A Guide to Prenuptial Agreements in Maryland
March 30th, 2021
Sometime between the proposal and the wedding day, many Maryland couples find themselves thinking about how marriage will affect their lives, their property, and their loved ones. With more couples waiting to get married, or getting remarried later in life, many Maryland residents are coming into new relationships with assets, debts, and children that need to be addressed and protected. Often, the solution to these complicated family issues comes in the form of a prenuptial agreement.
What is a Prenuptial Agreement?
A prenuptial agreement (sometimes called a “prenup” or a “premarital agreement”) is a contract between two people who plan on getting married in the future. In contract terms, it is an agreement made “in consideration of” the marriage. In other words, each party agrees that in exchange for the rights and interests outlined in the contract, they will say “I do” when standing at the altar.
As a contract, a prenuptial agreement creates a legally binding guide for courts that need to divide up the family’s assets in the future. It can also help to clarify how you and your spouse will deal with finances and debts during the marriage (i.e. Will you use a joint checking account or divide up household bills?), and can even anticipate issues like child-rearing. Many prenuptial agreements include provisions that account for both divorce and the death of a spouse. No matter how the marriage ends, the purpose of the prenuptial agreement is to control the claims one spouse has to the property of the other.
Do You Need a Prenup?
Most people assume that the only people who need a prenuptial agreement are trust-fund beneficiaries and the very rich. However, there are many family situations where negotiating the division of assets ahead of time may be important to protect the interests of everyone involved.
Children from a Prior Relationship
If you have children from a prior relationship, you may want to work with a family law attorney to create a prenuptial agreement that ensures that those children will receive your assets upon your death. A prenuptial agreement, along with a carefully drafted will or estate plan, can carve out “non-marital property” that belongs solely to you. If you die before your spouse, these documents can override the state’s inheritance laws that would give those assets to your surviving spouse, to make sure your children don’t have to rely on their step-parent’s good will to receive their inheritance.
Providing for a Homemaker or Caregiver Spouse
A prenuptial agreement in Maryland cannot set the terms for child custody or child support payments related to the parties’ current or future children. However, family planning is still a motivating factor for many couples weighing whether to get a prenup. If you and your fiance plan to have children together, you may want to work with an attorney to prepare a prenuptial agreement that sets out who will be the children’s caregiver, and anticipates how that interruption to his or her career path will affect the homemaker spouse in the event of divorce.
Your prenuptial agreement could set out a plan for alimony based on a percentage of the wage-earner’s income or other financial obligations. This alimony can be awarded for a set period of time, or until the children reach a certain age. This allows the caregiver spouse to carry out your shared plan for child-rearing, even if the marriage itself does not survive.
Interest in a Family-Owned or Closely Held Business
If either you or your spouse own a business before you get married, the terms of your partnership agreement may encourage you to get a prenuptial agreement to protect your interest in the business. Some business formation documents say that a divorce can trigger a buyout of a partner’s interest, rather than creating a risk that the person’s spouse will end up owning the partner’s shares.
In other cases, you may anticipate inheriting a business in the future. Ownership of a family business often passes from parents to children only when the founding family member retires or passes away. If there is a chance your spouse could claim an interest in your family business as their own, your family may want you to get a prenup to protect the family’s legacy.
In either case, a prenuptial agreement can explicitly list any business interest you have as your “non-marital property,” belonging only to you. This language will protect your business property from claims by your spouse and shield you from losing your business if your marriage breaks down.
Shielding Premarital Assets
The same consideration applies to any pre-marital assets. Under Maryland law, except for certain circumstances, any property acquired during the marriage is deemed to be marital property subject to equitable division by the courts. Property owned prior to the marriage, as well as gifts and inheritances received prior to or during the marriage are non-marital. You don’t need a prenuptial agreement to argue that certain assets are non-marital during a divorce. However, doing so often involves trying to produce historical records to establish the ownership and value of property on the date of the marriage - which may be many years ago. Most premarital agreements include an inventory of each spouse’s assets and debts at the time the agreement is entered. Creating that list now, before the marriage, will be far easier and less expensive than gathering the same information years or even decades later - when it may not even be possible to collect the historical data required.
Protection of Retirement Benefits
Often, when people get married later in life, one main concern is that their new spouse will claim part of their pension, retirement accounts, or veteran’s benefits in a later divorce. Retirement assets earned during the marriage can be divided between spouses. However, a prenup can waive one spouse’s claim to the pension, 401(k)s, and annuities of the other spouse, so that each of you knows what assets will be available to you when you retire. Your prenuptial agreement can also lay out your agreement with regard to Veteran’s survivor benefits and spousal annuities. However, there may be additional steps you need to take to carry out that agreement should a divorce eventually occur.
Premarital Agreement Pros and Cons
Some people find the idea of a premarital agreement distasteful. If you imagine a marriage in romantic terms, with two lives becoming one and the couple living happily ever after, it may seem premature and unnecessary to anticipate what happens when the marriage ends. You may be concerned that by considering divorce before you get married you make it more likely to come to pass.
However, as of 2020, nearly 4 in 10 marriages ended in divorce. If this is your second or subsequent marriage, the chance of your marriage ending is even higher. Even if you and your spouse do stay together for life, when one or both of you pass away your family will need to know how to divide up your property. Whenever and however your marriage ends, a prenuptial agreement can streamline the process of identifying and distributing your assets, either between spouses or among your surviving loved ones.
In addition, many couples find that being intentional and having the conversation about these difficult issues early -- before the marriage begins -- reduces stress throughout their married life together. If you share financial resources and wealth accumulation with your spouse, it is because you choose to do so - not as a result of specific marital property laws which may not have been considered. If divorce does result, having a prenuptial agreement can streamline the divorce process as well, and reduce the emotional strain of separating the family’s property.
What Makes a Maryland Prenuptial Agreement Valid?
Maryland is one of the few states that does not follow the Uniform Prenuptial Agreement Act. Instead, the state treats a prenup just like any other contract. That means that to be valid, a prenuptial agreement must be:
- In writing
- Signed by both spouses
- Entered after each spouse has the opportunity to talk to his or her own attorney (even if a spouse never actually does so)
- Include complete financial disclosures (or a waiver of that right to information)
When Will a Court Ignore a Prenup?
Prenuptial agreements are legally binding contracts. That means they are generally enforceable even if circumstances change over time or one spouse changes his or her mind after the fact. However, there are certain defenses a spouse can raise during the divorce that will allow a Maryland family court judge to ignore a prenup:
- undue influence
- incompetence, or
- unconscionability (shockingly unfair).
Claims of duress or coercion often involve a prenup that was presented to a fiance as a complete document at the last minute, or which did not include financial disclosures. Also, as mentioned above, a prenuptial agreement cannot include negotiations over child custody or child support -- especially for children who have not yet been born. If your prenuptial agreement includes these terms, the court will likely ignore that part of the contract, while the property-related provisions remain.
Should You Get a Prenuptial Agreement Lawyer?
Many couples work together to sort out their plans for a prenuptial agreement in advance. However, because these agreements affect your property rights, divorce law, and inheritance, it is a good idea to speak with an attorney to review the terms that you and your partner have discussed before anything is signed or finalized. This is true even if your spouse has already presented you with a draft agreement.
Maryland attorneys can only represent one party in the formation of a contract, and they have a legal and ethical obligation to do what is best for his or her client. If your spouse has worked with a lawyer to prepare a prenuptial agreement, there may be parts of the document that work in your spouse’s favor that you didn’t consider, intend, or even fully understand. You should never assume the terms in a draft (unsigned document) are necessary or non-negotiable terms. A draft prenuptial agreement is a great place to start negotiations. However, the final version of a prenuptial agreement should reflect both parties’ interests, and that means getting independent counsel, review, and considerations for each person.
Remember that duress and coercion can negate a prenuptial agreement. The best strategy to make sure your prenuptial agreement will stand up in court involves:
- Starting well before your wedding day
- Hiring two attorneys -- one for each spouse
- Negotiating the terms of the prenuptial agreement together
- Including alternatives that account for unlikely but foreseeable life changes (i.e. one spouse becoming disabled)
- A thorough exchange of relevant financial information and supporting and detailed asset schedules
By working with individual attorneys and customizing the terms of your prenuptial agreement, you can anticipate and prepare for future legal troubles at a time when you both still want what is best for one another. Smart, effective drafting of a prenuptial agreement can make life easier for everyone involved whenever the marriage ends and it becomes time to divide up what you own.
At the Law Office of Shelly M. Ingram, our family law attorneys want to help you remove stress from your marriage and from your engagement, while you plan a life together. We can help you negotiate a prenuptial agreement based on a full disclosure of both spouse’s assets and debts, that is fair and anticipates many of life’s unexpected changes. We treat prenuptial agreements as a tool to build better relationships now, as well as an opportunity to protect our clients’ interests and those of their children now and in the future. If you are getting married, or have received a draft prenuptial agreement from your fiance, contact us today to schedule a consultation with an attorney.