A premarital agreement, also known as a prenuptial agreement or "prenup", is a written contract between two people who intend to get married, which governs how their assets and property will be divided should they ever divorce. Such agreements may also state what rights each party will have to financial support during or after a marriage.
If you're trying to decide whether or not to enter into a prenuptial agreement, you'll need to understand what this type of contract can and cannot do for you. For instance, a prenuptial agreement can define who gets what in case of divorce, but it cannot speak to future child custody rights. It's important that your agreement contain only what it should; unethical or illegal clauses could cause a judge to consider your entire prenuptial agreement to be invalid.
Before getting to the specifics of your own situation, it’s helpful to look at the general advantages and disadvantages of making a prenuptial agreement.
Define who gets what in the event of a divorce. Every state has its own laws regarding property division in the event of a divorce. Without a prenup, state law may dictate a result that is unfavorable to either party. You can use a prenup to establish your own rules for property division and avoid potential disagreements in the event of a divorce. In most states, you can also use the agreement to establish whether or not one or both of you will be entitled to alimony.
Alimony is money paid by one ex-spouse to the other for support under the terms of a court order or settlement agreement following a divorce. Except in marriages lasting ten years or more, or in the case of an ailing spouse, alimony usually lasts for a set period, with the expectation that the recipient spouse will become self-supporting. Alimony is also called "spousal support" or "maintenance." Some states forbid or restrict agreements about alimony, however.
Keep finances separate. Every state has laws designating certain kinds of assets accumulated during marriage as community property or marital property, even if these assets are held in the name of just one spouse. States differ as to exactly what is included in marital property; some states include all property and earnings accumulated during the marriage, while others exclude gifts and inheritances. If you want to avoid having some or all of your individual accumulations during marriage divided up by a court, you can do so with a prenuptial agreement.
Protect from each others’ debts. It may be the case that you and or your partner has debts prior to the marriage. Without a prenup, creditors are sometimes able to turn to marital or community property to satisfy the debts of just one spouse. A prenup can be used to limit your liability for each other’s debts.
Provide for children from prior marriages. A prenup is helpful and in some cases essential if you or your partner has children from another relationship and you want to make sure that your children inherit their share of your property. In a prenup, one or both spouses can give up the right to claim a share of the other's property at death.
Keep property in your family. If your property includes something you wish to keep in your birth family, whether it be an heirloom or a share in a family business, you and your spouse can agree that it will remain in your family, and you can specify that item in your prenup. This can even include property that you expect to receive in a future inheritance.
Please note that in addition to using your prenuptial agreement to waive inheritance rights and state your intentions for passing on your property at death, it is vital that you make an estate plan with a will, a living trust, and so on that actually transfers your property as you intend.
Though there may be significant advantages to making a premarital agreement, it is important to consider the downsides of the process as well.
It may not be the right time. The issues covered in a prenup, including money management, property rights, responsibility for debts and estate planning, will probably arise sooner or later in your marriage. And if your marriage doesn't work out, you'll certainly need to deal with divorce decisions. But making a prenup forces you to confront many of these issues prematurely. Discussing what goes into a prenup could be uncomfortable and stressful, leaving one or both of you with bad feelings about the relationship.
It may taint the marriage. Making a prenup is not romantic. Although marriage is a financial partnership as well as a romantic one, discussing something as mundane and potentially uncomfortable as property and finances, as well as the possibility of divorce, could mar an otherwise beautiful time of your lives.
It is important to note that state law may protect you without a prenup. Each state has its own set of marriage laws. Your state laws may do a fine job of accomplishing what you want. For example, if you live in a community property state where assets owned before marriage are separate property and those accumulated during marriage are community property that is owned fifty-fifty, then this is how the courts will divide the property in the event of a divorce case. If this is essentially what you would want in your prenup, then there is little need for the agreement. Its important to be aware of any special circumstances where your state law is unclear.
If you are exploring the possibility of a premarital agreement, you should consult with an attorney in your state who has experience drafting prenuptial agreements. The requirements for drafting a valid prenuptial agreement vary significantly from state to state. In general, the agreement must:
Be in writing,
Be signed by both spouses,
Have been accompanied by sufficient disclosure of all the assets, income and debt of each spouse,
Have allowed the parties ample opportunity to consider its contents, and obtain separate legal advice, before signing,
Be free from fraud, duress,
Entered into freely and voluntarily by both parties.
It is also important to consider future events, such as child birth. Although child custody and child support declarations in a prenup are not enforceable by the courts, you are able to include contingencies such as increasing the benefits provided to the less wealthy spouse in the event of the birth of a child.
You are also able to set an expiration date for the prenuptial agreement. For example, you can declare that if your marriage lasts for a certain amount of time, the agreement is no longer effective, or that the parties must agree to renew it at that time.
Please be aware that if you wish to employ a prenuptial agreement, you will have to provide an honest disclosure of all of your assets and debts as part of the process. Your agreement may not be enforceable if it is discovered that assets were hidden or debts dishonestly recited.
When drafting a prenup, it is important to offer a fair contract for both parties. A premarital agreement that would leave the less wealthy spouse with nothing would probably not be enforced by the court. Some states look at fairness not only when the agreement is signed but also when it is enforced. In these states, a previously enforceable agreement may be rendered invalid if there are significant changes in a spouse’s health, employment, or financial status. A lawyer experienced with prenuptial agreements can guide you through all of these issues.
To be most effective, a prenuptial agreement should be drafted and signed well in advance of the wedding - ideally at least a month or more in advance. It may be important for you or your partner to hire an independent attorney to review the agreement, and negotiate changes if necessary. Usually, If the agreement is signed on the eve of the wedding, it can be challenged on the basis that it was signed under coercive circumstance.