A prenuptial agreement (frequently also called a prenup) is an agreement signed prior to marriage that re- designates assets during the marriage to keep some property intentionally separate from the marital property. In the event of a divorce or death marital or communal property between the spouses are equitably divisible under state law or applicable to inheritance laws under the state via next of kin. However, a prenuptial agreement bypasses the need for state law intervention by issuing an agreement in which the spouse agree amongst themselves how the accumulations of wealth during the marriage will be divided in the event of separation.
What Can a Prenuptial Agreement Do?
- A prenuptial agreement may protect the parties entering into the marriage from debts, creditor collections, and liability for debts.
- A prenuptial agreement may provide for children from previous relationships; such as through an inheritance.
- A prenuptial agreement may help keep property within the family; such as, a business, heirloom, and may even include future anticipated inheritance.
- A prenuptial agreement may also define who receives certain properties in the event of a divorce.
Note: A prenuptial agreement should also be filed in proper conjunction with an estate plan including a will or living trust.
In a Divorce:
In a divorce the prenuptial agreement determines who obtains which property. If a prenup is not signed prior to the marriage then the state will have the jurisdiction to determine how the property will be divided in the divorce. Generally, if the decision is left up to the court then the result of the final case may not be the desired result of either party. In other words a prenup during a divorce allows for the parties to establish their own rules to settle property and disagreements during a divorce.
In the event of a divorce a prenuptial agreement may maintain separations that existed during the marriage; such as:
- Determining if income tax returns are filed jointly or separately during the divorce proceeding and thereafter.
- Who maintains the residence and who pays the bills for the residence and how.
- Which accounts are joint accounts and which are separate- also who is allowed to manage said accounts.
- Agreements on the legal sole ownership or joint ownership that are obtained during the marriage.
- Credit card debt- which purchases may be made on joint cards, who receives the records and who maintains the payments.
- Which party has rights to savings accounts – sole property v. marital property?
- Surviving spousal support – via estate plan, will, insurance, etc.
- How to settle disagreements in the marriage or during divorce- agree to either hire a mediator, legal counsel, or private arbitrator for conflict resolution v. going to court.
What You Cannot Do With a Prenuptial Agreement?
There are some state laws that may consider for a matter to be off limits within the terms of a prenuptial agreement generally these types of agreements are deemed unenforceable. Most of the matters that cannot be addressed within a prenuptial agreement are matters that violate state law due to their illegal nature or because they directly act against explicitly outlined public policies. If these illegal items are added to the prenuptial agreement the other items listed within the document may be also considered invalid. There is a list of specific matters that cannot be addressed within a prenuptial agreement which is not limited to the following list of the most common prenuptial restrictions.
- Restrictions of Support or visitation rights- No state will honor agreements in which a parent agrees to give up the right to future child support. Welfare for children is considered a public policy which cannot be enforceable denied through private agreements which may leave the child without support or without a visitation relationship with the other parent.
- Alimony rights- A few states may limit your ability to waive your future right to alimony, spousal support, or separation maintenance in the event of a divorce. However, some states on the contrary allow for waivers of these rights to occur. If you are unsure of your states law then it is necessary to hire an attorney to determine if the waiving of such rights is a legal action.
- “Encouraging Divorce”- If a prenup is viewed to encourage divorce by providing financial or material incentives for divorcing the spouse then the judge may dismiss the agreement especially if it places the other party at a disadvantage.
- Rules about non-financial matters- Including personal agreements within preempts that you may not wish to be included in you divorce proceeding. Personal agreements may include: responsibility for house hold care, hyphenated names or not changing names after marriage, parenting arrangements, child prevention/ birth control, child care, child education, child names, in law or step parent relationships, and pet ownership and responsibility.
Who Should Consider a Prenuptial Agreement?
A prenuptial agreement should be considered by any party that desires to clearly outline separate properties within the marriage or to explicitly outline and maintain separate properties within the marriage. A prenuptial agreement may make a divorce much more expedient and less costly. Most people considering a prenuptial agreement might do so in a second or third marriage or may enter in a prenup due to family property and inheritance of a significant value. Despite the precise reason a prenup will allow for parties to separate during a divorce with little if any involvement by the state –allowing for the spouses to handle the divorce privately and amongst themselves in compliance to their own previous agreements.