Prenuptial agreements, which are also referred to as premarital agreements or ‘prenups,’ are agreements which establish the financial and property rights of each spouse in the event of a divorce. Although you may think that considering prenuptials is a negative attitude to have about your upcoming marriage, the fact is that fifty percent of marriages in the United States of America end in divorce. It is also true that marriage isn’t simply a relationship based on attraction and romance but a number of agreements, many of which are financial. So while it may be negative, it is also prudent to consider having a prenuptial agreement. There is a stereotype that prenuptials are only used to protect the assets of a wealthy spouse. While that may be true in many cases, prenuptials can also protect a family business along with serving many other functions.
Reasons to use prenuptial agreements
Getting a prenuptial agreement can have benefits for both parties. In general, prenuptials are used to protect assets and properties which may otherwise be subject to marital property laws. They may specifically be used to:
- Protect one party from taking on the debts of the other
- Protect specified assets from one party
- Determine the manner in which property is passed on after death
- Simplify property division in the event of a divorce
- Clarify the financial responsibilities of all parties
Pros of getting a prenuptial agreement
- Prenuptials can protect the inheritance rights of children and grandchildren from a previous marriage
- If you are the owner of your own business or practice, prenuptials can protect the business or practice from being divided or subject to the control of your former spouse upon divorce
- If one spouse is in debt, or if both spouses are in debt but one is in more debt than the other, a prenuptial agreement can protect the spouse with no debt or a smaller debt from having to take on the obligations of the other spouse
- If you plan to give up a profitable career after getting married, a prenuptial agreement can ensure that you will be compensated for what you have given up if the marriage ends in a divorce
- A premarital agreement can dictate more than just the financial aspect of marriage and can set boundaries and rules regarding decision making and responsibilities to which both parties agree on in advance
- A premarital agreement can limit the amount of spousal support that one spouse will have to pay the other in case of a divorce
- Prenuptials can protect the assets of older people, people entering into their second or third marriages and wealthy spouses
Cons of getting a prenuptial agreement
- There is a possibility that the agreement will require you to give up your right to inherit from your spouse’s estate. This is a right you are guaranteed if a prenuptial agreement is not signed
- A spouse often has a role to play in their partner’s business or professional practice. This can include attending business dinners, entertaining guests or taking care of the home while their spouse manages their business. If the business or practice grows as a result of your contributions, you may not have the right to benefit from that growth or inherit any part of the business in the event your spouse’s death
- Initiating a relationship with a contract which sets forth the particulars of what will happen in the event of death or divorce can cause a lack of trust
- Projecting future possibilities is often an unsuccessful practice, specifically when deciding how future issues ought to be handled
- A low or non-wage earning spouse will often not be able to sustain the lifestyle they grew accustomed to during marriage in cases where a prenuptial agreement severely limits the amount of spousal support to which they are entitled
- It is easy for one spouse to agree to terms in a prenuptial agreement which are not in their favor during the ‘honeymoon phase’ of the marriage
Can a prenuptial agreement be rendered invalid?
A prenuptial agreement can be rendered invalid under a number of different conditions and scenarios. A prenuptial agreement can be improperly executed. If the agreement is not written, read and signed by both concerned parties, it can be rendered invalid. Prenuptials can also be signed under duress and partners can claim that they were made to sign the agreement under duress. A state may also not recognize a prenuptial agreement due to the lack of independent counsel for each spouse, false information, being far too one-sided, and lack of time for consideration, invalid provisions, as well as false or incomplete information.
What can’t be included in a Prenuptial Agreement?
The following cannot be included in a prenuptial agreement:
- Provisions detailing anything illegal
- Decisions regarding child support or custody
- Waiving your right to alimony
- Encouraging divorce
- Rules about personal matters
What can be included in a Prenuptial Agreement?
The following can be included in a prenuptial agreement:
- Protection for one spouse from the others debts
- Distinguishing between separate and marital property
- Providing for children from a previous relationship
- Keeping family property in the family
- Protecting the estate plan
- Defining property distribution upon divorce
- Detailing responsibilities during marriage
Items and entities commonly included in prenuptial agreements
- Separate businesses
- Retirement benefits
- Income, deductions and claims for filing tax returns
- Management of household bills and expenses
- Management of joint bank accounts
- Arrangements regarding certain investments and purchases such as a house or business
- Management of credit card spending and payments
- Savings contributions
- Property distribution to the survivor, including life insurance, in the event of death
- Arrangements to put one or the other spouse through school
- Settlement of potential disagreements, such as using mediation or arbitration
If you need help drafting a prenuptial agreement, get in touch with an experienced family law attorney.
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