A prenuptial agreement is a legally binding document that future spouses enter into before they officially marry. Its purpose is to regulate financial and family matters during the marriage and in the event of a divorce.
The most important issues couples typically address in this premarital agreement include their assets, debts, property, and matters like child support, custody, and spousal support.
The sections below cover all aspects of a prenuptial agreement that the couple should consider when drafting it, so let’s dive in!
How Do Prenuptial Agreements Work?
A prenuptial agreement, also known as a prenup, allows partners to regulate matters related to their assets, debts, and property that they will bring into the marriage and how these financial issues will be resolved in the event of a divorce.
There is no restriction against addressing family matters, such as when one spouse will receive spousal support or how they will support a child they had before getting married.
In any case, this agreement must be based on the future spouses’ free will because it regulates the most significant marital issues. Any forced prenuptial agreement or one obtained through fraud will not be effective and can be quickly declared void by the court.
Besides the partners' free will, most states have adopted the Uniform Premarital Agreement Act (UPAA), which sets additional criteria that a prenup must meet to be valid.
The most important criteria that a prenup should meet are the following:
Prenuptial Agreement Criteria
A prenuptial agreement must be in writing because only a written document can detail everything the partners have agreed upon.
The prenup provisions must be in line with state law. The future spouses should consider seeking legal help to be sure that everything is in order.
The agreement is only valid if the couple gets married because, as we said, its main purpose is to manage their financial relationship during the marriage.
Once established, a prenuptial agreement is not final. The partners can revise it if circumstances have changed and require certain adjustments. In that case, they have to ensure that the new provisions and the remaining ones are consistent and that the revised prenup meets all the requirements that the initial prenup fulfilled.
Who is the Prenuptial Agreement For?
A prenuptial agreement is for couples planning to get married who want to handle their financial matters in marriage by mutual agreement. Behind this general definition lies the reason why many partners in the USA use prenuptial agreements and what benefits they gain from them.
Firstly, partners use a prenup when they have assets, property, or inheritance acquired before the marriage and want to keep these separate during the marriage. It's also a common situation when one partner has developed a business that generates a profit, so they want to retain their separate property.
A prenuptial agreement is also very useful when one partner has debts before the marriage that the other partner does not want to pay off or want to pay partially, ensuring that their separate assets are not used to cover these debts.
Significant differences in earnings or inherited wealth can also be reasons for a partner to choose a prenuptial agreement to protect these before entering the marriage.
Finally, a prenuptial agreement is used when one partner has children from a previous marriage or relationship and wants to protect the financial interests of that child and themselves as a parent.
Anyway, a prenup makes things clear and predictable. When made with both partners’ free will and mutual consent and by state laws and requirements, partners know their rights and obligations regarding separate and mutual property, child support, or spousal support.
In this way, there is little room for dispute. Neither partner wants to act against the prenup terms, which could lead to potential disputes and the high costs that disputes can cause.
What Information Goes into a Prenuptial Agreement
The information that goes into a prenuptial agreement covers the following matters: parties involved, their financial and family status, and agreed arrangements.
Let's break this down.
Parties
A prenuptial agreement, like any contract, begins with the basic details about the parties involved – future spouses. This includes their full names, addresses, and contact details.
Financial and Family Status of the Parties
The following section includes information about the finances and personal matters of each party, such as:
Incomes (salary, retirement plan)
Assets (real estate, registered vehicles, personal belongings, shares, insurance)
Liabilities (loans, taxes, mortgages, medical bills, credit card debts)
Children information
This section outlines what each spouse owns before entering the marriage and serves as an introduction to the prenuptial agreement.
Arrangements
The following section regulates family and financial matters in a prenuptial agreement after marriage.
It includes:
Division of property, business ownership, savings and retirement, and debts. This part determines what will be considered separate or marital property/debt of each spouse in the event of death or divorce.
Alimony, support, and health insurance. The future spouses can agree on specific financial support arrangements, including the amount, duration, and payment method for alimony or spousal support, as well as one party's obligation to maintain health insurance for the other.
Information about children. This part addresses the protection of assets and inheritance rights of both spouses’ children, whether acquired before or during the marriage. Prenuptial agreements do not cover child support and custody issues, as those are matters that must involve the court for the child's best interest.
Clauses
This section pertains to potential provisions that can be included in the agreement, such as a jurisdiction clause specifying which court will handle disputes arising from the contract.
Often, a severability clause is included to ensure that if any part of the agreement is deemed invalid, it won't affect the validity of the entire agreement.
How to Create a Prenuptial Agreement
To create a prenuptial agreement, follow the steps outlined below and use our builder for an easier and more convenient experience.
#1. Have a Discussion With Your Future Spouse
Communicating on time with your future spouse about creating a prenuptial agreement is crucial. This initial step allows the future spouses to share their thoughts and understand the importance of drafting such a document.
Consulting with a lawyer is advisable to understand the required information for the agreement and its consequences.
#2. Provide Information About Both Parties and Their Property
The next step is to enter basic information about the parties involved in the agreement, such as their full names, mailing addresses, zip codes, states, and contact details.
Then, provide accurate information about the property owned and debts held by each party up to the time of drafting the agreement.
#3. Divide the Property
In this section, future spouses should mutually decide what property acquired before the marriage will be considered each spouse`s individual property, what will be considered marital property, and how the property will be divided in the event of divorce or the death of one spouse.
Additionally, decisions about debt payments should be made about whether debts will be individually paid or from joint funds.
#4. Decide on the Business Ownership
An essential part of the prenuptial agreement is deciding on the rights of one spouse in the other's business—whether a partner`s business or their share in the company will be considered separate or marital property or if the spouses reach different agreements.
#5. Discuss and Decide on Other Matters
When drafting the prenuptial agreement, future spouses can address other important matters, such as what will be considered the child's property and their rights and obligations regarding that property.
Also, parties can decide on living arrangements after the divorce or death of one spouse and determine spousal support or alimony, including the amount, duration, and enforcement of alimony payments, as well as the payment of health insurance.
#6. Sign the Agreement
Signatures are a necessary part of any agreement, including prenuptial agreements. Therefore, once both parties agree to the above-mentioned terms, they should sign the agreement.
What to do if You Get Divorced Without a Prenup?
If you’re getting divorced without a prenup, the court will divide your assets and debts according to the state laws where the divorce takes place.
This generally means that either all assets acquired during the marriage will be considered marital property, subject to a 50-50 split, or the court will consider various factors to decide on a fair and just division of assets, such as:
Each spouse's income
Pre-marital assets
Contributions during the marriage
Health
Financial status
Alternatively, the parties can create a marital settlement agreement during the divorce procedure. This agreement allows the spouses to outline their rights and obligations regarding all assets and debts.
The court generally accepts this kind of agreement unless it's deemed unfair to either party or any children involved.
How to Discuss Prenuptial Agreement With Your Partner
Bringing up the topic of a prenuptial agreement in marriage requires tact and timing.
Start by openly and empathetically expressing why you think creating such a document is a wise step for your future together. Show that you understand their perspective and concerns regarding the agreement`s purpose and remind your partner that the agreement can be adjusted anytime to accommodate changing circumstances.
It's helpful to have an impartial expert explain the advantages of such an agreement to both parties, emphasizing that it's about proactive planning for the future, focusing on long-term stability.
Approach the discussion as equals, emphasizing that both of you will have a say in the process. This approach ensures that everyone`s concerns are addressed and that the final agreement reflects the mutual decision made by both parties.
3 Mistakes To Avoid When Making a Prenuptial Agreement
Let's explore the three common mistakes that future spouses should avoid when making a prenuptial agreement:
Prenuptial Agreement Mistakes
Failure to sign. If the agreement remains unsigned, it won't hold legal weight. The signature signifies consent, validating the terms outlined in the agreement.
Ambiguous language. When completing the contract and providing details, ensure clarity to prevent misunderstandings. Every provision should be clear and precise, leaving no room for misinterpretation. This way, the parties avoid any potential confusion or disputes in the future.
Not updating/checking regularly. It's crucial to offer accurate and thorough information concerning all agreement aspects, so engage in ongoing discussions with your partner and craft the prenup with full attention. Incorrectly identifying property, liabilities, or other elements could lead to challenges in proving the agreed terms in the event of future disputes.
Final Thoughts
Marriage represents the highest expression of love and partnership between two individuals, so entering into a contract such as a prenup, which regulates the financial and other important matters between future spouses, can seem skeptical.
However, the purpose of a prenup is to ensure that each spouse`s financial and family aspects are adequately addressed and regulated before starting the new journey called marriage, laying the secure foundation upon which the spouses can build their future lives together.
