Planning a wedding is one of the most exciting times in a person’s life, but marriage is about much more than the romance of that one day. When you become a husband or wife, you also become a financial partner and often a business partner. A prenuptial agreement (prenup) is a way to address many of the issues that may come up down the line if the partnership comes to an end.
Learn more about what a prenup is, how it works, and the pros and cons you should consider in this definitive guide.
What is a prenuptial agreement?
Prenuptial agreement meaning: A prenuptial agreement is a written contract between two people who are planning on getting married, which outlines what will happen to the couple’s assets and liabilities in the event of a divorce or death. Note, the contract must be completed before the marriage occurs to be considered a prenup, or it will fall under postnuptial agreements. Prenups often list the property and debts each person will own, each person’s property rights, and the terms and limits of spousal support.
The contract can also contain conditions in the case of specific scenarios like divorce due to infidelity. For example, you may agree that either partner will forfeit their right to a property if there is evidence they have committed adultery. Each state has its respective laws regarding prenuptial agreements, which are important to understand as you want your contract to be fully effective if it is ever needed.
Prenuptial agreement checklist
What items are often included in a prenuptial agreement? Here’s a list of the most common:
- Separate property assets and liabilities: How the assets and liabilities that you each bring into the marriage will be split. Will they remain separate, or will you treat them as marital property? The property includes anything that can be bought or sold, including but not limited to houses, cars, furniture, clothing, bank accounts, cash, pension plans, stocks, patents, businesses, and life insurance with cash value.
- Marital property: How property and income acquired during the marriage will be split. Will it be 50/50 or another arrangement?
- Spousal support: If one party will offer the other financial support after the divorce. Issues around this include how much and the terms and duration of the support.
- Gift management: How will you treat gifts or debts from family members in a separation? As separate or marital property?
- Agreement duration: How long will the agreement stay valid? Will it change after a set amount of time or after children?
- Fault: Does it matter who decides to end the marriage or who is to blame? Will it have any impact on the agreement?
For a more in-depth look, see the prenuptial agreement sample, courtesy of the New York Bar Association.
How to write a prenup
How do you get started with the prenup process? Here’s a step-by-step guide.
1. Work out the details with your spouse
The first step is to sit down with your spouse and hash out the details of what you have now, what you expect to have throughout your marriage, and what you both find fair. Most states require that both partners fully disclose their current income and assets. Be sure to review the state laws regarding prenups that will apply to you.
During this conversation, you should consider what is likely to happen in the future, such as your education and career plans, potential inheritances, and plans for either spouse to take time off of work for situations like child-rearing. Ask what income, assets, and debt can you expect in the coming years of marriage.
Then, identify how you both want to separate your assets in the event of a divorce or death, taking into consideration passing on inheritances to children. Talk about items such as bank accounts, real estate, businesses, personal items, furniture, investment accounts, etc. Also, consider spousal support.
2. Create the written agreement
Prenups must be in writing to be legally valid, so you will need to have your agreement drafted. You may hire someone to do this or can do it yourself. The main components include:
- Title the agreement “Prenuptial agreement.”
- Identify both people getting married by their full legal names.
- Explain that you are getting married and provide the date of the marriage.
- Provide a list of each person’s income, assets, and debts.
- Explain how income, assets, and debts will be alotted throughout the marriage.
- Disclose any protections either spouse requests. For example, if one spouse is taking on a large sum of student debt, the other may want to remain disconnected from that debt.
- Finally, spell out how assets, income, and debt will be divided upon divorce.
Once written, it is recommended you have the agreement reviewed by an attorney.
3. Sign the agreement
Once both spouses have consulted with legal advisors and agree on the agreement, they should sign it and put it into effect. Be sure to follow the formalities required by your state.
Frequently asked questions about prenuptial agreements
Now let’s take a look at some answers to frequently asked questions about prenuptial agreements.
Should my spouse and I get separate attorneys for a prenup?
Many family law experts recommend that each spouse consults a separate attorney to get unbiased guidance on the document. This helps to ensure that each person’s best interests are acknowledged. If you and your spouse do not seek separate counsel, your prenuptial agreement will not be honored in some states, and it may be looked at more carefully by the courts in others.
How much does it cost to get a prenuptial agreement?
The cost of a prenup will vary depending on where you live but generally runs from $1,500 to $2,500.
When might a prenup be thrown out in court?
A prenup may be thrown out in divorce court if any aspects violate public policy or law. Further, courts will often look for signs of a spouse signing the agreement while under duress, such as signing it after the wedding is paid for and occurring within a few days. Some states require both partners to receive separate legal counsel from individuals who advise them of their rights, and some require you to complete the prenup a certain amount of time before the marriage. If you have a situation in which you think your agreement should be disregarded, you should seek legal counsel from an expert in family law.
What role do prenuptial agreements play in estate plans?
The default arrangement, if you don’t have a prenuptial agreement, is for your spouse to pretty much gain complete control over your estate when you pass away. If you would like any other type of arrangement, a prenuptial agreement is a way for you to ensure your wishes are carried out. For example, if you and your spouse have children from prior marriages, you may want to ensure part of your estate goes to your children. This should be listed explicitly in the prenup.
Are prenups primarily for people with a prior marriage?
Prenuptial agreements can be beneficial in many scenarios, not only for individuals with prior marriages. They can serve as a way to identify assets that belong to only one spouse (i.e., separate property), waive individual rights provided by law, determine how spouses will spend money in the marriage, disinherit a spouse, clarify how sources of funds will be split, and more.
A prenup may be more of a benefit for those with prior marriages who have children from those marriages, pay support to their previous spouse, or have notable assets. However, they are useful for any couple that wants to protect their future and clarify how finances will be broken down if a divorce or death does happen to occur.
Can you outline child support and custody issues in a prenup?
While many topics can be included in a prenup, child custody issues and child support are not eligible. Courts in all 50 states retain the power to decide on what is best for children, from financial support to custody arrangements.
Community property and equitable distribution in a prenup
In community property states, spouses equally own all assets, income, and debt earned or received during the marriage. For example, if you work and your spouse does not, all of the income is 50% yours 50% theirs. If your spouse goes out and finances an expensive car, by law, you own half of that debt. If you divorce, you both have rights to half.
Community property states include AZ, CA, ID, LA, NV, NM, TX, WA, and WI.
In the remaining equitable distribution states, the spouse who takes on debt, earns income, or purchases assets will have ownership of them. In the event of a divorce, many factors are considered to decide who gets what.
If you don’t want to leave it up to your state laws, a prenuptial agreement allows you to decide how your marital property will be handled.
State laws and prenuptial agreements
People commonly ask about prenuptial agreements in California or prenuptial agreements in Florida in an attempt to find out how their states treat the agreements.
Before 1983, many courts refused to enforce or honor prenuptial agreements. This led to the Uniform Premarital Agreement Act (UPAA) in 1983, which strengthens the contracts and makes them more reliably enforced. Since then, 26, the following 26 states and the District of Columbia have adopted the UPAA.
|1. Arizona||9. Idaho||16. Nebraska||23. Rhode Island|
|2. Arkansas||9. Illinois||16. Nevada||23. South Dakota|
|3. California||10. Indiana||17. New Jersey||24. Texas|
|4. Connecticut||11. Iowa||18. New Mexico||25. Utah|
|5. Delaware||12. Kansas||19. North Carolina||26. Virginia|
|6. Florida||13. Maine||20. North Dakota|
|7. Hawaii||14. Montana||21. Oregon|
If you’re considering a prenup, it’s important to review the state laws where you live to gain an understanding of what you can expect.
Prenuptial agreement pros and cons
Should you get a prenuptial agreement? Here are some of the top benefits and drawbacks to consider.
Here is a list of the benefits and the drawbacks to consider.
- Protect your financial interests when you are gone or divorced.
- Limit the amount of spousal support you will have to pay in the event of a divorce.
- Ensure you are compensated for the financial sacrifices you have made for the marriage (like giving up a lucrative career).
- Prevent taking on the debt of your spouse.
- Protect your business from the divorce.
- Address common legal hurdles in advance to prevent a lengthy court battle and resolution process in the event of a divorce.
- Protect family heirlooms and separate property.
- Protect the inheritance rights of children or grandchildren from previous relationships.
- You can learn more about your spouse and their boundaries and intentions before committing to marriage.
- It kills the romance. The conversations around planning for a divorce when planning for a marriage can be difficult and can potentially cause relationship-threatening conflicts.
- It may be an unnecessary step and a waste of time and stress.
- Individuals may be overly generous as they are in love and don’t believe anything could ever change that.
- It may cause you to lose the rights and benefits you would otherwise have.
Is a prenuptial agreement right for you?
Should you get a prenuptial agreement? While it can feel like you are planning for failure, some situations warrant a prenuptial agreement. Namely, if you or your spouse are coming into the marriage with significant financial assets, a prenup will allow you to protect what was originally yours. Further, if you have children from a previous marriage, the agreement will enable you to protect yourself from a loss of property that will reduce their inheritance or level of support. Another common issue is debt. For example, if one partner has a large outstanding student loan, the other partner may want to ensure they don’t end up liable for it.
If you aren’t sure whether you should opt for a prenuptial agreement, it’s never a bad idea to seek out professional advice. Review and compare financial advisors below to find a trusted expert you can consult.
Jessica Walrack is a personal finance writer at SuperMoney, The Simple Dollar, Interest.com, Commonbond, Bankrate, NextAdvisor, Guardian, Personalloans.org and many others. She specializes in taking personal finance topics like loans, credit cards, and budgeting, and making them accessible and fun.