No one wants to think about divorce when planning a wedding, but creating a prenup can provide useful financial protections for both partners if the relationship ends.
This article provides helpful guidance on how to craft a balanced, fair prenup that considers both parties' interests and goals.
You'll learn key tips for disclosing assets, defining separate and joint property, scheduling reviews, negotiating in good faith, planning for change, and more.
Introduction
Prenuptial agreements, commonly known as prenups, are legal contracts signed by couples planning to get married. They outline what will happen to assets, debts, and other financial matters in the event of separation, divorce, or death.
Crafting a fair prenup requires careful consideration of both parties' situations and open communication about needs and expectations. This ensures the agreement protects both individuals while supporting the marriage.
What is a Prenup?
A prenuptial agreement is a binding legal contract signed before marriage. It details how assets and debts will be divided if the couple separates or divorces. It may also cover spousal support arrangements and other financial matters.
The prenup acts as an insurance policy, providing clarity on financial issues during an otherwise emotionally-fraught process. It can help make negotiations smoother by settling certain questions beforehand.
Why Get a Prenup?
There are several common reasons couples pursue prenups:
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Protect personal assets: Preserve assets brought into the marriage such as family inheritances, business interests, real estate, investments, etc.
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Support children from previous relationships: Ensure child support and custody arrangements are upheld.
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Avoid disputes over shared property: Clarify who gets what in case of separation, especially for higher net worth couples.
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Set expectations: Establish financial boundaries regarding spending, accounting, investments, etc.
Having open conversations about finances early on sets the stage for understanding each other's situations.
Prenup Considerations
Key factors to weigh when deciding if a prenup makes sense include:
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Relationship history: Length of dating, previous marriages, children, etc. can impact prenup decisions.
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Current finances: Assess incomes, assets, debts, obligations, etc. to determine current stakes.
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Future financial goals: Will assets be combined or separate? What are each person's financial priorities long-term?
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Estate planning: How do inheritance wishes or business interests owned impact the prenup?
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State laws: Requirements around prenups vary, so consult a local lawyer.
Approaching the prenup process with openness, honesty and care for your partner can lead to an agreement that protects both of your best interests while supporting the marriage.
How do I make sure my prenup is fair?
A prenuptial agreement allows couples to decide how to divide assets and debts if they separate or divorce. To help ensure it is fair:
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Disclose all assets/debts. Both parties must fully disclose all assets, incomes, debts, and financial obligations before signing. Omissions can make a prenup void.
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Allow time to review. Give your partner several weeks to review the agreement with a lawyer before signing. Rushing it can indicate coercion.
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Don't hide assets. Attempting to hide assets not listed in the prenup could also invalidate the agreement later.
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Update as needed. Revisit the prenup every few years, especially after major life changes like having children or large changes in assets. Update as needed to keep it current.
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Compromise. Be willing to negotiate and compromise on terms. Courts will look more favorably on prenups both parties played a role in shaping.
The key is entering the prenup fully informed, allowing adequate review, and mutually settling on terms. This helps demonstrate it was not coerced and is fair to both spouses.
What are five things that Cannot be included in a prenuptial agreement?
A prenuptial agreement, also known as a premarital agreement or prenup, is a contract entered into by a couple prior to marriage. This agreement typically outlines how assets and debts will be divided in the event of separation, divorce or death of a spouse.
However, there are certain matters that cannot legally be included in a prenuptial agreement. These generally relate to issues involving any future children, as well as any provisions that violate law or public policy.
Specifically, a prenup cannot dictate the following:
- Child custody or visitation matters
- Child support amounts or arrangements
- Alimony or spousal support if the marriage ends
- Day-to-day household decisions made within the marriage
- Anything illegal or against public policy
The key focus of a prenup remains the division of assets and debts. Provisions dealing with children or spousal support after divorce generally cannot be binding within a premarital contract.
Overall, couples should keep this in mind when drafting a prenup. Consulting an attorney can also help navigate what can and cannot be included from a legal perspective before signing any premarital agreement. This ensures the contract stands up over time while achieving the intended financial protections.
What is an example of an unfair prenuptial agreement?
An example of an unfair prenuptial agreement provision could be one that requires one spouse to perform unreasonable, unethical, dangerous or illegal acts after the divorce is finalized.
For instance, a provision requiring one spouse to do a handstand for an hour every week for a year after the divorce or face a fine, would likely be considered unfair and unenforceable by a court.
Some key reasons why this type of provision could be seen as unfair:
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It imposes an unreasonable burden on one spouse that serves no legitimate purpose related to the divorce. Requiring physical acts like this seems intended only to punish, not equitably divide assets or responsibilities.
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The requirement to do handstands has no logical connection to the marriage or divorce. Provisions in a prenup should relate to the couple's assets, finances, children, etc.
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Imposing a fine for not complying turns an unreasonable demand into a punitive measure. Even if one party agreed to it initially, courts frown on divorce settlements having a primary purpose of punishment.
In summary, a prenuptial agreement provision requiring physical acts or other compliance unrelated to divorce logistics could be deemed unconscionable. Provisions with a punitive nature rather than an equitable purpose are at high risk of being ruled unfair and unenforceable.
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How do you structure a prenup?
A prenuptial agreement, commonly known as a prenup, is a contract signed before marriage that outlines what assets each spouse brings into the marriage and how those assets would be divided in case of divorce. Here are some key elements to include when structuring a fair prenup:
Financial Disclosures
Both parties should fully disclose all assets, debts, income sources, investments, business interests, inheritance prospects, etc. This ensures understanding of each other's financial standing when entering the marriage.
Division of Assets
The prenup should clearly state what happens to assets acquired before and during the marriage in case of divorce. This includes clarifying sole vs joint ownership of properties, bank accounts, investments, retirement accounts, etc.
Alimony Terms
If one spouse earns significantly more, the prenup can waive or limit alimony payments in case of divorce. This provides financial protection for the higher earning spouse.
Estate Planning
The prenup can confirm inheritance rights to separate properties brought into the marriage by each spouse. This safeguards those assets for children from a previous marriage if applicable.
While prenups safeguard financial interests, couples should draft them collaboratively, with transparency and fairness top of mind, rather than just protecting oneself. This promotes openness and trust at the outset of marriage.
Creating a Balanced Agreement
Crafting a fair prenup requires open communication, compromise, and forethought from both parties. By disclosing assets upfront, defining separate and joint property, and scheduling periodic reviews, couples can create an agreement that protects both spouses' interests in case of divorce.
Disclose Assets Upfront
Being transparent about individual assets and debts from the very beginning allows couples to negotiate prenup terms from an informed position. This includes revealing information on:
- Savings and investment accounts
- Retirement funds
- Real estate holdings
- Business partnerships
- Inheritances
- Tax implications
Full financial disclosure enables couples to shape an equitable agreement based on a complete picture of each person's current assets and future earning potential.
Define Separate & Joint Property
Clearly delineating separate and marital property is key for simplifying division of assets if the couple splits. Separate property often includes:
- Assets owned before marriage
- Inheritances and gifts received during marriage
- Compensation from personal injury lawsuits
Joint property typically covers assets acquired during marriage, like houses, cars, savings accounts, investments, and retirement funds.
Defining separate and joint upfront clarifies ownership and makes divorce proceedings more straightforward if that day comes.
Schedule Regular Reviews
Situations evolve over time, so it's important to revisit the prenup every 2-5 years. Scheduling periodic reviews allows couples to:
- Account for major life changes like having kids, switching careers, relocating, etc.
- Adjust terms based on how much joint property has been accumulated
- Renegotiate if there is significant change in either person's income
- Update estate planning details as needed
Building in regular check-ins enables couples to keep the agreement current and reflective of their present circumstances. This maintains fairness in case the marriage eventually ends.
Seeking Legal Counsel
The importance of having experienced family law attorneys represent both parties.
It is highly recommended that both parties in a prenuptial agreement retain independent legal counsel to review the terms and advise them on potential rights and obligations. An attorney experienced in family law can help ensure your best interests are protected in the prenup. They will negotiate reasonable terms on your behalf and provide guidance on aspects you may not have considered.
Seeking legal counsel allows you to:
- Better understand your current and future rights regarding property division, spousal support, inheritance, etc.
- Negotiate terms fairly, avoiding an imbalance of power between parties.
- Ensure the agreement complies with state laws and aligns with your goals.
- Confirm the prenup will be enforceable if challenged down the road.
Though hiring attorneys adds costs upfront, it prevents much larger expenses later should disputes arise. Their legal expertise leads to a stronger, more balanced prenup.
Negotiate in Good Faith
Work collaboratively towards acceptable terms, not from an adversarial posture.
It is important for both parties to negotiate prenuptial agreements in good faith, with open communication and transparency. Adopting an adversarial approach focused solely on individual interests can undermine the foundation of trust in a marriage.
Tips for negotiating in good faith:
- Disclose all assets, debts, income sources, and other relevant financial information.
- Compromise to reach mutually agreeable terms.
- Keep discussions respectful - avoid threats, accusations, or ultimatums.
- Be willing to make concessions for your partner's requests if reasonable.
- Seek objective guidance from legal and financial professionals.
Approaching prenup talks cooperatively demonstrates commitment and helps prevent future conflicts over enforcement.
Allow Time for Review
Ensure each party has adequate time to understand terms before signing.
It is vital to allow sufficient time for your own legal counsel to review prenuptial agreement drafts before signing. Two weeks or longer may be needed to carefully analyze terms related to property division, spousal support, estate planning, and other complex issues.
Rushing the process can lead to overlooking key details, so make time to:
- Thoroughly review all sections of the agreement.
- Research any unfamiliar legal concepts.
- Consult your attorney on the fairness and enforceability of provisions.
- Request edits to terms you find objectionable.
- Finalize schedules of each party's assets, debts, etc.
Allowing proper review prevents feeling pressured into accepting unfavorable or even unenforceable terms later on.
Discuss Enforceability
Understand how courts view prenups and what factors determine validity.
It's important for couples to discuss prenup enforceability openly. Prenups deemed unfair or signed under duress may be overturned or modified by courts during divorce proceedings.
To evaluate enforceability, courts examine:
- If both parties had opportunity for independent legal counsel.
- If there was full financial disclosure by each party.
- The time provided to review terms before signing.
- If any changes in circumstances have occurred since execution.
Knowing these factors not only helps guide prenup negotiations but also provides confidence in relying on the agreement long-term. Discussing enforceability upfront is key.
Planning for Change
Building flexibility into a prenuptial agreement can help couples prepare for major life changes that may impact their financial situation over time, such as having children, receiving an inheritance, or changes in their careers.
Outline If-Then Scenarios
- Consider including clauses that outline how specific situations like infertility, job loss/change, relocation, etc. would alter the terms of the agreement. This allows you to plan for possible changes in advance.
- For example, you could state that if one spouse receives a large inheritance, additional assets acquired with that money would remain separate property.
Add Sunset Provisions
- Sunset provisions set expiration timelines that require periodic review and renewal of the prenup terms.
- For instance, you may choose to review the agreement every 5 or 10 years. This allows you to reassess and adjust terms as needed.
Clarify Amendment Process
- Specify the process for formally amending the prenup if you mutually agree to modify terms down the road.
- This should define what is required for approval, such as written consent and notarization. Outlining this in advance makes future amendments simpler.
Carefully considering future changes and flexibility upfront when drafting your prenuptial agreement can help ease later transitions and support the long-term success of your marriage.
Conclusion
When crafting a prenuptial agreement, it is important for both parties to thoughtfully consider what terms and conditions will lead to the most equitable outcome in the event of divorce. Seeking legal counsel can help couples navigate complex asset and debt divisions to find a fair compromise. The goal should be protecting both parties' interests in a balanced way, not strictly favoring one over the other. With open and honest communication, compassion for each other's perspectives, and a spirit of good faith and compromise, couples can create prenups that provide meaningful protections without being overly one-sided or restrictive. The key is focusing on care, understanding and mutual benefit.
