Prenuptial Agreements Are Not Just For the Rich

Many people think prenuptial agreements are only for the rich. There is no truth to the idea that you have to be rich to get a prenuptial agreement. A prenuptial agreement is a good idea for anyone getting married, no matter how much money they have.

Couples must develop skills to discuss money without arguing. Before getting married, it’s a good idea for both people to talk about their assets, debts, and the possibility of a prenuptial agreement.

What is a Prenuptial Agreement?

A prenuptial agreement is a contract between two individuals who intend to marry. The agreement describes the assets and liabilities each party brings to the marriage and each party’s property rights and obligations in the event of divorce. 

If the marriage ends in divorce, the premarital agreement will govern the division of the couple’s assets and liabilities.

Who Should Consider Getting a Prenuptial Agreement? 

Whether or not a prenuptial agreement is necessary for you and your future spouse, the decision should be made together. Each couple’s financial status is unique, and you should discuss your current economic circumstances and how they may change after the wedding.

Prenuptial agreements have many benefits but are only appropriate for some relationships. For some, their state’s divorce and property rules may be adequate, and they may not need a prenuptial agreement.

For others, a prenuptial agreement is a good idea. Couples frequently sign prenuptial agreements for one or more of the reasons outlined below. If any of the following apply to you or your future spouse, a prenuptial agreement may be wise.

  • You own or are a partner in a business: If you own or are a partner in a business, a prenuptial agreement can ensure that your spouse will not acquire a significant ownership stake in the event of a divorce. Shareholders frequently ask business partners who are getting married to draft prenuptial agreements.

  • You have children from a prior marriage or relationship: A prenuptial agreement is a good idea if you or your to-be spouse have children from a prior relationship. A prenuptial agreement will safeguard the property rights of your children if you have a child from a prior marriage or relationship. Children from a previous relationship may not be provided per your wishes if you do not have a valid prenuptial agreement. The prenuptial agreement can outline what property will go to your children after a death. This will keep the children from being disinherited.

  • You have substantially more assets than your partner: A prenuptial agreement can prevent your wealth from becoming community or marital property if you are wealthier than your partner. 

  • You earn significantly more money than your spouse: In most states, a prenuptial agreement can reduce the amount of alimony payable upon divorce. Notably, prenuptial agreements are subject to judicial scrutiny, and if a judge deems your alimony arrangements in the prenuptial agreement unfair, they can be overturned by the court.

  • You are financially weaker than your partner: Prenuptial agreements can be used to protect you if you have substantially less money than your to-be spouse. The Prenuptial agreement can ensure that you are adequately protected financially in the case of a divorce.

  • Your spouse has substantial financial debt: If you marry someone with a lot of debt, including student and business loans, you may be held liable for those debts if the marriage ends in divorce. A prenuptial agreement will prevent you from acquiring your spouse’s liabilities in the event of a divorce.

  • You plan to quit your employment to raise children: Leaving your job to raise children can negatively affect your professional trajectory and earning prospects. A premarital agreement will ensure that you are compensated fairly for the time you have spent out of the workforce raising children.

What Items Can Be Included in a Prenuptial Agreement?

Separate and marital property: Separate and community property are distinguished by state-specific regulations. If a couple doesn’t have a prenuptial agreement, the court will use state law to decide how to divide their assets. In the event of a divorce, a good prenuptial agreement spells out what will and will not be considered marital property. This will safeguard each partner’s assets in the event of a divorce.

Strategies for saving and spending: A prenuptial agreement should address the couple’s financial goals for the future, such as how they plan to invest and save for retirement. It should also specify how much income will be deposited into joint or separate bank accounts and whether spending allowances will be established.

Financial obligations during the marriage: A prenuptial agreement can stipulate how the couple’s household costs will be handled, detailing who will be in charge of paying the bills and what each party will pay in terms of money. 

Debt payments: Creditors can seize marital property even if only one spouse is signed on to the debt. In the event of a divorce, a prenuptial agreement can protect the debt-free spouse from taking on the other’s debts.

Children from a prior relationship: The property rights of children from a prior relationship will be maintained with the help of a prenuptial agreement.

Family property: A prenuptial agreement can be used to ensure that family property (heirlooms, business shares, real estate, etc.) stays in the birth family and doesn’t go to the family of the divorced spouse. A well-written prenuptial agreement can help set up and protect the inheritance rights of your heirs.

Wills and Testaments: A legal prenuptial agreement ensures that both people’s wills and testaments will be carried out the way they want and that the surviving spouse can’t change them. It is important to note that a prenuptial agreement is not a replacement for a will or trust. The prenuptial agreement can only be used to strengthen these instruments.

Again, each state has its own unique laws regarding the division of assets and property during a divorce proceeding. A prenuptial agreement can avoid some of these rules if the couple decides who will receive what in the event of a future divorce.

Alimony/Maintenance/Spousal support: In some states, a prenuptial agreement can be utilized to calculate the amount of spousal support owed by one party to the other in the event of divorce. But no state will enforce an unfair agreement for spousal support that leaves the divorced spouse poor.

State laws governing the agreement: The prenuptial agreement should identify which state has jurisdiction if there is a question regarding the agreement’s enforceability. If not, it will be the state where the divorce is formalized, not where the couple was married.

What Items Cannot Be Included in the Prenuptial Agreement? 

Child Custody: A premarital agreement cannot cover child custody concerns, including legal custody, visitation rights, religious upbringing, and education. The court is responsible for assessing the children’s best interests.

Child Support: Once again, the court is responsible for determining and preserving the child’s best interests, and a prenuptial agreement cannot include specific child support provisions.

Forfeiture of Alimony Rights: This is the provision in prenuptial agreements that is most frequently invalidated, and most states ban any waiver of alimony rights.

Personal Matters Cannot Be Discussed in a Prenuptial Agreement: The courts will invalidate clauses in a prenuptial agreement that outline where to spend the holidays, who is accountable for particular chores, and which relatives are welcome to visit. The point of a prenuptial agreement is to talk about money. Anything else will be seen as unimportant by the court and thrown out.

Anything seen as wrong or illegal: Like any other contract, any part of a prenuptial agreement that could be seen as allowing or encouraging criminal behavior will be thrown out. Similarly, any provisions found unjust or not in the best interests of either party would be voided, which might render the entire prenuptial agreement unenforceable.

Lifestyle Clauses (Sometimes Not Allowed): The most common lifestyle clause is an infidelity provision. Some states let prenuptial agreements have an “infidelity clause,” but others, like California, don’t let them have any clauses at all. Infidelity clauses are hard to enforce, so many judges are hesitant to decide about them when looking at a prenuptial agreement.

Other lifestyle clauses may include the couple’s plans to have children, their sexual habits, how often they see their in-laws, and whether or not they drink or use drugs. When considering a prenuptial agreement, these types of lifestyle terms are generally viewed negatively by the majority of courts. Most attorneys advise their clients against inserting such stipulations in any premarital agreement.

What to Do Before Obtaining a Prenuptial Agreement? 

Before entering into a prenuptial agreement, couples must provide a comprehensive financial disclosure of the party’s assets. The following is a list of documents to get ready before deciding on the terms of a prenuptial agreement:

  • A current list of all assets and debts.

  • A copy of recent bank account statements.

  • A copy of your most recent investment account statement.

  • Documentation on any businesses owned by either party, including estimated values of assets and accounts receivable, along with the debts of the business.

  • A copy of each property deed.

  • The real and personal property appraiser’s valuation estimate and tax bills.

  • A copy of any registrations, titles, or bills of sale for all vehicles.

  • A comprehensive and detailed inventory of tangible personal property, including jewelry, antiques, and collectibles.

Couples engaging in negotiations on a prenuptial agreement should also detail all of their debts. A list of debts should include the following:

  • A copy of all mortgages and deeds of trust on real estate, as well as the status of payments.

  • A copy of all notes and liens on personal property.

  • A copy of any loans or notes that are unsecured.

  • A copy of all credit card bills.

  • A copy of a current student loan statement.

  • A copy of any medical bills.

  • A copy of any auto loan paperwork.

  • A copy of the medical bill.

  • Tax bills.

  • Each couple should verify their income, including personal and business tax returns from the previous year, recent pay stubs, and annual retirement plan statements.

How to Ask Your Fiancé a Prenuptial Agreement

The discussion of prenuptial agreements is not romantic Most people are nervous about evening bringing up the subject. As adults, you and your fiance’ should be able to discuss your shared future calmly and straightforwardly. 

If you believe that you want to explore a prenuptial agreement but are unsure how to approach the subject with your fiance, the following discussion points should help make the conversation less awkward.

  • Reaffirm your love and commitment to your fiance. Having a prenuptial agreement has no bearing on your love for your fiance or your commitment to the marriage in the long term. It is simply settling your financial problems so that both of your financial futures are secure.

  • Explain you are protecting both of your financial interests. Without a prenuptial agreement, you and your spouse will be subject to your state’s marriage and property laws, and there is no assurance that a court will be fair and impartial to both of your interests in the event of a divorce. A premarital agreement protects both parties.

  • Explain the prenuptial agreement will protect your children from a prior relationship. If you have children from a prior relationship, it is only normal that you would want to protect their best interests and meet their requirements. Likewise, when your new family expands, you will want to safeguard their interests.

  • Explain a prenuptial is proper financial planning.  You would be negligent if you did not make plans for the future. The agreement will address investment and retirement planning and how the kid’s college is going to be paid.

  • Explain your business partners require the agreement. If you are a partner in a business, obtaining a prenuptial agreement is a common procedure. For instance, if you are a legal firm or medical practice partner, your colleagues may require you to have a valid prenuptial agreement.

The decision to seek a prenuptial agreement does not imply that you do not love your partner or foresee a time when you will want to separate from them. Prenuptial agreements are estate management strategies designed to protect you, your spouse, and your family in the case of an unexpected death or divorce.

For many people, negotiating and agreeing on a prenuptial agreement is no more burdensome than choosing a wedding location or making a down payment on a starter house.

If you or your spouse believe that a prenuptial agreement is the best option for your financial future, examine the advantages and disadvantages of the agreement calmly and vulnerably, and give yourselves ample time to draft a preliminary agreement. 

Consider what should and should not be included in the agreement. When you have reached a tentative agreement, be sure to obtain skilled legal counsel to assist you in finalizing the agreement. Nothing is ever certain in the future, but a plan is essential.

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Tim McDuffey is a practicing attorney in the State of Missouri. Tim is a licensed member of the Missouri Bar and Missouri Bar Association.

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