With wedding season just around the corner, here is a primer on what a pre-nuptial agreement can and cannot do for you:
What a prenup is:
A prenuptial agreement is a private agreement between a couple signed before they get married which sets forth the division of their assets in the event of divorce and death. Each state has its own laws regarding the enforcement and validity of prenuptial agreements. Which state’s law to apply depends on where the marriage will take place, where the couple will live during the marriage, and what state law the agreement says to apply.
In most states, the agreement has to be fair, the parties have to fully disclose their assets, and each party needs to have their own attorney.
The idea of fairness depends on the unique facts and circumstances surrounding each couple. Would it be fair if after 20 years of marriage, the “poorer” spouse walked away with only the small amount of cash she brought into the marriage and no alimony? Probably not, particularly if she was a stay at home parent raising the children. It is to the “wealthier” spouse’s advantage to give the agreement “teeth” – to make sure his ex-spouse is provided for adequately while still protecting his assets.
Typically, the parties also have to fully disclose their assets. In many states the assets need to be listed in the agreement. Also, some states look at each party’s expected inheritance so that may have to be disclosed as well.
Each party should have their own attorney to represent them regarding the prenuptial agreement. Some states require this. You do not want the prenup to be thrown out down the road just because your spouse did not have an attorney.
Also, presenting your intended with a prenup the week before the marriage is not good practice, and in some states could be used to overturn the prenup. For that reason, the idea of a prenup should be raised long before the marriage.
What Happens in the Event of Divorce:
In the event of divorce, the prenup can divide up the couple’s assets. Often prenups state that any assets brought into the marriage remain that person’s separate property. If you bring it into the marriage, you leave with it. A prenup can also state that any assets the couple earned during the marriage is marital property subject to division. Any monies earned during the marriage are divided between the couple. Many clients find this approach fair and reasonable; however, each prenuptial agreement is tailored to the couple’s unique assets and the terms they agree to.
In most instances, the parties will either waive alimony in the agreement or specifically not waive it. If alimony is waived, it means that one party cannot seek alimony from the other in the event of divorce. If alimony is not waived in the agreement, then either party could go after the other for alimony.
What Happens in the Event of Death:
Most prenups will allow each party to leave their separate property to whomever they want, while requiring some provisions for the surviving spouse. For instance, if you die you can leave all your separate property to your siblings, but you have to leave your marital home and a certain amount of cash to your spouse. The agreement should provide sufficiently for the surviving spouse. If you do not have enough liquid assets to leave to your surviving spouse, you can always buy life insurance.
What a prenup cannot provide:
A prenuptial agreement cannot provide for or limit child support or rights related to children. Courts and legislatures do not let couples bargain away the rights of their children.