Why You Need a Prenuptial Agreement
You have met the person of your dreams, and you know that they are the one for you. However, now that you are getting married, all of your friends have told you that you might want to look into a prenuptial agreement before saying “I do.” The problem is that you are just not sure if you need one. After all, prenuptial agreements are only for the rich and famous, correct?
The truth is that prenuptial agreements are designed for everyone, not just people with money. In this article, you will learn exactly what a prenuptial agreement is, how it is used, and how it can be beneficial to you.
What is a Prenup?
Prenuptial agreements (also known as prenups or premarital agreements) are legal agreements that are designed to be signed before you get married. A prenup basically outlines the property that each person in the relationship financially gains, should the marriage end in divorce.
Many people feel that if they do a prenup, they are telling the world that the marriage is not going to work. However, that could not be further from the truth.
Think of it this way: When you get insurance on your car, are you saying that you are inevitably going to get into an accident? No. You get the insurance to protect you, in case an accident does happen.
Use this same rationale for getting a prenup. If the marriage ends, then the prenup will outline what you will walk away with. Or if you have assets going into the marriage, it will outline what is protected, and what your spouse will get. It is protection for you both.
Each person will generally come into the marriage with their own belongings (separate property). Then there are those belongings that you accumulate while you are married (community property). Legally differentiating these kinds of properties can make it easier on both of you, if the marriage does not work out. In most cases, it saves arguments over many assets.
In addition, if you had a lot of assets coming into the marriage, a prenup is a great way to protect those assets. After all, you worked hard for those assets before your future spouse came along.
A prenup is also a great way to protect yourself if your partner has less-than-ideal credit and a lot of debt coming into the marriage. Your prenup can state that your spouse assumes all responsibility and liability for any debts coming into the marriage. Therefore, creditors cannot come after you or seize your separate property. Again, it is like an insurance policy.
When it comes to your property, you do not want the state assuming control over who gets what, especially if you have separate assets. Therefore, use your prenup to put the power in your hands—by stating ahead of time what each person will walk away from the marriage with.
Prenups are also a great way to list the expectations of each other during the marriage. You can list whether or not one spouse will pay for the education of another, how much of a spending limit or allowance each person will get, and how access to bank accounts will be handled. If you have businesses coming into the marriage, then a prenup can be used to outline the separation and liability of those businesses.
Who Needs a Prenup?
The truth is that every couple will not really benefit from going through the motions of obtaining a prenuptial agreement. Certain criteria make you more likely to need this legal document than others. To determine if you need a prenup, consider how many of the following eligibility factors apply to your relationship or the projected trajectory of your marriage:
- You are an individual who has a lot of separate assets (including real estate, savings accounts in excess of $50,000, or lots of stocks and investments).
- At least one of you is a high-income earner.
- At least one of you has plans to accumulate debt throughout the marriage, such as student loans.
- At least one of you currently has a lot of individual debt they are bringing into the relationship.
- You are a business owner.
- You had a short engagement.
- One partner has no plans to work, or plans to be a stay-at-home parent.
If one or more of these criteria apply to your relationship, you should seriously consider drafting one of these agreements. It can be the best way to financially protect yourself well into the future.
What Cannot Be Included in a Prenup?
Now that you know some of the things that a prenup can do, let us talk about some of the things that cannot be included in this type of agreement.
Prenuptial agreements cannot dictate child-support amounts. Remember, child support is there to protect—and provide for—the child. The court is going to work in that child’s best interests, so they will determine what amount of child support, if any, will be received.
When it comes to alimony, most states will not allow a person to waive his or her right to alimony. Therefore, you will want to check your state’s guidelines, but generally, this waiver cannot be included in a prenup. In addition, prenups are legal documents, so they cannot contain anything that can be construed as illegal. In most cases, doing so would void out the prenup. Also, prenups cannot encourage someone to get a divorce.
In addition, prenups cannot be used to list things for your own personal gain, such as dictating if and when a child will be brought into the marriage, and who is responsible for taking care of that child. A prenup also cannot be used to turn your spouse into your own personal housekeeper.
Remember, a prenup is designed to protect your assets; it is not meant to be used for personal gain.
Do Prenups Actually Work?
The answer is a resounding yes! The key to making any prenup effective is to make sure that you are clear and detailed when writing it. If the prenup is not clearly written and difficult to understand, then it can leave lots of room for interpretation, which is not something you want.
It should clearly outline what each person’s responsibilities and liabilities are regarding financial and property assets (before and during the marriage). Sure, things will change in the relationship over time, and there may be assets that were unpredicted when the prenup was written.
The key is to protect what you are coming into the marriage with, as well as outline the basic responsibilities of money and property in the marriage. Everything else can be handled by your divorce attorney, should that time come.
Can you afford to let the court decide if your spouse gets the house that you paid for before the marriage? What about half of the nest egg that you built up before the marriage, should it all end in a divorce?
Protect yourself, and get a prenup.
How to Tell Your Spouse You Want a Prenup
Talking with your partner about wanting a prenup has the potential to spark an immediate argument, and it can trigger a tension-filled atmosphere. Although this tension may easily be the default reaction to the conversation, it does not necessarily have to be. You will need to explain to your future spouse that this agreement functions more like an insurance policy than an expectation that your union will end in divorce. Its function is to protect both parties and their individual assets—in the event that a divorce occurs, even if it seems unlikely to do so.
When you discuss the possibility of arranging a prenup, be sure to set aside plenty of time in a private location. Because it has the potential to lead to a heated debate, you will want to settle on a spot that offers some privacy, but that will allow you both to speak openly and freely about your financial situation.
Remember that it is crucial for you to stay emotionally calm throughout the conversation, no matter where you happen to be. Share your honest feelings, instead of placing the blame on your partner. You should be prepared to hear your partner’s point of view and your concerns with a prenuptial agreement, regardless of whether or not you agree with them. An open dialogue is the key to having a successful talk about this topic.
If you can manage to have a calm conversation, you should talk about separating the property, debts, and income if a divorce occurs. Bring a small notebook, where you can write down ideas and concerns that both of you have throughout your talk. This action will demonstrate a willingness to listen, and it provides you with some ideas to think about in the following days. These thoughts could be the catalyst for hiring separate attorneys.
Taking the Other Side: When a Prenup Does Not Work
Here are four reasons why a prenup may not protect you:
1) No Written Agreement
In order to be enforced, prenuptial agreements must be signed by both parties. If the prenuptial document consists of ambiguous wording, it can be contested in court. Verbal agreements are not legally binding. The premarital agreement must always be in written form—with four signed copies, which are retained by each spouse and each party’s lawyer.
2) No Independent Counsel
With separate interests at stake, each spouse must be legally represented by his or her own legal counsel, in order for a prenup to be valid. One attorney cannot represent both spouses’ interests.
It is each attorney’s responsibility to ensure that his or her client completely understands the prenuptial agreement (and all of its provisions) prior to voluntarily signing the document. Failure to do so can void the prenuptial agreement, should the marriage end in divorce.
On the mere grounds that a spouse has recommended an attorney to his or her partner, some prenups have been deemed irrelevant by a court. Preferably, each spouse should seek his or her own counsel, and should be individually responsible for paying attorney fees.
3) Insufficient Time to Review
In the event that a spouse was not given enough time to consider the prenup before signing it, it may not be enforceable. For instance, if a spouse was intimidated or pressured into signing the prenup minutes before walking down the aisle, it may not be binding. Some states mandate a specific number of days—for the spouse receiving the prenup to read and review it.
A premarital agreement should be signed at least one month before the wedding. In this situation, it is better to err on the side of caution. So the more time given, the better. It is then the recipient’s responsibility to carefully and thoroughly read the document (with his or her attorney present), which will help guide and answer any questions that may arise.
4) False Financial Information
Prenups are only valid if both parties fully disclose their income, assets, and liabilities. If one spouse fails to provide accurate information, it can result in a prenuptial pitfall. All relevant information must be disclosed in the written document. Each spouse must know the extent of his or her partner’s finances before signing the agreement.
It is important for the couple to exchange current, individual net-worth statements. If a spouse lies about his or her assets, or only discloses part of them, a divorce court could terminate the prenuptial agreement. In several divorce cases, the court has ruled that a spouse was fraudulently induced into signing a prenup. Spouses should always avoid any fraud-related issues by fully disclosing financial information.
When the appropriate steps are followed, a prenuptial agreement allows each spouse to protect his or her assets and financial stability. Should a couple decide to untie the knot, the purpose of a prenuptial agreement is to eliminate any confusion when dividing assets.
Disadvantages to a Prenup
While there are certainly valid reasons to consider drafting a prenup before the wedding, there are also a few drawbacks that are inherent to the process. And you should take the time to consider these before you take the first steps.
First and foremost, the idea of a prenup certainly detracts from the romance of your wedding and pending marriage. No one wants to discuss divorce in the days and months leading up to (what is meant to be) one of the happiest days of their life. These talks can whisk away the romance, and usher in heated debate or tension in its stead.
If you did not plan on obtaining a prenup well in advance, it could also mean postponing your ceremony. In order to be upheld in a court of law in the future, the agreement has to be completed and finalized before you walk down the aisle. To help keep things moving along smoothly, this stipulation requires advance planning on your part. Otherwise, you may have to push back the wedding date to meet the necessary timeline requirements.
You will not get to add your personal preferences into the prenup, no matter how much you may be tempted to try. The following details will need to be worked out with your partner, but they won’t have any legal standing in the courtroom: the division of household labor, any future child support or alimony payments, and lifestyle choices.
Last but not least, there is the additional cost of creating the prenuptial agreement. You and your partner will both need separate attorneys, which means that the monthly bills can start to add up rather quickly. In addition to the to the expense of the wedding that is already forthcoming, you may also need to pay attorney’s fees, filing fees, and court fees for the finalization.
While there are a lot of great benefits to protecting yourself financially with a prenuptial agreement, you may also want to take the time to consider some of these disadvantages as well.
However, without a written agreement, independent counsel, ample time, and the full disclosure of both parties, the prenup can very well be found invalid by a judge. By taking the necessary precautions, you can ensure that your prenuptial agreement is upheld.
Perhaps you are already married and think you missed the opportunity to create this much-needed document to protect your financial interests. The good news is that you still have time to draft a postnuptial agreement in its place. These agreements can hold many of the same benefits and values as a prenup. But they can be completed after the wedding is over, and the luster of new love has worn off just a bit.
No matter which route you decide to take, protecting your personal financial interests is crucial to establishing a bright future for yourself. Relationships can be unpredictable at times, and divorce is a daily reality for many people around the world. Therefore, take the steps you can to create a whole and financially healthy life for yourself, in the event that a divorce looms on the horizon.