If you’re thinking about getting married or going to be married soon, you might want to consider getting a prenuptial agreement to plan how you will split your assets in the event of a divorce. While the topic of a prenup might be a difficult discussion to have for some, it can offer reassurance for both parties to know what to expect when their marriage dissolves.
- What Is a Prenuptial Agreement?
- Who Should Get a Prenuptial Agreement?
- What Is Included in a Prenuptial Agreement?
- What Are the Benefits of Having a Prenuptial Agreement?
- How Long Does It Take To Get a Prenup?
- How Does a Prenuptial Agreement Affect a Will?
- How Do I Make a Prenuptial Agreement?
- Frequently Asked Questions
What Is a Prenuptial Agreement?
A prenuptial agreement is a contract couples enter into before they get married. The document details how they will divide their assets, how children from previous marriages will be provided for, and provide spousal support if their marriage ends in divorce. A prenuptial agreement can also be referred to as a premarital agreement, an antenuptial agreement, or a marriage contract.
When creating a prenuptial agreement, you need to identify what kind of assets you and your spouse own, as the court recognizes property in specific ways:
Separate Property is any property owned before the marriage and kept separate from the marriage by the intent of the owner and with the knowledge of the spouse. For example, a car owned outright before the marriage by the wife would be her separate property.
Community Property is anything acquired during the marriage or accrues because of both spouses’ efforts. For example, if both spouses buy real estate and pay the mortgage with their combined salaries, it is community property. There are only nine states that are community property states, and they include:
- New Mexico
Common-Law Property, or equitable distribution, is when assets are divided based on whoever acquired them. This property system means assets are not necessarily divided equally. A variety of factors are considered to divide marital property fairly and equitably. Most states follow common law.
Who Should Get a Prenuptial Agreement?
There can be multiple reasons to get a prenup. While the wealthy commonly use the agreement to protect their assets, people with a modest background find creating a prenup can be helpful in their marriages. Some examples of why a person might want a prenuptial agreement are below:
- They have significant pre-marital assets and want to ensure their spouse doesn’t claim full or partial ownership of those assets if they divorce.
- They want to ensure their children from a previous relationship inherit their assets instead of their spouse when they pass away.
- They want to protect themselves or their spouse from inheriting significant debts.
- They want to simplify the divorce process by agreeing on terms in advance, so there are no arguments if they ever divorce.
What happens if I don’t have one?
When spouses cannot agree on the division of assets, shared responsibilities, or any other relevant terms outlined in the agreement, the court will decide on their behalf after the judge has considered all the necessary facts. For example:
- The financial needs and earning potential of either spouse
- The standard of living for their family
- If there are any dependents
- Contributions towards home maintenance
- The well-being of any children the spouses have together
However, most states follow equitable distribution laws, so the court will divide assets after considering multiple factors. This means that your ex will have a right to assets you acquired during your marriage, such as a business, regardless of whether they had any involvement in it or not.
There is also a possibility of inheriting your spouse’s debts and tax liabilities if they pass away during the marriage.
What Is Included in a Prenuptial Agreement?
A prenuptial agreement may cover multiple aspects of property and responsibilities in your family:
Separate property under community or common law: If the family uses the wife’s car, it could be considered community property under the law. Alternatively, if a spouse is a co-owner of the car, it is regarded as the couple’s joint property. A prenup can keep it her separate property.
Business ownership or partnership: Businesses started before marriage are separate property in most states, but profits earned during the marriage can be considered community or common law property. You can add clauses to limit this or remove this as a possibility in your prenup.
If you live in a community property state, you can protect your business from your spouse and convert it to separate property using an LLC Operating Agreement. This route will require a postnuptial agreement. Another way is using a spousal consent form, which can be included in the LLC Operating Agreement or used as a stand-alone document.
Child custody and child support: Most states, such as California, will not enforce any prenuptial agreement regarding custody and support for unborn children. California also will not allow parties to waive child support. However, parties can make arrangements for living children in a prenuptial agreement. However, as a matter of public policy, provisions regarding child support, child custody, or visitation in a premarital agreement are not guaranteed to be upheld because the court has the final say over those matters, especially when it comes to child support.
What Are the Benefits of Having a Prenuptial Agreement?
While discussing a prenuptial agreement with your partner is often thought to be a tough conversation, it can positively affect your future marriage once both parties understand the agreement can benefit them individually.
Protects Your Assets and Divides Them Fairly
Partners who enter a marriage with significant separate assets can have peace of mind knowing they will be protected in the event of a divorce.
In a prenuptial agreement, partners can specify which assets are considered marital property, which the court will then distribute according to their state laws. Having the prenup in place ensures that the court will distribute the assets according to the wishes of both partners instead of using community property or equitable distribution laws utilized in a traditional divorce.
Encourages Open Discussion
A prenuptial agreement can pave the road to an open and honest discussion about finances, assets, and liabilities with your partner. The positive effect of having this important conversation is that it can create a deeper level of trust between partners. It lets them know what to expect before getting married and provides reassurance that they won’t have to deal with any unfortunate surprises later down the line.
Simplifies Divorce Process & Saves Fees
A prenuptial agreement allows couples to agree on matters that may become contentious in court if they want to divorce. The document simplifies and speeds up the entire divorce process and saves money on court fees, which can skyrocket depending on how drawn out the process becomes.
Avoids Inheriting Debts
When a partner enters into a marriage with financial debts, there may be a possibility the other partner will have to share the debt obligations when they divorce. Having a prenup in place can protect both parties from assuming these debt obligations, which can be reassuring to know if your partner’s debt is significantly higher than yours.
How Long Does It Take To Get a Prenup?
Drafting a prenup takes as much or as little time as the parties wish. There is no specific requirement, but parties must consider that to be valid, a prenup must meet certain guidelines:
- It must be in writing.
- There must be full and fair disclosure of all finances.
- The signers must attest they signed voluntarily (without duress or coercion).
- The terms must not be unconscionable, meaning they cannot be so grossly unfair that it would lead to a partner being destitute or living a substandard quality of life.
- It must be signed by witnesses and notarized according to state laws.
Some states, such as California and Florida, require a separate clause or attestation that the parties had an opportunity to consult with independent counsel such as a lawyer. If they do not want to speak with one, they must acknowledge that they have waived the opportunity in the agreement.
Most states also require a waiting period between receiving the prenup and signing the document. In California, for instance, the time is seven days and cannot be waived.
Courts may also refuse to enforce a prenup, even if it meets all the requirements. For example, if you presented the document to your partner during a stressful period or with an enforced deadline. The court may find that the couple did not meet the voluntary signing requirement if the bride received the prenup seven days before the wedding.
How Does a Prenuptial Agreement Affect a Will?
A prenuptial agreement can include terms that dictate what happens to assets in the event of a divorce or the death of a spouse. So the document can take precedence over a will. For example, if there was a stipulation in the will that you will give the ownership of an asset to a relative when you pass away, but your prenuptial agreement has conflicting arrangements, the court will most likely enforce the prenup.
How Do I Make a Prenuptial Agreement?
Frequently Asked Questions
Since a prenuptial agreement is a contract, it is as enforceable as any other contract if it follows the state’s requirements. Once the parties have signed and notarized the contract, they have demonstrated an “intent to be bound,” and the courts will enforce the permissible terms of the agreement.
Yes. Every state requires notarization for a prenuptial agreement to be enforceable. Before completing a prenup, make sure you consult an attorney to ensure you have complied with all witness and notarization requirements.
Yes, a prenuptial agreement can be valid after death, and there are situations where this particular outcome is desired. For example, if you have children from a previous relationship and want to ensure they are the beneficiaries of your estate when you pass away.
For the court to respect your wishes, the prenup must have the necessary stipulations. In the case of inheritance, the agreement can contain provisions stating that certain assets are considered separate property and the spouse waives all statutory inheritance rights.
The price will depend on whether you do it yourself or have an attorney draft the document. If you do your own prenuptial agreement, the cost will be minimal, limited to the notary fee. The risks are that you might overlook some important issue or property or use improper legal phrasing.
If you choose to pay an attorney, a prenuptial agreement lawyer will cost considerably more. However, you will have peace of mind knowing they will take care of all legalities.
Suppose you and your prospective spouse have numerous separate properties or businesses you want to keep separate or are unsure of your state’s requirements. In that case, you will at least want to have your paperwork reviewed by a lawyer before you sign.
No, you can’t get a prenuptial agreement after marriage. By definition, a prenuptial agreement is “before nuptials,” or in other words, before marriage. However, you can create a postnuptial agreement that follows the same guidelines as a prenup and provides the same degree of protection.