March 8, 2012

How to Avoid A “Lott-o” Drama: A Perfect Argument for a Premarital Agreement

by: Julie Andrews, Attorney
Imagine holding the winning Hoosier Lotto ticket worth a cool $34.5 Million dollars! Then imagine having to give half of it away to a soon-to-be ex spouse! Not too enticing, is it?
Lottery Ticket.jpgFor those of you who have not followed the drama behind the recent Hoosier Lotto winning ticket, the story goes like this: A winning ticket was sold in Shelby County worth $34.5. A few days later, a woman received a call from her estranged husband, who coincidentally lives in Shelby County. The husband requested finalization of their divorce. The wife thought her husband sounded suspicious and questioned why he suddenly wanted to finalize the divorce. She asked if the reason was because he had won the lottery. In what now appears to be a sarcastic response, the husband admitted that he was the winner. After his affirmative admission, the game was on! The wife hired a lawyer to secure her share of the winnings through the divorce process. In fact, the court quickly issued a temporary restraining order which prevented the husband from dispersing any of the money until the divorce was settled in Court. It was never confirmed that the husband was the winner. In fact, it has recently been revealed that the winner of the Hoosier Lotto is a 70 year old woman.
During a divorce and dividing up property, most people won’t be as lucky as the couple that George Strait sings about:

When that front door swung wide open,
She flung her diamond ring and
Said: “Give it away.”
“Just give it away.”
An’ I said: “Now, honey, don’t you even want,
Your half of everything.”
She said: “Give it away.”
Just give it away.
“There ain’t nothin’ in this house worth fightin’ over.
“Oh, an’ we’re both tired of fightin’ anyway,
“So just give it away.”

Realistically, most people have situations such as the Lottery story above and not the George Strait couple. Soon-to-be ex spouses want to make sure they get their share of the wealth. Some litigants even get down to dividing the food and condiments, similar to a famous scene from The Jerk with Steve Martin. The estate or “marital pot” includes all things, assets and debts whether they were acquired by the parties prior to the marriage, during the marriage by the efforts of one or both spouses or by gift or inheritance.

Once the value of the estate is determined, it has to be divvied up between husband and wife. The beginning presumption is that an equal division of the estate is just and reasonable. However, this presumption is rebuttable and is based on the unique facts of the case, this gives the judge a wide range of discretion. Discretion can be translated to mean uncertainty as to how the Judge will resolve the disputed property division issues and higher attorney fees.
This uncertainty, or “divorce purgatory”, can cause difficulty for parties to live day-to-day during a divorce and to plan for their post-divorce life. One way to avoid this issue is to enter into a premarital agreement. Premarital, or prenuptial agreements, have gained popularity as more people are waiting until they are established in their careers before they get married. Having a well established career means that a person is likely to have a greater asset base than people who get married fresh out of college or high school.
Likewise, people who remarry are more likely to have a larger asset base they wish to protect. These same people may desire not to be saddled with the risk of assuming half of their prospective spouse’s debts. A premarital agreement gives prospective spouses peace of mind as well as autonomy and control over how their property will be divided in the event of a divorce or death. Although it can be an uncomfortable conversation to discuss how to divorce when the parties are preparing to walk down the aisle, it is a wise financial, drama-reducing plan.
When preparing for a premarital agreement, the following are a few (of many) helpful points:

1. Don’t present a premarital agreement to your prospective spouse the night before the wedding. Creating a premarital agreement takes time. An agreement entered into without adequate notice or representation can be set aside as being signed under duress;
2. Hire an attorney. If you are emotional during the process (not to mention being preoccupied by details of the upcoming nuptials), your attorney can keep you focused on the end result and pay attention to the detail. An attorney can help keep the bargaining power equal to avoid the agreement being set aside for being unconscionable;
3. Prepare a complete list of all of your assets and all of your debts;
4. Issues of spousal maintenance and divorce attorney fees should be considered;
5. Child support cannot be bargained away between the parties

While premarital agreements are subject to being set aside under certain conditions, some of which are set out above it is more likely that the end result will be more predictable and less expensive. If the husband and wife in the Lotto story had a premarital agreement in place (and if the husband really been the winner!), they may have avoided the drama of dividing their presumed assets and probably saved money in legal fees and expenses.

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