21 Jan What Is The Real Benefit of A Marital Agreement?

Without a prenup or postnup the negotiation and trial are about how much more than half a spouse will receive. With a marital agreement, the spouses can negotiate whether one will receive more than the agreement provides and, if so, how much. The trial is about whether the agreement is valid. To save time and resources a spouse may offer the other more than required by the agreement, but not close to half of what the community estate would be. Like litigation between a seller and buyer, even though the seller believes the product had no defect, she might accept a discounted payment to bring the litigation to an end. Some call this “nuisance value.” Likewise, the spouse with more wealth or higher income might pay the other more than required by the agreement.

With a substantial estate this can be a huge difference. Depending on the length of the marriage, retirement, savings, investments, real estate, etc. might have grown substantially and the potential community estate could be several hundred thousand dollars or millions. Instead of arguing about hundreds of thousands or millions, the negotiation is about a few thousand dollars of nuisance value.

The party challenging the agreement has great risk it will be enforced, and he will receive only what the agreement provides. Without a prenup or postnup, that spouse’s worst day at court is half the community estate. Minimally, he will receive half without a written agreement. The likelihood of receiving only what the agreement provides makes any offer worthy of consideration, even if much less than the spouse thinks is fair and not close to half of what the community estate would have been.

The real benefit of a marital agreement is it changes the negotiation and the worst-case scenario for each party. It provides no fast-pass to the front of the line at court. A lawyer may not simply explain to the Judge there’s a prenup or postnup so the process should be skipped and a judgment signed awarding the client all she requests. A marital agreement might not save attorney’s fees if a spouse is determined to challenge it, but it changes the payout at the end.