Wondering what a prenuptial agreement is? Read on for all you need to know about what prenups are, how they work, and who should have one.
A prenuptial agreement, commonly referred to as a prenup for short, is a written contract entered into by two individuals before they get married. The purpose of a prenup is to outline each spouse's financial and property rights in the event of a divorce or death.
Depending on where you live, state laws refer to prenuptial agreements by different names, including:
These terms are basically interchangeable, but the clear theme is that they refer to a contract or agreement entered into before marriage. This stands in contrast to a postnuptial agreement, which is a contract or agreement entered into during marriage.
Many people associate prenups with a wealthy person protecting their assets and financial interests from a potential divorce. But prenups have become increasingly popular, and people enter into premarital agreements for various reasons.
Here are some reasons people might want to have a premarital agreement.
If you or your future spouse have children from a prior marriage or previous relationships, you may want to pass separate property--that is, the property you have prior to marrying--to your respective children.
Everyone hopes for a successful marriage, but the reality is that many marriages end in divorce. The divorce process does not have to get ugly, though, and a prenup can help stave off that scenario if you decide how assets and debts would be allocated in advance.
Sometimes people may want to simply clarify their respective financial rights and obligations. This might particularly apply if one spouse has debt, given that debts incurred during the marriage may be treated differently under state laws than debts incurred before the marriage.
While the specific contents of a prenup will vary depending on the couple's particular circumstances, here are some key elements that people often include in premarital agreements.
One of the primary purposes of a prenup is to establish how assets will be divided in the event of a divorce. This can include both separate property (i.e. assets that each party brings into the marriage), as well as marital property (i.e. any assets acquired during the marriage).
In addition to assets, a premarital agreement should also address how any debts will be allocated in a divorce. Again, this can include both debts that each party brings into the marriage, as well as debts that are incurred during the marriage.
Another common issue to address is spousal support or alimony. This will establish whether one party will be required to provide financial support if the parties divorce, as well as the amount and duration of any such support payments.
But keep in mind that state laws vary on whether premarital agreements can waive a party's rights to spousal support, and other states will scrutinize such agreements if the party waiving spousal support did not have legal counsel.
Also, note that prenups cannot dictate child custody or child support arrangements, and the court typically decides these matters based on the best interests of the child.
In some cases, a prenup may be used to protect the individual assets, or separate property, of one or both parties. For example, one party may have a significant amount of assets, such as a family business or inherited property, that they want to remain separate from the marital assets.
A prenup can provide clear guidelines for handling these and whether they should be treated differently from marital assets.
In the event that one spouse dies, a prenup can be used to specify how the deceased party's assets will be distributed.
In some ways, a prenup can be a more powerful estate planning tool than a will in determining what the other spouse might inherit, as state laws often influence what a surviving spouse will receive. But if you and your future spouse have determined in advance what is marital property vs separate property, the prenup would govern.
This can help avoid potential disputes among family members, including the surviving spouse, and ensure that the deceased party's wishes are fulfilled.
A prenup will also often include provisions for how it can be modified or terminated in the future. This can include provisions for regular review and updates, as well as provisions for how the prenup can be terminated.
And remember, a prenup should be carefully drafted and reviewed by a lawyer to ensure that it is fair and enforceable under the applicable contract law.
If you do not have a prenup and are getting divorced, the process will be governed by state law. Property division will depend on the state law where you live, and whether you are in an equitable distribution state or a community property state.
In most states, the court will use a system of equitable distribution to divide the couple's assets and debts. This means that the court will try to divide the couple's property and financial assets in a fair and equitable manner.
Note, though, that “fair and equitable” does not necessarily mean “equally.”
Courts will typically take into account factors such as:
In community property states, state law dictates that marital property--that is, all property acquired during the marriage--is jointly owned by both parties.
In these states, the court will generally divide the couple's marital property and assets equally. (Laws in some community property states have relaxed the requirement of a 50/50 split, though, and some states allow judges to divide property more equitably).
Regardless of what the law is in your state, the key point is that these issues and crucial financial matters can either be decided for you, or they can be addressed in advance through a premarital agreement.
Many people wonder what the advantages and disadvantages are of a prenuptial agreement.
On the pro side of the ledger, a premarital agreement can provide financial protection for both parties in the event of a divorce. It can also help to clarify and define each party's assets and liabilities, which can prevent confusion and disputes in the future.
Additionally, a prenup can provide peace of mind and allow both parties to enter the marriage with a clear understanding of their financial situation.
On the con side of the ledger, some might view a future spouse’s desire for a prenup as a lack of confidence in the future of the marriage. This can create tension, especially if the prenup is brought up only a few weeks or days before the wedding date.
Ultimately, whether to enter a premarital agreement is a personal decision and should be made carefully based on a person's particular circumstances.
If you are considering a prenup, it is important to have frank conversations with your partner early in the process.
The time frame for entering a premarital agreement will vary for every couple, but experts suggest finalizing one at least 30 days before the wedding date.
A prenuptial agreement lawyer is an attorney who specializes in helping individuals navigate creating and enforcing prenups. Prenuptial agreement lawyers fall under the broader umbrella of matrimonial lawyers (or the even more general umbrella of family law lawyers).
These lawyers are experienced in the state laws and regulations governing prenups and can provide valuable guidance to individuals considering premarital agreements.
The primary role of a prenuptial agreement lawyer is to help individuals create a legally-binding contract that outlines the rights and obligations of each party as they head into marriage. This typically involves reviewing the financial situation of both parties, discussing their respective goals and concerns, and drafting a prenup that reflects those circumstances.
Once the prenup is drafted, a prenuptial agreement lawyer will review it with the parties and make any revisions to ensure that it is fair and enforceable.
In addition to helping people draft prenups, a prenuptial agreement lawyer might also provide counsel if a prenup must be enforced. This might involve representing one of the parties in court, negotiating a settlement between the parties, or ensuring the terms of the prenup are followed.
When deciding whether or not to hire a prenuptial agreement lawyer, there are a few factors to consider. Here are some reasons why you might want to hire an attorney to help with your prenup:
Hiring a prenuptial agreement lawyer can also help ensure your prenup is legally enforceable, which may provide peace of mind as you enter your marriage.
Whether or not to use separate attorneys is a personal decision that depends on your specific situation. However, it often makes sense to use separate lawyers if you are in a position to do so.
Here are two reasons why:
In general, the cost of a prenup can range from several hundred dollars to several thousand dollars. Some of the factors that affect the cost of getting a prenup in place include:
If you are worried about the cost of hiring a prenuptial agreement lawyer, one alternative is using a prenuptial agreement template. There are pros and cons to this approach, however.
On the plus side, using a template can be convenient and cost-effective. And if your situation isn't too complex, you might feel comfortable going the do-it-yourself route.
But one of the most significant drawbacks of using a free prenuptial agreement template is that it may not be legally enforceable. Prenuptial agreements are legal documents and can address complex issues. If your prenup is not properly drafted or executed, it may not be enforceable down the road.
That is why it often makes sense to have a lawyer review your prenup to ensure it is fair and enforceable, even if you choose to work off a template to start the process.
Prenuptial agreements are written contracts that future spouses enter before marriage.
Postnuptial agreements, meanwhile, are contracts entered into during a marriage.
Prenuptial agreements are enforceable in court, but only if deemed fair and reasonable. For a prenup to be considered valid, it typically must meet the following requirements:
If a court finds a prenup to be invalid, the court may decide to enforce part or none of the agreement.
There may be instances where one or both parties want to nullify or cancel a premarital agreement.
If you want to nullify a prenuptial agreement, here are a few factors to look for that can make a prenup unenforceable:
A family law attorney might be a vital resource if you plan on contesting a premarital agreement.
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