals, a prenuptial agreement is actually a postnuptial agreement. These agreements can cover all the same issues that prenuptial agreements can, and may provide the same advantage of security for the parties involved.