Of love, marriage, real estate and divorce
Q. I am getting married later this year. My fiancee makes about $20,000 more a year than I do and owns her own home, which I will move into after the wedding. Do I need to ask her to sign a prenuptial agreement?
A. I’ll answer your question with a question of my own: Why in Cupid’s name would you want your fiancee to sign a prenuptial agreement when she apparently has a lot more financial assets than you have?
I get questions about prenups all the time. Those queries always peak around Valentine’s Day or in June, the latter of which is the most popular month for weddings, but it’s a good starting point for my annual Valentine’s column.
A prenuptial agreement, sometimes called a “premarital agreement,” is a written contract created by two people before they are wed. A prenup typically lists all of the property that each person owns — as well as any debts that each owes — and specifies what each person’s property rights will be after they are wed and if they later get divorced.
Once upon a time, prenups were typically used only by wealthy people who wanted to ensure that a guy or gal who was about to marry into their family could not later claim a big part of their riches. But the agreements today have become more common among middle-class folks, too, especially if one bought a home months or years before the planned wedding day, and the home has gone up sharply in value.
Your letter states that your fiancee makes about $20,000 a year more than you and owns a home that you will move into after the wedding. I don’t think you need a prenup because she apparently has a lot more assets that you do, unless, say, you have a home of your own that can be sold for a tidy profit, lots of money in a stock account or retirement fund, or maybe an uncashed lottery ticket for a few million bucks that you haven’t told your sweetheart about.
Others who might want to consider a prenup are those whose betrothed has much more debt than they do or are financially responsible for children from a previous relationship. Still others seek such an agreement to reduce the chance that an eventual divorce may jeopardize a business enterprise that may have been in the bride or groom’s family for years.
Discuss your real estate and other financial concerns about your upcoming wedding with an attorney, as well as with your sweetie.
REAL ESTATE TRIVIA
Some legal experts suggest that engaged couples who tentatively agree to sign a prenup have their proposed pact first reviewed by separate lawyers, each representing the couple’s individual interests, to reduce the chance that a divorce-court judge will later void the contract because it unduly treated one of the individuals more favorably than the other.
Q. Is it legal for me to buy a home now, even though I am planning to get married this summer?
A. Sure. You can buy a home anytime you want, wherever you want, with or without your fiance, as long as financing can be arranged. A key question here, though, is how a lender will view the mortgage application.
If both you and your loved one have good credit scores and solid income, you may want to file the paperwork jointly to improve your chances of getting the best interest rate and largest mortgage possible.
Conversely, if your sweetheart has a lousy credit record or tons of debt, it would probably make better sense to apply for the loan by yourself.
Q. What is a FLARPL?
A. It’s a goofy-sounding abbreviation for a “family law attorney’s real property lien,” which some states allow lawyers to file if they agree to represent a homeowner who is involved in a divorce or other lawsuit but doesn’t have a lot of hard cash to pay the attorney’s fees.
To illustrate, let’s say that Jane and John Doe have a combined $100,000 equity in their house. Jane wants to sue for divorce but doesn’t have cash to pay for adequate legal representation regarding future ownership of the home, custody of the kids, child support and the like.
If Jane and an attorney sign a FLARPL, Jane can pledge her $50,000 half-interest in the house to her divorce lawyer. The lawyer would then represent Jane with little or no pay throughout the proceedings. Jane’s attorney would get paid only when the divorce decree is issued and the house is sold, or if some other type of satisfactory agreement is reached.
Many lawyers aren’t keen about FLARPLs or similar arrangements, largely because they may have to put in months or even years of work but won’t get paid until the case is eventually settled. On the upside, though, the lien helps to ensure that for an equity-rich client, the attorney likely will be paid in full rather than having to slash the bill.
ABOUT LIVING TRUSTS
Even low- and middle-income homeowners can now reap the same benefits that creating an inexpensive trust once provided only to the wealthiest families. For a copy of David Myers’ “Straight Talk About Living Trusts” booklet, send $4 and a self-addressed, stamped envelope to David Myers/Trust, P.O. Box 4405, Culver City, CA 90231. Net proceeds will be donated to the American Red Cross.
Send questions to David Myers, P.O. Box 4405, Culver City, CA 90231, and we’ll try to respond in a future column.