John and Jenny are considering getting married. Each of them has children of prior relationships. John has a business that is his separate property. Jenny is expecting to receive an inheritance. Each is employed and each owns a home.

Why might John and Jenny consider negotiating a premarital agreement? A premarital agreement assists with communication between the parties about their expectations. The process results in accomplishing the following:

1. The holdings of each party at the time of marriage are documented.
2. The debts of each party are defined, in part to protect the other's property and holdings.
3. Acquisitions during marriage are classified as community or separate, depending upon the circumstances.
4. The financial responsibility for children is agreed upon.
5. The effect of a divorce on property rights is agreed upon. Generally, the separate property of one party is declared unavailable for award to the other party in a divorce. In addition to making the agreement, there are steps to be followed during the marriage to keep separate property distinct from community property.
6. The rights and obligations of each party, in disposing of property at death, are established.

In order to enter into an effective premarital agreement, each party should have separate counsel to provide independent advice. Additionally, it should be negotiated well before marriage.

Incidentally, if you or someone you know is living with a partner but not married, you or your friend may be surprised when the relationship terminates in death or separation. The law is starting to give rights that may or may not be intended by the parties. It's a good idea to review this issue with an attorney and document the agreement or understanding between the parties.

Please feel free to call us with questions on any aspect of your estate planning. Members of our Trusts & Estates Group include Julie Dickens, Alan Macpherson, Eileen Peterson and Sandy Rovai.