What Is A Prenuptial Agreement?

A prenuptial agreement (“prenup”) is a document that sets forth what will happen to your assets in the event of a divorce, separation, or death.

A prenuptial agreement can preserve and maintain the separate nature of property, instead of being subject to community property or the laws of equitable distribution.

Prenups have been around for thousands of years and were necessary for women in the United States during the 19^th Century – up until the Married Women’s Property Act of 1848.

Before the act became law, the prenup required that everything a woman owned or inherited had to be transferee to her husband. In the event that he died or divorced her, she could possibly lose everything.

Today, prenups are becoming more popular for a variety of reasons. There are more women in the workforce today with accumulating wealth. Men and women are getting married later in life, focusing on careers and acquiring property and financial independence along the way.

Prenuptial agreements are also popular when one partner has children from a former marriage and wants to make sure his or her separate property goes to those children.

Prenups are often used to protect the assets of wealthy spouses or preserve a family business. There is a long history of premarital agreements used to protect a wealthy spouse often at the expense of the other spouse.

History of Prenuptial Agreements

Originally, prenuptial agreements were studied carefully by judges because they were traditionally used to protect the property of wealthy individuals from less fortunate marriage partners. There were instances where the partner with fewer means was coerced into signing the agreement, and this often led to dissolved marriages.

Today, divorces are more prominent, and women are less vulnerable and have an equal footing in society. They don’t need as much protection as before, and most prenups are upheld.

But deciding whether or not to have a prenuptial agreement can be a difficult decision. There are many pros and cons to consider.

What A Prenuptial Agreement Covers

• The prenuptial agreement can protect the assets of one party while also protecting against assuming the debts of the other party.
• The prenup clarifies financial responsibilities during the marriage, avoids costly disputes in the case of divorce, and determines how a property will be passed on upon death.
• Prenups preserve family ties and inheritance; it keeps family property in the family.
• The agreement ensures that your estate will be settled according to your wishes used (along with other documents like Will and Living Trust)
• This agreement puts financial expectations on the table and forces partners to face financial issues that need to be faced.
• The financial well-being of children from a previous marriage is protected. The agreement spells out which assets a spouse may give to children or other family members if a death occurs.

What It Does Not Cover

• A prenuptial agreement is certainly not romantic. It can cause a great deal of stress.
• It may be thought of as a lack of commitment and an expectation to divorce at some point. It can lead to a lack of trust and resentment between spouses. Some people may look at the process as planning the divorce before planning the wedding.
• A prenup may be found to be invalid due to non-disclosure of all assets or evidence of fraud, duress or lack of representation.
• Prenups cannot contain provisions or instructions regarding anything illegal. Such provisions might jeopardize part or all of the agreement.
• A prenup does discuss financial issues, but it may not contain issues regarding child support or child custody. The court determines such issues based on the “best interests” of each child. For example, a prenup cannot dictate visitation rights or a child’s right to financial support or relationship with a parent.
• A spouse cannot waive a right to alimony. While some states do allow such waivers, most states do not or at least limit this ability.
• A prenup cannot use language that tends to offer a financial incentive for divorce. It is in the interest of the courts and society in general to limit divorce. Any provisions to divide property in a way that encourages divorce will not be accepted.
• The agreement must be financial, and not personal. It should not discuss child rearing, use of names, specified chores, vacation rules, or relationships. Mention of private domestic matters can lead to the rejection of the agreement.

What Makes It Invalid?

In addition to the above items which are not covered and can lead to rejection of the prenup, here are some more reasons.

• The prenuptial agreement must be in the form of a written document. If not, the agreement is not enforceable.
• The agreement must be properly executed and signed by both parties.
• The agreement is invalid if one of the spouses felt pressured to sign, by the other spouse, attorney or member of the family.
• The agreement was not read. Sometimes a spouse is given a pile of papers to sign, and this particular agreement is one of them and doesn’t get read. Or the spouse isn’t given enough time to read and understand the agreement. Either of these is grounds for making it invalid.
• Any false or misleading information, as well as incomplete pertinent information, can make the agreement unenforceable.
• Both sides should have independent representation and counsel. Some states require this. Having your own attorney is the best way to ensure your own particular interests are being represented. Without independent counsel, the agreement may not be enforceable.

The State Laws

States have different laws concerning prenuptial agreements and the distribution of property upon divorce. Community property states have rules that divide accumulated property equally.

Community property states include Arizona, California, Louisiana, Idaho, Nevada, New Mexico, Texas, Washington, Wisconsin, and the territory of Puerto Rico.

Other states have policies of dividing property assets on an equitable distribution basis.

For example, a judge may distribute property by giving the wealthier spouse a portion like 2/3 and the other spouse, 1/3 of the combined property. You should consult your own state to determine its specific rules governing distribution.

What to Consider When Creating A Prenuptial Agreement

If you and your spouse both think that a prenuptial agreement is a good idea for you and your situation, there are some things you should consider to make the experience a positive one.

Be honest with each other and considerate of each other’s feelings. This can be a very tense and emotional experience. You don’t want to jeopardize your marriage before it gets started.

You shouldn’t hide your emotions or disguise your feelings. Being open with one another is an important first step.

Discuss it early on, and don’t wait until just before the wedding. Walking down the aisle leaves little time for discussion.

Once you decide on the process, you should each hire separate attorneys and ask them for an affidavit of independent legal counsel. Keep this with the other forms you fill out as part of the prenuptial proceedings.

A good prenuptial arrangement should serve both your interests and leave you free to enjoy your relationship on a more personal level.