11 Drafting the Agreement: Overview

• Library: Premarital Agreements: Drafting and Negotiation (ABA) (2017 Ed.)

11 Drafting the Agreement: Overview

§11.01 Basic models

A premarital or postmarital agreement generally starts out as one of two basic models on which parties may build variations according to their needs and wishes:

• Title Controls. For parties who wish to have an agreement that is relatively simple and inexpensive to draft and administer and that will produce a well-defined, predictable result, the agreement can define the parties' rights almost exclusively by title. In client-friendly terms, this type of agreement can be described as a his-is-his-and-hers-is-hers agreement.
• Shared Property. Under a shared property regime, each party maintains his or her nonmarital property, however that is defined in the agreement, but the parties share property acquired through either party's labor or industry. This approach most resembles, but need not be identical to, the treatment of property at divorce in dual classification states.¹

Under either model, the agreement can also provide for the economically stronger party to transfer cash or assets to the weaker party during the marriage or upon death or dissolution of the marriage.

§11.02 Title controls model

In a title controls agreement, all separately titled property will belong to the owner, even if acquired through marital labor, and will remain the property of the owner at divorce (except to the extent the agreement carves out a share for the nonowner). Each party will also control disposition of his or her assets at death except as provided by the contract. All jointly titled property will be equally owned and will therefore be equally divided at dissolution, even though the parties may have contributed to acquisition costs disproportionately, and will go to the survivor at death in accordance with title. The material in Chapter 12 consists of the model provisions for a complete premarital or postmarital agreement with comments about the provisions to aid the lawyer in tailoring the agreement to the needs and wishes of the client. It is based on the title controls model agreement but includes a number of optional add-in provisions designed to provide for an economically weaker party.

§11.03 Shared property model

Chapter 13 provides model paragraphs for a shared property agreement. When the parties wish to have an agreement that provides for sharing the fruits of their labor, counsel may start with the title controls agreement and substitute the appropriate paragraphs from Chapter 13. A shared property premarital or postmarital agreement typically provides for each party to have exclusive rights to nonmarital property, usually defined as premarital, inherited, and gifted assets, and to share the fruits of their labor. Younger couples often prefer this approach because it comports with their ideas about marriage as an economic partnership. A major benefit of such an agreement is that it can allow parties to protect premarital, gifted, and inherited assets from a spousal claim without violating their feelings about what marriage is supposed to be. A proposal for such an agreement will often be readily accepted by an economically weaker party, thus making the negotiation process relatively easy.

Such an agreement can reduce significantly the cost of divorce by providing certainty and eliminating some issues from contention that can be quite costly to litigate. Several recurring issues in divorce litigation are especially expensive to resolve. Parties who wish to do so can have a shared property agreement that eliminates these issues from future litigation as long as the agreement clearly and expressly so provides.

• The agreement can provide that a party's interest in a business or professional services practice is excluded from the marital pool of assets but leave the owner's compensation for personal services in the marital pool along with assets acquired from such compensation.² The potentially high cost of a business valuation, with competing expert witnesses, can thus be eliminated, as can the cost of litigating the extent to which appreciation of a premarital business was the result of active efforts or market forces. Taking the business out of the marital estate may also insulate the business from intrusion into its financial affairs through formal discovery.
• The agreement can specifically exclude from the marital estate the appreciation in value of a party's separate

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