Are you contemplating writing up a prenuptial agreement between you and your partner before you get married?
Here are a few important points to take into account throughout the process.
Many believe that prenuptial agreements are for wealthy celebrities or rich heiresses who wish to protect their assets. However, it is a misconception that one has to be wealthy in order to enter into a prenuptial agreement. Prenups are often known as marriage insurance and can be a good idea for anyone looking to marry, regardless of their net worth. Even though no one enters a marriage planning to get divorced, prenups can end up saving couples a lot of time, money, and hassle in the future.
Although both parties must ultimately sign a prenuptial agreement, the topic is usually first brought up by one of the future spouses. While the concept of planning what would happen in the event of a divorce is a highly delicate subject for a couple contemplating marriage, it is nonetheless highly advisable to broach the subject as early as possible. This gives the other partner time to adjust to the idea—even if they are opposed to it when first brought up. Additionally, if the couple has plans to marry within the near future, it is beneficial to have ample time to negotiate the prenup’s terms.
One of the necessary components of a fair and enforceable prenuptial agreement is the full disclosure of each party’s respective assets and liabilities, and the failure by one of the parties to provide a complete and accurate disclosure can invalidate the prenup. To this end, each party should collect and submit their most recent financial records, including bank statements, retirement accounts, and asset appraisals, as well as documentation of all their liabilities such as credit card debt statements, mortgages, and loans. Remember: transparency is key to an enforceable prenup.
It is important to understand the difference between how property is classified and how it must be distributed upon divorce in the absence of a prenup. While the exact terms and specifics vary, property is generally either classified as separate, marital, or community and distributed as follows:
Separate Property. Property owned by one of the parties before the marriage, as well as inheritances and gifts received by one of them, whether before or after the marriage, are all considered separate property and are not subject to division between the parties.
Martial property. Marital property is anything that was bought or earned during the marriage. This can include businesses, investments, jointly owned real estate and bank accounts, cars, furniture, and other items. In most states, whether any specific item of property will be split between the parties (or if it is, what percentage each will be entitled to) will be based on the principles of equitable distribution, which means that the property is divided in a way that is fair but not necessarily equal.
Community property. This is also property acquired during the marriage, but specifically in a small handful of states (currently 9) where community property laws apply. In community property states, all property acquired during the marriage is presumed to be owned equally by both spouses and is subject to equal division in the event of a divorce.
With a prenup, a couple may agree to change the default classification for a certain type of property (for example, in a state where an individual’s retirement account is generally considered separate property, they can agree that it will be marital property), and they can also agree on a different distribution methodology (for example, in a community property state where all assets acquired during the marriage by either of the spouses should be split 50/50 by default, they can agree that it will instead be distributed in accordance with the amount of money each one put into the investment).
If a couple does not sign a prenuptial agreement or does not address in the prenup how their property will be divided upon divorce, the default state laws will apply, and either a judge will decide how the property should be distributed in some states, and in others the parties will be required to resolve the matter out of court via alternative dispute resolution (ADR) proceedings such as mediation and arbitration.
In some states, a prenuptial agreement can protect a spouse from having to pay alimony or spell out the conditions under which alimony will be paid. Specifically, a prenup can stipulate that in the event of a divorce, one or both of the spouses agree to waive their right to spousal support in the event of a divorce. Alternatively, the parties may agree in a prenup that a party will be entitled to more support or for a longer period than they would otherwise be required to pay under state law. However, in some states prenups may not include clauses where a party agrees to waive their rights to receive spousal support. It is advised to check your state’s laws concerning alimony clauses before drafting a prenuptial agreement.
While a prenuptial agreement can be incredibly valuable in determining issues such as alimony, debt allocation, and property distribution in the event of a divorce, there are a few things that cannot be stipulated in a prenup. The court has the power to calculate child support and determine child custody in the “best interests of the child,” so these issues cannot be established in a prenuptial agreement.
Lifestyle clauses in a prenuptial agreement pertain to behavioral expectations within the marriage, and will provide penalties for the violation of those expectations. For example, the most common lifestyle clause (often referred to as an “infidelity” or “no-cheating” clause) provides that a spouse who commits infidelity can lose rights to certain property and/or be entitled to less cash or assets than they would otherwise be entitled to under the prenup. Less common lifestyle clauses can require that one or both spouses agree to random drug testing and be penalized for positive test results, prohibit a spouse from posting negative or disparaging comments about the other on social media platforms, and even limit how much time they may spend on social media. That said, most states restrict or limit the enforcement of such clauses to some extent. For instance, the state of Florida prevents any “unreasonable” provisions from being enforced in a prenup. Before incorporating lifestyle clauses into a prenuptial agreement, make sure to check the laws of your state.
Prenuptial agreements can affect your life for decades to come. With so much on the line, it is crucial to have proper legal representation while drafting a prenup. Not only is it highly advised to enter a prenuptial agreement with the help of a divorce attorney, but some states even require the parties to have their own legal representation. A good divorce lawyer will draft a customized agreement that will take into account both your interests and concerns while keeping you fully informed regarding the contract’s potential implications.