Prenuptial Agreements: Comprehensive Guide and Basics

All states recognize these legal documents (also called antenuptial agreements), though the terms and specifics of the document can vary.

Prenuptial agreements are a common legal step taken before marriage. A prenup establishes each spouse's financial and property rights in the event of a divorce. If you are already married, you can consider a postnuptial agreement instead.

While no one thinks about a divorce when they get married, about 40-50% of all marriages in America end up in divorce proceedings. So it's often prudent for a soon-to-be-married couple to at least consider a prenuptial agreement.

Prenups are often used to protect the assets of wealthy spouses but also can protect family businesses and serve other vital functions. Learn about your state's legal requirements for a prenuptial agreement and whether it's right for you.

This comprehensive article covers the basics of prenuptial agreements:

• How can a prenup help you
• How to hire a prenup attorney and when it's a good idea
• Invalid prenup agreements
• How to consider if a prenup is right for you
• Pros and cons of premarital agreements
• What a sample agreement looks like

Emotions Surrounding Prenup Agreements and Discussions

Entering into a prenuptial agreement should never be taken lightly. Typically, mentioning a prenup suggests the possibility that the marriage may end at some point.

Discussion of a prenuptial agreement also can create stress in a relationship. Setting certain financial conditions and designations of separate property is a personal decision. It can be added stress while also planning a wedding or marriage ceremony.

It helps to understand the pros and cons of signing such an agreement.

Is a Prenup Right for Me? Analyzing Your Own Situation

To determine if a prenup is right for you, base your decision on your unique circumstances. Analyze your own situation and keep your best interests in mind. It can help to ask yourself the following questions:

• Do you own real estate?
• Do you have more than $50,000 in assets?
• Do you earn more than $100,000 a year in earned income?
• Do you own any part of a business?
• Do you have more than one year's worth of retirement benefits?
• Do you have employment benefits such as stock options or profit-sharing?
• Do you or your partner plan to go to school for an advanced degree while the other works?
• Does a part of your estate name beneficiaries or heirs other than your partner?

If you or your partner answered yes to one or more of these questions, a prenuptial agreement may be in your interest. Consult with a family law attorney if you are unsure about the benefits of a prenup. An attorney can help you understand how it could still be used to protect your current or future assets.

Why Should I Have a Prenuptial Agreement?

There are several reasons why one party (or both parties) may want to sign a valid prenuptial agreement before getting married.

Generally, prenups protect assets that may otherwise be subject to marital property laws. While they can get a bad reputation for "being negative" about the future of the marriage or "planning to get divorced," prenups simply exist to protect both people.

Specifically, these documents may be used to:

• Protect one party from taking on the debts of the other
• Protect specified assets of one party (some assets become joint property or community property after marriage)
• Simplify property division if the marriage ends
• Clarify the financial responsibilities of the parties

The Pros and Cons of Prenuptial Agreements

Marriage is not only a romantic relationship but also a type of business relationship. A prenuptial agreement can be useful to protect each spouse's financial interests or property.

The following is an examination of the pros and cons of prenuptial agreements. Differences in state laws are also important to consider.

Pros of Prenuptial Agreements

• Inheritance: a premarital agreement can protect the inheritance rights of children and grandchildren from a previous marriage.
• Business: a premarital agreement can protect that interest if you have a business or professional practice. It can prevent the business or practice from being divided up or sold. It can also stop the control or involvement of your former spouse after divorce.
• Debt: a premarital agreement can protect a debt-free spouse from having to assume the obligations of the other. Prenups are helpful when one spouse has significantly more debt than the other. Taking on a spouse's debts is a stressful risk during marriage or divorce.
• Stay-at-Home Parents: If you plan to give up a lucrative career after the marriage, a prenup can ensure you will be compensated for that sacrifice. If the marriage does not last, you will have some financial protection.
• Spousal Support: a premarital agreement can limit the amount of spousal support (also called alimony) one spouse must pay the other upon divorce.
• Older Adults: a premarital agreement can protect the financial interests of older persons
• Second Marriage: prenups can protect assets for people entering into second or subsequent marriages
• Wealth: a prenup agreement can protect people with substantial wealth
• Estate Planning: prenups can support your estate plan and plan out details without future court involvement
• "Legalize" Plans: having a legal document like a prenup can make certain financial agreements with your spouse official. You can take legal action if the agreements aren't followed.
• Homes and Property: a prenup ensures fewer real estate and property conflicts during the divorce process. The details of these assets and how they are divided will already be set in a prenup.

A premarital agreement can address more than just the financial aspects of marriage.

It can cover details of decision-making and responsibility sharing. The two parties must agree and add these decisions to their document.

Cons of Prenuptial Agreements

• Inheritance: the agreement may require you to give up your right to inherit from your spouse's estate when they die. Under the law, you are entitled to a portion of the estate even if your spouse does not include such a provision in their will.
• Business: if a spouse's business does well, you may not be entitled to claim a share of the increase in value. This only applies if you agree to these terms in a premarital agreement. Some spouses might contribute to the continuing success and growth of their spouse's business or professional practice by entertaining clients. Some might contribute by taking care of the home or kids. Under many states' laws, this value increase would be considered divisible marital property. However, a prenup can override these laws.
• Personal Relationship: starting a relationship with a contract that details what will happen after death or divorce can feel like a lack of trust. Some people may feel like a prenup creates distrust in the relationship.
• Unknowns: it can be difficult to predict how potential future issues should be handled. What may seem like a small compromise in the romantic premarital period may seem more monumental and burdensome later.
• Low or No Income Spouses: a low- or non-wage-earning spouse may end up with less money than they thought. They might not be able to sustain the lifestyle they got used to during the marriage. This only applies if the agreement substantially limits the spousal support a spouse can receive.
• Changing Feelings: in a relationship's "honeymoon" stage, one spouse may agree to terms that are not in their best interests. This can happen when someone is "too in love" to be concerned about the financial aspects of marriage. They can't imagine the union ending untimely and don't plan for it.
• State Laws: certain elements of the prenup may already be addressed by state law. A premarital agreement might give you fewer benefits than the state's division of property laws already does.
• Children: you can't address child support or child custody issues in a prenup. These types of items can't be agreed upon prior to the marriage ending. You will need other legal documents to handle these agreements. No court will uphold any type of agreement made years in advance regarding custody or child support. The exception is a mediation agreement that was done recently and filed with the initial divorce papers. A recent mediation agreement would likely be upheld.
• Requires Court Involvement: a judge may rule parts of the prenup are unenforceable. This depends on the relevant facts in the case.
• Limits: non-monetary matters, such as chores and tasks, cannot be addressed in a prenup.

What Makes a Prenuptial Agreement Invalid?

A prenuptial agreement may be considered invalid under several different conditions and scenarios. A prenup must be:

• Written and signed by both parties
• Properly executed
• Willingly signed and not signed under duress
• Read before signing (some people don't read prenups when they have a package of documents requesting signatures, for instance)

These reasons mean a prenup may not be considered valid. Specific state laws may have other rules about recognizing a prenuptial agreement.

Sample Prenuptial Agreement

Deciding whether to sign a prenuptial agreement can be one of the most difficult decisions engaged people face. It can feel like a stressor during what is supposed to be a romantic time.

Creating the agreement, however, doesn't have to be hard. It can be the first of many instances where a couple works together to agree on how they want their marriage to work. Knowing what to expect in a prenup document can help.

What the Agreement Might Look Like

Important Note: The following form is intended for illustrative purposes only.

This sample document outline can be a guide for:

• Discussing the issues raised below
• Determining your wishes
• Drafting a prenuptial agreement that best protects your interests

Your situation is unique, and the below provisions may or may not be appropriate for your case. This is only intended to show an example.

A family law attorney who understands your goals, situation, and the state laws in effect can provide an appropriate and enforceable prenuptial agreement.

Sample of a Prenup Agreement

It is common for both people to list their names and then be referred to as "Prospective Spouse 1" and "Prospective Spouse 2." The document will also need the date when it was created.

It should outline basics such as:

• You are contemplating marriage soon.
• You both wish to establish your rights and responsibilities regarding each other's current income and property.
• Income and property acquired, either separately or together, during the marriage will be marital property unless covered in this document.
• Both spouses have fully disclosed all of their financial assets and liabilities.
• You have both created Financial Statements with your financial information that will be attached to the prenup.

You will both be asked to waive the following rights:

• Sharing in each other's estates upon one spouse's death
• Spousal maintenance (both temporary and permanent)
• Sharing in the increase in value during the marriage of the separate property of the parties
• Sharing in the pension, profit sharing, or other retirement accounts of the other
• Dividing any separate property of the spouses (whether you currently own it or acquired it after marriage)
• Any claims based on the time the spouses live together or cohabitate
• Both parties can outline any other relevant exceptions in the document
• Both future spouses can list any additional provisions

Adding Relevant Exceptions or Provisions in a Prenup

Both spouses can add unique statements to a premarital document if they agree, like allocating household chores between the parties.

Most decisions about children aren't set in a prenup. They are determined later in a child custody arrangement. For example, what religion a child is raised in is a custody decision. If the divorcing parents end up with joint legal custody, they will need to agree on the stated religion at that time.

Final Elements Of a Prenup

Your document should conclude with the following types of agreements, statements, and requirements:

• Both spouses are represented by separate and independent legal counsel of their own choosing.
• Each person has separate income and assets for their own financial needs.
• This agreement outlines the entire agreement of the parties.
• The prenup may only be modified in writing and executed by both spouses.
• If part of the prenup is invalid due to state laws, that provision is deemed separate from the rest of the agreement. The rest of the agreement remains valid and enforceable.
• This agreement follows the laws of the state where you reside.
• The laws of that state will resolve any dispute regarding the prenup's enforcement.
• The agreement takes effect immediately after the parties' marriage.
• Both parties have read the agreement in full and understand its content.
• Both parties understand the implications of the agreement.
• Each spouse agrees to its terms.
• Both parties voluntarily submit to the prenups execution.
• Both people must sign the document.

What Can a Prenup Do For Me?

There are a lot of misconceptions about what prenuptial agreements are and who uses them.

Wealthy individuals with a high net worth often do use prenups. However, prenuptial agreements have far more uses than simply protecting the assets of a wealthy individual. One of the main benefits is avoiding long, costly disputes in case of divorce.

It can also benefit couples who still need to get their estate planning in place. The prenup determines how property will be passed along upon death. However, having the full suite of estate planning documents is still smart.

Your prenup can also clarify financial rights and responsibilities during marriage. Couples can set guidelines for:

• Gambling
• Betting
• Buying or selling stocks
• Donating
• Tithing
• Credit card usage
• Saving money
• Creating bank accounts for children or emergencies
• Planning for the financial future

It can be a helpful and legally binding way to avoid poor money choices by either party.

If You Don't Get a Prenuptial Agreement

Your state has a series of family laws. These determine how property is divided during a divorce.

In most states, for instance, your spouse is entitled to:

• Share and receive ownership of property acquired during the marriage
• Receive some of your property upon death
• Share in any debts acquired during the marriage
• Share responsibilities in managing property acquired during the marriage

There are many good reasons to deviate from your state's laws. For instance, if you have children from a previous marriage. You may want your property to pass to your children upon your death rather than transfer to your current spouse.

The advantage of premarital agreements is that you can craft them to meet your particular needs.

Creating a Valid Prenuptial Agreement

Originally, prenuptial agreements were heavily scrutinized by judges. This is because they were traditionally used to protect a wealthy individual from a partner with substantially less financial means.

The fear was that the poorer spouse was being coerced to sign the prenup. Such agreements were seen to encourage the dissolution of marriages because the marriage was "easier" to leave.

Today, however, every state allows premarital agreements. Divorce and remarriages are more widely accepted.

The Court's Role in Prenups

Courts will analyze prenups carefully, so it pays to do it right.

Create an agreement that is clear, understandable, and justifiable. You can typically use any prenuptial agreement template for your state. You may need a notary public's signature and stamp on the document before it is legal.

If a judge decides that your premarital agreement is unfair or doesn't meet state requirements, the agreement will be set aside.

The prenup can be used at the execution of the agreement (when you sign it) or at the time of enforcement (when you start the divorce process). The Uniform Premarital and Marital Agreements Act (UPAA) also applies to some states. It says when and how a prenup can be enforced.

Getting Legal Advice: An Attorney's Role in Prenups

It is perfectly fine to negotiate and create a basic prenup yourself. Both parties should get the prenup reviewed by their own attorney after it is created.

Your attorney can advise you on your rights. They will also review the premarital agreement to ensure it complies with state law.

When To Have an Attorney Help You With Your Premarital Agreement

Prenuptial agreements are not one-size-fits-all. You should discuss and understand each provision in the document. Both spouses should also agree to exactly what each item means before signing any agreement.

If you need more clarity about parts of the document, your own trusted family law attorney can ensure you understand. Each partner should consult a separate lawyer (from different firms) to ensure their rights and interests are covered.

Marriage and divorce laws are also changing constantly. Your lawyer can help clarify the local laws and changes relevant to your best interests.

Starting a conversation about prenuptial agreements can be challenging to do. However, not having that conversation can come back to haunt you years down the road. Using a family law attorney can help guide the conversation and set up a prenuptial agreement.

Find the right family law attorney near you for some peace of mind. A prenup shouldn't interfere with what is, at the core, a joyful time in your life and your partner's life.