Prenuptial Agreement

What is a prenuptial agreement?

A prenuptial agreement, also commonly known as a prenup, is a contract entered into by two individuals who are about to get married. This agreement outlines the financial obligations of both Parties and includes a plan of how to divide assets and debt obligations if the marriage ever comes to an end. Prenuptial agreements are often associated with individuals who have a large amount of assets. However, a prenuptial agreement can be used in many situations, such as the following:

• One or both of the parties has children from a previous relationship;
• One or both of the parties owns property that they would like to keep separate;
• One or both of the parties has a significant amount of debt; or
• The parties would like to outline their financial responsibilities for housing and living expenses before moving in together after getting married.

A thorough and successful prenuptial agreement can drastically speed up divorce litigation, or even avoid it altogether in the event of a divorce. For more information about prenuptial agreements, please refer to the guide Tackling Tricky Topics: The Ins and Outs of Prenuptial Agreements.

What is the difference between a prenuptial agreement and a postnuptial agreement?

A postnuptial agreement is similar to a prenuptial agreement because both documents outline the terms of a potential separation or divorce. However, a postnuptial agreement is distinctive because it is created after the couple has already been married. In contrast, a prenuptial agreement can only be created before the couple is married.

Is it mandatory to have a prenuptial agreement?

No, it is not mandatory to have a prenuptial agreement.

However, having a prenuptial agreement is highly advised, especially for couples with numerous assets, pre-existing children, or high debt. As challenging as it can be to contemplate the potential end of a marriage just as it is beginning, a prenup is a way to make agreements about difficult and contentious topics while still on loving terms. This helps the couple avoid more acrimonious or retaliatory behavior down the line if things turn sour. Further, a prenup allows a couple to avoid subjecting themselves to the arbitrary and ever-changing laws of the state that will govern in the event of a divorce without a prenuptial agreement to guide it. For many couples, it is much easier to create a prenuptial agreement at the start of a marriage than to create a divorce agreement at the end of that marriage.

What is "physical custody"?

Physical custody refers to where the couple's children would live if they divorced. Physical custody can be shared between two parents, meaning that children would split their time and live with both parents. Alternatively, one parent could have sole physical custody, meaning that the children would only live with one parents.

What is "legal custody"?

Legal custody refers to who would make important decisions concerning the children, such as what medical treatments they will receive, where they will go to school, what, if any, religious education they will receive, and other such issues. Just as with physical custody, legal custody can be shared between two parents, meaning both parents get input into these decisions, or one parent can have sole legal custody, meaning they get to make the final decision by themselves.

What is "marital property"?

Marital property is any property or debt acquired by the couple during the course of the marriage. This could include homes, cars, stock options, retirement accounts, mortgages, credit card debt, or any other type of tangible or intangible property or debt. This property is subject to division during the divorce. It does not include any property that a party already had before entering into the marriage, like a home that was already owned by one member of the marriage before the marriage took place.

What must a prenuptial agreement include?

A valid prenuptial agreement must contain at least the following mandatory clauses:

• Identifying information: The prenuptial agreement should include information describing each of the parties getting married, as well as any children they have together and any children each of them have separately.
• Property description: The prenuptial agreement thoroughly describes the property owned by both of the parties, both separately and jointly. The agreement also specifies whether property that the parties acquired separately prior to the marriage will remain separate or will become part of the marital property and subject to division if they divorce.
• Property division: The prenuptial agreement goes over how the couple will divide all of their marital property if they do end up getting divorced. The marital property includes any assets or debts the couple acquires over the course of the marriage.
• Debt: The prenuptial agreement outlines the debt owed by both of the parties, incurred both separately and jointly. The agreement also specifies whether debt that the parties acquired separately prior to the marriage will remain separate or will become part of the marital debt and subject to division if they divorce.
• Income: A premarital agreement often discusses how income earned during the marriage will be handled. The parties can decide which income, if any, will be considered a joint marital asset and which, if any, will remain separate.
• Custody of shared children: If the couple has any shared children or plans to have children together, the prenuptial agreement discusses how the couple will arrange custody if they divorce. This covers both physical custody, or where the children would live, and legal custody, or who would make decisions regarding how the children are raised.

In addition to the above mandatory information, the following information may also be included:

• Spousal support: The prenuptial allows the parties to decide whether one party will pay spousal support, also known as alimony, to the other party if they divorce in the future. Spousal support is generally paid to the party who made less money during the marriage. If the parties already know that one of them will not be working or will be making significantly less money, spousal support payments can be negotiated and planned for ahead of time using the prenuptial agreement.

NOTE: A judge can revoke the spousal support agreed to in a prenuptial agreement if they believe it will leave one party destitute or if it is otherwise considered one-sided or unfair, even if the parties initially agreed on the terms.

• Living expenses: If the couple plans to live together during the marriage, the prenuptial agreement can describe how the parties will handle paying and dividing their shared living and housing expenses during the marriage.
  
  

What is not allowed in a prenuptial agreement?

Since child support is ultimately a matter for the courts to decide, the prenuptial agreement does not address this issue. The judge has the final say on who will pay support and how much they will pay.

What are the prerequisites of a prenuptial agreement?

For a couple to create a valid prenuptial agreement, they must not be married when they create and sign it. If they are already married and wish to create something like this, they must use a postnuptial agreement instead.

The most important way to protect the validity of the prenup is for both parties to make an honest and complete financial disclosure to each other, listing all assets and debts. Each party should know what they are gaining and giving up by signing the agreement. Nothing should be concealed, no matter how small the account or whether the account is based in another country. The risk in not disclosing fully is that the agreement will be challenged in court by the other party based on the argument that the agreement would not have been signed in the first place if the missing item had been disclosed.

The second major strategy to avoid any potential future challenge of a prenuptial agreement is assuring there is ample time before the wedding for both parties to discuss, read, and review the agreement. One of the common arguments made when trying to set aside a prenuptial agreement is that the agreement was created and signed such a short time before the marriage that there was pressure to get it signed without close review by both parties and any further negotiation of the terms of the agreement. While some states have specific guidelines about timing, generally, there is no concrete guidance about how long one should wait between signing a prenup and the wedding ceremony. The most common rule of thumb is that there should be at least a two-week wait between the signing of the prenup and the start of the marriage.

What should be done once the prenuptial agreement is finished?

The parties should make every effort to complete the agreement well in advance of the marriage; thirty days is a common guideline. Further, they should both have a reasonable amount of time to review the completed agreement prior to signing. After completing the Agreement, the parties may independently consult attorneys. The parties may agree to each consult with an attorney prior to executing the document due to the nature of the important and personal rights involved. If desired, there is an option to sign the document in front of their attorneys and have their attorneys complete paperwork acknowledging that they've witnessed the signing of the document. The Parties do not need to file their agreement anywhere once it is completed. However, signed copies of the document should be kept in a safe and secure location such as a safe, bank safe deposit box, or with an attorney.

Which laws are applicable to prenuptial agreements?

Prenuptial Agreements are a matter of state law, with different states having different requirements dictating the enforceability of a Prenuptial Agreement.

As of 2017, 27 states (Arizona, Arkansas, California, Connecticut, Delaware, District of Columbia, Florida, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Maine, Montana, Nebraska, Nevada, New Mexico, North Carolina, North Dakota, Oregon, Rhode Island, South Dakota, Texas, Utah, Virginia, and Wisconsin) have signed onto the Uniform Premarital Agreement Act. This Act addresses the varying standards regarding Prenuptial Agreements that have lead to varying laws and questionable enforceability as couples move from state to state. This Act dictates that if a prenuptial agreement is deemed enforceable in one of the states that has signed on, it will be enforceable in all the other states that have signed on.

In determining matters related to children, such as child custody, visitation, and support, a Court must approve any arrangement using a "best interests of the child" standard. Generally, if both parents come to an agreement regarding these matters, a Court will be willing to include the agreement in the official legal documents. However, the possibility remains that a Court will require an adjustment of the agreement if they determine that the arrangement is not in the best interests of the child(ren) involved.

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