Prenuptial Agreements
What Is A Prenuptial Agreement?
A prenup, or prenuptial agreement, is a legal document a couple creates before they get married. It outlines how their assets will be divided if the marriage ends.
In addition to prenups, there are also post-nuptial agreements, which are made after marriage, and cohabitation agreements, designed for unmarried couples or parents.
What What Happens When You Don't Have A Prenup?
Without prenuptial, postnuptial, or cohabitation agreements, state law governs divorce issues. Establishing agreements on property division before marriage can help you avoid costly and contentious divorce disputes. It also allows both partners to enter the relationship fully informed about each other's financial expectations from the outset.
Related Reading: How Are Assets Divided?
What Is Their Purpose?
Discussing the need for a prenuptial agreement with someone you want to spend your life with can often be misinterpreted as a lack of trust. Conversely, the individual who requests the prenup may also perceive their future spouse's refusal to sign it as a sign of mistrust.
However, the true intention is to clarify the current status of your relationship. When you decide to get married, you are essentially entering into a partnership.
When you get married, you go into business together. The state treats it as a business when it dissolves.
In this context, you are essentially saying, "This is where we currently stand; here are my contributions to the marriage; here are your contributions; and here are the terms we will follow if things don’t work out."
Related Reading: What's In a Divorce Decree?
Are Prenups Always Enforced?
In short, the answer is no. Several factors can affect this outcome, common reasons include:
- Is the prenuptial agreement heavily biased in favor of the wealthier individual?
- Did both parties enter into the agreement with a clear understanding of each other's assets, property, and debt?
- Did the less advantaged spouse have sufficient time to carefully consider the terms of the agreement?
- Were issues concerning child support or custody included in the agreement?
If a prenuptial agreement is deemed reasonable, the final judgment may reflect the terms set forth in the agreement, but it ultimately depends on the court's decision.
Do You Need A Prenup?
There are a number of reasons you may want to consider a prenuptial agreement:
- If one party is much wealthier than the other, it can help protect preexisting assets.
- If one spouse earns substantially more, this can limit future support payments (alimony).
- Does one of you have a significant amount of debt? This can protect you from having to cover your ex’s liability.
- Do you own a business and want to make sure it remains yours?
Related Reading: Your Business Is A Divisible Asset
The most important thing to understand, is that your prenup, postnup, or cohabitation agreement, needs to be balanced, and written well enough to be enforced by the courts if/when the time comes.
Related Reading: Moore Marsden, Shared Homes, and Divorce
