The prenuptial agreement is a heavy and emotionally charged topic. It can be one of the trickiest conversations you and your soon-to-be will have in the days leading up to your marriage. If you are planning a prenup you probably know all the uneasiness around it. Our goal is to provide an overview, not to take a position.
What is a prenup?
A prenuptial agreement or premarital agreement, is a legally binding written contract entered into prior to a marriage, civil union or other arrangements by a couple intending to marry. Prenups are commonly used to spell out exactly what happens in the event of divorce, death, or dissolution of a marriage.
Common Reasons for Creating a Prenup
1. Those with children from a previous marriage or relationship. Prenups create a definitive inheritance plan for his or her biological children, both in cases of divorce or death. They can spell out who will be the financial guardian in case the child is still a minor. Divorce settlements tend to favor children of the spouse, as do inheritance laws in most states; but a prenup can handle these issues definitively.
2. Business owners. Shares of a business can and do become marital property. That’s true whether the spouse started the business or it is a family business. This is often an area where the prenup may be mandated by the family owning the business as they trying to prevent complication in their own affairs because of a bad marriage. In these situations, prenups are typically more about protecting other owners of the business.
3. Those with large amounts of debt. Debt becomes marital property just like wealth. Prenups can be used to isolate the debt to the partner bringing it into the marriage.
4. Protection of family estates or heirlooms: A prenup will protect family estates, both large and small, or guarantee family heirlooms go to a specific family member.
5. Second or later in life marriages. A prenup is often used in case one or both spouses have developed substantial assets and retirement funds.
6. Couples with uneven earning power because one is planning to forgo a career to stay at home with children. Prenups can add extra protection to this stay at home spouse in case of divorce.
7. And the most controversial one: Viewing the prenup as an insurance plan; something you never want to use, but if you do, you are glad you have it. While we aren’t using this article as a moral debate piece, prenups do set up ground rules for infidelity and childcare if a divorce should occur. Divorces are expensive, emotionally and financially. A well-drafted prenup dramatically reduces divorce messiness as most of the decisions around who owns what, etc., have already been made. It reduces legal fees and often leaves just a handful of issues to be negotiated.
No matter your reasons for wanting a prenup there is a wrong way to approach the matter and a right way.
The Right Way
1. Give your spouse notice you want them to sign a prenup. Never spring a contract on your soon-to-be days, weeks or even a several months before the wedding. Not having conversation prior to meeting with lawyers invites suspicion. We suggest discussing the prenup, mapping out what might be protected, and why you need one while in premarital counseling. The counselor can act as a mediator, cutting down on expensive hours with a lawyer. Couples serious about doing this right will have multiple conversations and give each side ample time to look at the agreement legally and emotionally.
2. Full disclosure on the part of each person entering into the marriage. Know what you are getting into, make sure all assets are legally disclosed, and know what your partner is bringing to the table.
3. Don’t use force. You, your lawyers, or your family putting undue pressure on your-soon-to-be is the wrong way to start a marriage, plain and simple. Most states will not uphold a prenup if it was signed involuntarily, there was not full disclosure at the time of execution, if the agreement is unconscionable, or if the document was not signed and notarized in the manner required by your state. Forcing your partner into accepting a prenup will not benefit you short or long term.
4. Be equal. If you lawyer up and leave your soon-to-be scrambling for legal representation, you are putting the person you love at a disadvantage from the start of your union.