When planning a wedding (and a marriage), it’s wise to include a discussion of a prenuptial agreement, also known as a “prenup.” Though a prenup may seem unromantic or a matter more suited to celebrity gossip news, under the law a marriage is considered to be a binding contract between the betrothed couple, and with that contract comes certain automatic property rights for each prospective spouse.
A prenup is a private, individually negotiated contract between a couple. It spells out certain property rights and financial arrangements agreed to by the parties as a condition of getting married. This agreement can help you and your future spouse decide how you will support yourselves financially throughout your marriage, whether your assets will be considered separate property or marital property during the marriage, and what will happen if your marriage ever ends in divorce.
As divorce rates in the United States continue to hover between 40% to 50%, prenups are becoming increasingly common for couples of all financial standing. In addition, engaged couples are more commonly obtaining prenuptial agreements as a way of deciding for themselves how their property and assets would be divided in the event of a divorce or death.
A Prenup Can Help
Simply put, a prenuptial agreement provides clarity in a marriage.
Research points to marriages actually being stronger when there is a prenuptial agreement in place. Since money is one of the biggest topics couples fight about, removing the financial smoke and mirrors simultaneously removes a huge stressor from relationships. Prenuptial agreements are all about transparency, and transparency contributes to strong marriages.
Ideally, you will start the process of discussing your prenup many months before your wedding. If you are considering a prenup and haven’t discussed it with your future spouse yet, be sure to give yourself two to three months to have the initial conversation. This will help you both get comfortable with the idea.
Before you start the prenup discussion with your intended, you should understand what a prenup can and can’t do, the most common reasons couples choose to sign these agreements, and what makes a valid prenup.
What a Prenup Can Do
Typically, a prenup lists all of the property each person owns and debts they owe, and it spells out each person’s property rights during the marriage or in the event that they later divorce or that one partner predeceases the other.
A prenuptial agreement can protect the property interests of each individual in a marriage. Prenuptial agreements can also protect a spouse from assuming credit card, school, personal, or mortgage debts of the other partner in the event of a divorce.
For marriages in which either spouse has children from a previous relationship, prenups can even determine which property is protected for purposes of estate planning. A prenup can address spousal support and alimony concerns and clarify financial rights and responsibilities during a marriage, and may help avoid long, emotionally exhausting, and expensive disputes in the case of divorce.
Prenuptial agreements can help protect your assets in the case of divorce or death. You can designate that certain property will be considered your own separate property and not subject to any claims by your spouse. Prenups can protect family inheritance and your children’s interests in your efforts and assets.
As noted, prenuptial agreements can also provide clarity and a plan about how to distribute property if spouses divorce in the future. This way, there is as little contention or dissipation of financial assets and property as possible.
What Can Be Included in a Prenup?
Classification of property. A prenuptial agreement can classify which property is “separate property” and what will be considered “marital property.” This classification allows a couple to avoid the state’s default laws that would otherwise apply in the event of divorce. For example, you or your partner may classify a condo or home you owned prior to marriage as “separate property,” meaning that should you divorce in the future, that property would remain solely yours.
Debts. A prenuptial agreement may specify that each spouse is responsible only for his or her own debts.
Provisions for children from a previous relationship. A prenuptial agreement may be able to protect the property interests of children from previous relationships in case the spouse passes away. The spouse may wish to leave separate property to their children from prior relationships. This may be especially important if there’s a desire to preserve a family heirloom that is cherished by the lineal descendants.
Maintenance of separate finances. A prenuptial agreement may specify that the spouses will keep certain finances separate during the marriage and may specify which funds are marital. This can allow spouses to keep control of their own bank accounts and avoid commingling funds that could otherwise become marital funds.
Who Gets What
Depending on the state you live in, a spouse usually has the right to:
- share ownership of most property acquired during the marriage, with the expectation that the property will be divided between the spouses if they divorce
- share responsibility for either spouse’s debts incurred during the marriage, and
- share in the management and control of marital property (or community property in states that follow community property rules), sometimes including the right to sell or give away the property.
If you don’t make a prenuptial agreement and your matrimonial bonds unfortunately dissolve (or, sadly, one spouse passes away), you may find you have unwanted company in the procedures that follow.
Each state’s laws determine what happens to separate and marital property in the case of divorce or when one spouse dies. A prenup allows the parties to avoid a state’s default rules about property in case of divorce or death. In most cases, a prenup will allow you to decide for yourselves how you’ll deal with your property.
If you do not have a prenuptial agreement and you get divorced, state law determines how your property will be divided. There are two different ways (generally speaking) that states divide property: community property or equitable division.
In “community property” states, the property earned or acquired during the marriage may be subject to a 50/50 split.
In states that operate under “equitable division,” marital property may be subject to a fair distribution of the property between the parties, but not necessarily an equal split. How “separate property” and “marital property” are determined is often dependent on each individual situation, including length of marriage, and is often not as cut and dry as you may imagine. The courts have tremendous discretion when determining the division of property, and each state’s laws are different.
A “sunset clause” is a provision in a contract or law that in essence gives the prenuptial agreement an expiration date. A sunset clause will list the specific date that the agreement will cease to have an effect and is typically drafted as an anniversary date such as “on the 25th anniversary.” The beauty of a sunset clause is that it allows all of the benefits of a prenup but can allow a couple to choose a date at which they believe the prenup is no longer necessary.
What Can’t Be Included in a Prenup?
Provisions that encourage divorce. All states have public policies that favor marriage and discourage divorce. Prenuptial agreements cannot encourage divorce in ways giving a spouse an incentive to get divorced.
Anything related to child support. A prenup can’t waive child support or dictate how much support should be paid. The laws of your state will determine child support. The court can properly calculate the amount of child support that should be paid.
Anything related to child custody. A prenuptial agreement cannot place any restrictions on child custody or visitation rights. Prenuptial agreements may not contract away the rights of a child and dictate which parent will have primary custody of future (or current) children.
Provisions that include illegal terms. Like all valid contracts, a prenuptial agreement cannot include any illegal terms or requirements. In other words, a spouse cannot be required to commit an illegal act in a prenuptial agreement.
Do You Need a Lawyer for a Prenup?
In most states, it’s not a requirement to use a lawyer for negotiating a prenup. However, the court will likely look at whether either spouse had the opportunity to obtain legal advice, and whether one or both were represented by a lawyer. Note that both parties to the prenup cannot share the same lawyer.
Among the questions likely to come up: Was there enough time to find a lawyer before the wedding? Did one or both spouses have access to a lawyer but simply choose not to use one? Did either spouse sign the agreement on short notice (without even reading it, perhaps), deprived of an opportunity or time to consult a lawyer? The answers to questions such as these will be taken into consideration.
It is worth having a lawyer review your prenup in case you have questions. If your assets are complex (involving significant family inheritance or business ownership, for example), it may be a very good idea to have a lawyer review your agreement.
If you plan to hire an attorney to negotiate and draft your prenup, you can expect the process of drafting, negotiating, and signing to take three to six months. The cost of drafting a prenup can easily run to $1,000 or more.
What Can Void a Prenup?
The three most common grounds for voiding a prenuptial agreement are:
- Unconscionability of the terms.
- Failure to disclose finances.
- Duress and coercion.
Disclosure of finances is absolutely necessary for a prenup, and although some states allow for a party to sign a waiver of financial information, this requirement can be tricky.
Some states require “full disclosure” of finances, and others require “full and fair financial disclosure” of finances. Other states allow parties to waive their rights to disclosure of assets. If you choose not to disclose all assets, there could be a very clear argument that the prenup should not be upheld since the waiver was not done correctly, or the other party did not have reason to know of the assets.
Requirements for prenups are based on an individual state’s law. Your prenuptial agreement must comply with the laws of your state.
The parties may have to provide complete and accurate disclosures about their respective income, assets, and debts. Generally, a prenuptial agreement should be in writing and signed by both parties. It should be straightforward and easy to understand.
Courts may not enforce an agreement that is obviously one-sided and unfair. Courts may also consider whether the circumstances surrounding the prenuptial agreement were unfair, such as asking a bride or groom to sign it immediately before the wedding, under threat of calling off the ceremony. Additionally, courts may examine the substantive information included in the prenuptial agreement for fairness.
If a prenuptial agreement is the result of fraud, duress, or coercion, it may be deemed invalid.
Many states do not consider a prenuptial agreement signed within a week of a wedding to be enforceable solely because of the time between signing and the wedding. If your prenup was signed the day before your wedding, it could be argued that you or your spouse didn’t have much time to fully review the agreement and did not have time to hire a lawyer.
Although there is no guarantee that a prenup will be enforced in the future if disputed in divorce litigation, it is becoming less and less common that they get “thrown out” if both parties entered the agreement willingly and with full disclosure of assets. In order for a prenup to be “thrown out” by a judge, divorcing parties would need to be engaged in pending divorce litigation. A prenuptial agreement is effective in avoiding divorce litigation because it acts as a layer of protection in the way of setting expectations prior to entering a marriage.
A prenuptial agreement must be signed before your marriage. If you decide to make a contractual agreement with your spouse after you get married, this is called “postnuptial agreement.”
Postnups, similar to prenups years ago, are less widely accepted in all states than prenups. Therefore, getting a prenuptial agreement, when possible, provides you with the greatest chance for protection of your assets.
Second Marriage Prenups
A second marriage does face an even greater risk of divorce than first marriages, with 67% of second marriages resulting in a split, so it’s important to take the necessary steps to plan for every scenario possible. If you’re remarrying, chances are that you have acquired more assets since your first marriage, making a prenup all the more relevant.
For example, a prenup can help you and your future spouse organize how household expenses will be shared. Will they be paid in proportion to your respective incomes? Will they be split equally down the middle? What about if one or both of you has children from another relationship? Will either of you support those children financially when they are in college and/or beyond? These are important conversations to have no matter what, and a prenuptial agreement can help facilitate these discussions and set the precedent for a marriage with plenty of open discussions.
Consider estate planning. Do you want to leave their money to your children or provide financially for a new spouse? Both? To remedy any concerns of estate plans post-marriage, a prenup can specify that an estate plan must be put into place after the couple marries or can specify what terms will occur upon death of one of the parties. A provision like this will allow both parties’ families to feel at ease.
Conclusion
If you think you might want a prenup, speak with your future spouse. However, it’s best to find a qualified legal expert to help guide you through drafting and executing your prenuptial agreement. Prenups can help keep you and your assets protected, no matter what the future holds.
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