It is indeed an exciting time to be practicing family law – there are changes in the wind, and today, I would like to remark on one of them that I see coming – prenuptial agreements and gay married couples.
Once upon a time prenuptial agreements (prenups) were the sole province of the rich and famous. However, with divorce rates having reached an all-time high in the past decades (estimates are that between 40% and 50% of married couples will divorce), prenups have become surprisingly commonplace. I am frequently consulted to prepare a prenup for a couple planning marriage. A few generalizations may be drawn from these clients. In most cases, at least one and sometimes both, have children from a previous relationship. Usually, the couple is in their 40’s or older. The primary concern in all of these cases is threefold:
a) Protecting assets for heirs in the event of death;
b) Protecting assets for heirs in the event of divorce; and
c) Reducing the unknowns of litigation in the event of a divorce.
Aside from issues of alimony, the most common concern of clients seeking a prenup is the desire to protect pre-marital assets. In Michigan, there are some general rules governing pre-marital property. Pre-marital property is typically considered to be separate property, and leaves the marriage with the person who accumulated it prior to the marriage. For example, if a woman has a 401k worth $50,000 at date of marriage and $200,000 at the date of divorce, the first $50,000 (and the passive interest earned on that amount) will generally be considered her separate property, and only $150,000 is subject to division at divorce as marital property. However, as we all know, rules are meant to be broken. Also, sometimes couples don’t want to play by the rules and have their own ideas about how assets are to be divided in divorce. For instance, a prenup could provide that the entire amount accrued before and during the marriage will be treated as separate.
However, what if a couple wished to treat the entire $200,000 as marital, even though only $150,000 accumulated during the marriage? You might wonder why that would be a goal. Well, what if you were gay, and had been living out of wedlock with your life partner for 20 years because gay marriage was illegal? Suddenly, the Supreme Court issues a landmark, history-making, life-changing ruling that legalizes gay marriage and you and your partner run off to the nearest justice of the peace? Whoa! Let’s put on the brakes for just a minute! The two of you have pooled your resources for 20 years and now society will treat you as equal partners in the social contract of marriage! Congratulations! However, along with marriage comes the real likelihood of divorce. Don’t you want to ensure that all the two of you have built together during that 20 years before you were permitted to legally marry be treated as marital? Certainly, you would have been married if you could have been married, and treating your pre-marital property as marital is a powerful statement in support of your relationship.
So, where heterosexual couples will generally come in to ensure that pre-marital assets remain separate in the event of death or divorce, I predict a new type of prenup client. I suspect that after a few unfortunate innocents suffer substantial financial set-backs in divorce, gay marriage partners are going to realize the real need to have prenups prior to that race to the alter – to ensure that pre-marital property is treated as marital.
