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What Is a Prenuptial Agreement?
A prenuptial agreement, also known as a premarital agreement or prenup, is a legal contract entered into by two parties before they get married that outlines each individual's assets and specifies how financial issues will be handled in case a divorce occurs. Prenuptial agreements are often associated with individuals who are wealthy, but this type of contract can benefit any couple who intends to get married. Alternatively, a postnuptial agreement is a similar document signed after two people are married and can be an option when people experience significant change in wealth after their marriage. However, a postnuptial agreement is sometimes seen as less enforceable, always speak with an attorney who can exaplin your rights and options prior to making a decision.
A prenuptial agreement allows the couple to address potential divorce issues early in the relationship when both parties are more likely to deal fairly and generously with one another. This document clarifies which assets belonged to each party before the two merged their homes while also specifying what assets each individual will be entitled to at the dissolution of the marriage and after the couple has combined some of their resources.
The Popularity of Prenuptial Agreements
In recent years, prenuptial agreements have increased in popularity. In a 2018 survey by the American Academy of Matrimonial Lawyers, 62% of lawyers polled said they had seen an increase in the number of clients seeking prenuptial agreements during the last three years. Some of this increase may be due to couples waiting longer to get married and accumulating more wealth and assets before getting engaged. The prevalence of divorce in previous generations may also contribute to the increase in prenups, since many millennials now getting married have divorced parents.
Benefits of a Prenuptial Agreement
Couples have many reasons to consider a prenuptial agreement.
Protection for Children From Previous Marriages
If either individual has a child or children from a previous marriage, a prenuptial agreement can include essential provisions that will help protect the children in the marriage. A prenup ensures that a child's biological parent can leave a portion of the estate to the child in the event of the parent's death. If the prenup is not in place, the surviving spouse may inherit most or all of these assets, leaving less than what the parent might have desired for the child.
Comprehensive Planning for the Future
Prenups cover more than divorce alone. Although divorce is the most common reason a couple will use a prenup, this document can also specify what happens in the case of death or incapacity.
Protection From Debts
If either party is entering the marriage with debts, a prenuptial agreement can clarify who these outstanding debts belong to. This arrangement will protect the other party from taking on the debt in the event of the divorce, an important point if the debts are substantial.
Safeguards for Personal Property
A prenuptial agreement can specify what property belongs to each party. If one of the individuals owns a home, vehicle, or other significant assets, a premarital agreement can prevent the other spouse from attempting to claim these pieces of property in a divorce settlement. Those who are engaged are more likely to deal fairly with one another, which could help the couple avoid disputes later if the marriage ends.
Protection From Typical Divorce Settlements
Understand what a typical divorce settlement would look like so that you can fully appreciate the value of a prenuptial agreement. Lacking a prenup, each spouse will typically have shared ownership and management of property acquired during the marriage. The spouses will also share liability for debts incurred in the marriage, leaving both parties to pay for these liabilities.
How to Handle a Prenuptial Agreement
Be aware of the requirements for a prenuptial agreement so that you can make sure that this document holds up in court if you need to call upon it in the future. While you can draft your own prenuptial agreement, you should do so with care and make note of the following considerations.
You should discuss your prenuptial agreement as soon as possible after you get engaged. Aim to complete this contract at least six months before the wedding. If you wait until a significant part of the wedding planning is complete, you may have trouble proving that the prenup wasn't entered into under duress. Once the parties have invested in sending invitations, putting a deposit on a wedding venue, and purchasing wedding attire, proving that the prenup was entered into freely becomes more challenging.
Secure Separate Attorneys
A single attorney cannot represent both parties fairly. Working with separate attorneys ensures that each party has someone reviewing the contract who is interested solely in the individual's best interests. An attorney is also a valuable resource for navigating issues that are specific to your state. Every state handles prenups differently. You should consult with a local attorney who understands the process in your area. You may want to:
- Create the first draft of the prenuptial agreement together.
- Individually take the document to separate lawyers for review.
- Meet together with both lawyers to review the changes and finalize the document.
Know What Areas to Include
You can put many items into a prenuptial agreement. While you're taking the time and effort to create this document, consider including as many details as possible. Some items that you can include in a prenup are the following:
- Distribution of retirement benefits
- Specifications on how you will file tax returns
- Details on the management of finances in your marriage including joint bank accounts, household bills, and expenses
- Information on savings contributions
- Arrangements for large purchases such as a home
- Specifications for managing a joint business
- Details on financial management if a spouse goes back to school
- Information on how disputes will be handled where arbitration or mediation is involved
- Management of credit card payments and spending
- Distribution of property and life insurance in the event of one spouse's death
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The Limitations of a Prenuptial Agreement
A prenuptial agreement is not all-encompassing. You can't manage all aspects of a marriage with this type of contract. You should understand these limitations before drafting the prenup, particularly if you're creating this contract independently. A prenup that includes the following may be deemed invalid:
- Child support : Child support is the right of a child , not the parent. Courts will not validate a prenup that attempts to waive a child's right to support, even if both parties are in agreement on the issue.
- Child custody or visitation : The courts maintain the right to determine how child custody and visitation are handled based on the interests of the child. The parents may not specify how these issues will be handled in a prenup.
- Incentives for divorce : Anything that might encourage a divorce will likely invalidate a prenuptial agreement.
- A waiver of alimony : Many states prohibit alimony waivers, and others limit them. While a few states allow alimony waivers, these waivers must be handled carefully.
- Personal matters : A prenuptial agreement is designed to deal with the couple's financial matters. It cannot be used to specify how the couple will raise their children, manage the housework, divide the holidays, handle surnames, or allocate their time, among other considerations.
A prenuptial agreement is a valuable document that deserves a great deal of time and consideration. When drafted properly, this contract can provide you and your spouse with a great deal of protection as you both approach the future together.
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