Prenuptial agreements, while not new, are making a comeback. Once considered a very antiquated practice, except among the very rich, they’re now becoming popular again. This is because many couples are waiting until much later in life to marry. This means they’re likely to have acquired many more assets than people who marry young.
Prenuptial agreements are defined as a written agreement between two people entering into marriage. The contract is designed to define, ahead of time, how money and assets would be divided should the marriage be dissolved in the future. Typically, it includes a list of all the financial assets owned by each party, and it makes specific mention of the rights both parties may have to them if a divorce takes place or a death occurs.
In some cases, the two parties decide to draw an agreement after the marriage has already taken place. This is called a post-marital agreement or contract. No matter how the agreement comes into force, some details exist that anyone considering a marriage contract should know.
Do You Need a Prenuptial Agreement?
These days, a prenuptial agreement doesn’t necessarily mean you’re rich. Many people are opting to have one for a variety of reasons. Any two persons considering a legal union can benefit from entering into a prenuptial agreement. An agreement entered into before marriage helps to memorialize the wishes and intentions of the couple in case of a dissolution, which can be highly charged with emotions.
To some, a prenuptial agreement is perceived as a lack of confidence or commitment to the union, but that’s a misguided assumption. There are many compelling reasons for opting for one besides the possibility of dissolution or end to the marriage in the future.
Make Clear the Financial Rights of Each Person
Sometimes, couples marry and already possess a substantial amount of assets, or they may have property and children born out of a previous marriage. Without first discussing finances, things can get cloudy very quickly when a marriage takes place, especially if it’s blending two families. Although some states recognize premarital property rights, as time goes by, it can become impossible to distinguish what each party brought into the marriage. Premarital agreements can also define the responsibilities of each party, which can be helpful when managing the day-to-day finances.
If there are children from a prior marriage, prenuptial agreements can be used to protect these kids financially in the event of a divorce, death, or incapacitation. With a prenuptial agreement, a family home owned prior to the marriage, for example, can be passed separately to the children via the agreement, thereby keeping it out of the joint assets of the marriage. Without an agreement, this property would be subject to the division of property laws of the state in which the couple resides. If there’s a death, it’s possible for everything to go to the surviving spouse and nothing to the children, if no will is in place.
Streamline the Dissolution of the Marriage
All couples go into a marriage with the best of intentions, but sometimes that’s not enough to hold it together. With a prenuptial agreement, the terms of the divorce can be predetermined, which can make for a less stressful and contentious divorce process. Things that can be addressed are the division of property, as well as whether alimony will be paid. However, some conditions must be met if the agreement contains a clause that excludes alimony from the divorce agreement. You can be sure that a judge will heavily scrutinize an agreement that excludes alimony to be sure that it was agreed to without duress and with good legal counsel.
Also with a prenup, the ownership of certain property, such as family heirlooms, can be clearly defined. This keeps these precious and sentimental items out of the discussion, and can protect them from being used as a bargaining chip. Sometimes, one party will make claim on items such as these simply out of spite, which only serves to escalate the contentiousness of the divorce and make life harder for everyone.
Prenuptial agreements can also protect each party from being responsible for any debts that existed prior to the marriage. Without an agreement, these debts can become marital property in some states if there’s nothing that defines them otherwise.
If there’s a business that must be considered, a prenuptial agreement can define how proceeds of the business will be distributed during and, if necessary, after a marriage. This can be crucial if there are partnerships involved or intent to sell the business at some point. Without an agreement outlining the terms in advance, a business could be tied up in a divorce proceeding for quite some time.
Without a prenuptial agreement, the dissolution of the marriage is subject to the laws of the state in which the couple resides. Generally, property acquired during the marriage is considered marital property, otherwise known as community property. The laws generally call for an equal division of all property acquired during the marriage and may even have some say in how property owned prior to the marriage will be divided. Without a prenuptial document defining a separate agreement, a spouse will most likely receive automatic rights such as:
- An equal share in the property acquired during the marriage with the expectation that the property or its proceeds will be divided equally upon divorce or will have inheritance rights of the property in the event of death.
- Maintain rights over the property to control its management, sale, or other disposition if applicable.
- Have his or her debts incurred prior to or during the marriage also be the responsibility of the spouse.
- Upon death, be the closest living relative, which under many probate laws means inheriting the vast majority of the assets, unless otherwise defined by a prior agreement.
Make Sure the Prenuptial Agreement Is Valid
Prenuptial agreements have traditionally been heavily scrutinized by the court system. This is because it was once thought that prenuptial agreements were, in essence, a get-out-of-jail-free card for the wealthier of the two spouses. However, as they’ve become more and more popular, and now are utilized in practical ways, the courts have begun to be more accepting of them.
As these agreements have become more balanced and as divorce and second marriages have become more commonplace, the laws have become more favorable in enforcing and validating them. They’re now legal in almost every state as long as they’re deemed fair and entered into in a proper and legal way.
However, this doesn’t mean that a prenuptial agreement, and how it was entered into, won’t be carefully examined by a court when it’s presented. Therefore, it’s important that you be sure to negotiate an agreement that’s fair, easy to understand, and sound from a legal standpoint. If you and the intended can sit down and reach an agreement on your own, that’s always the best course of action. However, be sure to have separate lawyers perform a review and offer up any advice deemed important. This will go a long way toward convincing the court that it’s indeed an agreement and not a one-sided situation imposed by one party in the marriage. Largely, most reasonable prenuptial agreements are recognized as valid by the court system.
One thing you cannot do with a prenuptial agreement is place limitations on child support payments due to a spouse or, in any way, limit a spouse’s right to child visitation.
However, an agreement can waive alimony (spousal support) and death benefits. This can serve as good backup to your will, as the court can assign validity to your intentions since they were stated and memorialized before the marriage even took place.
Prenuptial Agreements Are Especially Good for Second Marriages
Pre-marital agreements can be very useful for older individuals marrying for the second time or for those with children from a previous marriage. Many times, older couples considering marriage have significant assets from a first marriage in which the spouse has passed on and they’ve been the beneficiary of the estate. Generally, these older individuals need to protect their assets so they can be passed on to their own children and not be mingled with the new spouse’s assets. Co-mingling assets could potentially set up a scenario in which the children of the first marriage are cut out of their proper inheritance, or they lose control over the assets of a parent that becomes incapacitated.
Those entering second marriages with small children should make sure those children will be well taken care of should anything happen to the parent. This is where a prenuptial agreement can be important in defining what’s “yours, mine, and ours.” While everyone would want to believe that a surviving spouse would do the right thing when it comes to taking care of the deceased partner’s children, unfortunately, that’s not always the case.
Different States, Different Rules
The rules governing prenuptial agreements vary by state, so it’s important that you seek legal counsel when it comes to drawing up your agreement. For example, California requires that a prenuptial agreement be executed at least seven days from the time it was presented to the other partner and that there be a full and complete disclosure of assets. It also requires that each party to the agreement have a lawyer in the negotiation and execution.
These rules were made law after the famous prenuptial case of former professional baseball player Barry Bonds. His lawyers presented the agreement for signature to his fiancée the day before their wedding, and she was not under the advice of legal counsel at the time she signed it. While the agreement was upheld by the California Supreme Court, the legislature felt it was prudent to add these requirements to the law to protect future parties from entering into agreements they may not have been properly advised on.
It’s also prudent to make sure all parties entering into a prenuptial agreement are not under the influence of any drugs or alcohol and are not in a compromising position with their health or other extenuating circumstances. Doing so could lead to the agreement being deemed null and void. For instance, even a woman being pregnant at the time of signature would likely be considered grounds by the courts to overturn an agreement. Her negotiating position could be considered weakened or that she was under duress when the agreement was signed. Judges look unfavorably towards a person looking to take advantage of someone in a compromising position.
Talking Through the Terms in Advance Is Always the Best Way
Don’t wait to bring up the subject of a prenuptial agreement until after the wedding has already begun to be planned. This is a recipe for disaster and could become the cause for nullification if a judge feels like one party or the other was coerced. Talk about the terms of a prenuptial agreement at the same time you discuss the possibility of marriage, and look to gain agreement before the document is drawn up. This will up the chances of a successful agreement being reached.
Although you can always enter into a marriage agreement after the wedding, it’s not advisable. This is because agreements signed after the marriage has taken place have a higher likelihood of being challenged and overturned. In California, for example, prenuptial agreements are largely viewed as valid, as long as they’ve met the basic guidelines, while those entered into after the marriage are looked at skeptically by the courts. The spouse looking to have the agreement enforced will have to do extra work to prove to the court that the agreement was executed in a proper manner.
Having a prenuptial agreement can save a couple years of emotional upset and thousands of dollars in attorney fees if they’re properly executed. Don’t assume that you don’t need one if you’re considering getting married. Scheduling a quick consultation with an estate planner or family law attorney can set you on the right path to making the best decision.