Welcome! You’re here because you understand the importance of a prenuptial agreement that is both fair and balanced – and that’s a truly smart approach to entering marriage. It’s a common misconception that a prenup should solely benefit one party, and the reality is that overly one-sided agreements can actually be invalidated by a court. Imagine investing the time and effort into creating a document only to have it deemed unenforceable, leaving you without any of the intended financial protections at all. So, it begs the question: how do you create a prenup that not only protects your individual financial interests but also stands up in court because it is fair to both you and your future spouse? Keep reading to learn more!
What is a prenup?
A prenup is a contract executed between two love birds who are about to get married (must be done before the wedding). A prenup is only effective upon marriage. No marriage? No prenup. A prenup usually covers financial topics like property division, debt allocation, alimony (i.e., spousal support), and more. Prenups can also cover non-financial topics like pet ownership, confidentiality, infidelity, etc. A common misconception about prenups is that they only handle matters in divorce, but that’s not true. Prenups can also handle obligations during the marriage, as well!
Prenups must be fair, from a legal standpoint
Legally speaking, prenups must be reasonably fair. This does not mean that they must be 50/50, but a prenup should never be overly one-sided. If a prenup leaves one person destitute or needing public assistance, there’s a good chance it will be thrown out in court. A court doesn’t want to see one spouse zipping away in their Maserati while the other spouse is left in the homeless shelter.
Don’t believe us? Let’s take a look at a real-life case where a court declared a prenup to be invalid because it was unfair. Husband and wife had a nearly 20-year marriage when they filed for divorce. The wife requested that the prenup be thrown out based on unconscionability. The facts surrounding the prenup were as follows. The couple was set to be married on a Saturday. The husband presented the wife with the prenup on the Wednesday before the wedding. The wife suggested some changes to the agreement, and the revised version was sent over Friday night at 7:00 pm as they were leaving their rehearsal dinner. (Red flag!!)
Before entering the marriage, the husband had $627,373.57 in assets from a business he owned, and the wife was a secretary and entered the marriage with $5,000. The prenup stated that all of the husband’s assets were to remain separate, including any future assets accrued during the marriage. It also sets up the wife and husband to split any debts from the marriage. So, in effect, the wife was not entitled to any of the earnings from the husband’s business but was potentially on the hook for some of the debt from said business. Red flag, anyone?! Not to mention, the wife was the homemaker and stayed home to take care of the children, so she had minimal opportunity to make any money during the marriage. The verdict? The court said this is unfair (i.e., unconscionable) and unenforceable. The couple must split up assets according to default state divorce laws instead.
What can be learned from this case? Prenups should be reasonably fair. There doesn’t need to be a perfectly equal division of assets, but prenups should also not leave someone with a bunch of debt and no assets, especially when they are staying home with the children and taking care of the house (i.e., they have no real way of earning an income). With this in mind, it should help recenter you and your partner to make sure your prenup is fair and balanced. A fair prenup is a legally enforceable prenup, so make sure both parties feel comfortable with the outcome.
Having an open discussion is crucial to crafting a fair prenuptial agreement
Whether you like it or not, the prenup process will force you to have in-depth conversations with your future spouse. The conversations should focus on your life and financial goals, expectations of one another, and the roles each of you will have in the marriage. Having a truly open conversation can be a launching pad for creating a fair and balanced prenup. You want to make sure to listen to your partner, hear their needs and wants, and compromise, if necessary. And they should do the same for you! Both of you have a say in this, so both of your voices should be heard loud and clear in the prenup.
To get the brain juices flowing, here are some questions you can start asking your future spouse (and asking yourself) to get on your way to a fair and balanced prenup:
- What would make you feel comfortable in the prenup?
- What are your retirement goals?
- What are some of your life goals?
- Where do you see yourself in 20 years? 30 years? 40 years?
- Will someone stay home with the children and take care of the house?
- How will you handle finances during the marriage?
- What assets are you not comfortable with sharing if we ever get a divorce?
Again, the key is being honest, transparent, and taking a collaborative approach to this process, which starts with an open conversation.
Healthy negotiation helps craft a fair agreement
There’s no fair and balanced prenup without a little healthy negotiation. When people hear the word negotiation, they may immediately bring up an image of a bunch of lawyers viciously arguing over money. While it’s true negotiation can look like that, it doesn’t have to. You can have a cool, calm, and collected conversation debating your prenup with your honey that doesn’t involve anger, screaming, or greed. Without healthy negotiation, how would you possibly create a prenup that feels comfortable for both parties? Each person needs to speak up and state their desires and wishes for themselves.
Real-life examples of fair prenups
You may be wondering what some examples of prenups might be that was deemed fair by a court. Smart! Let’s dive into some case law in which a court found a prenup to be fair (despite being contested and argued to be unfair).
Sheri and William
This case is quite recent (2022) and shows us what a state supreme court says about prenup fairness. At the time they got married, Sheri had a net worth of $5,359, and William had a net worth of $2.95 million. Their prenup stated that in the event of a divorce, both Sheri and William should keep separate ownership of their own separate property. It also restricted but did not eliminate spousal support. At the time of the divorce, the combined assets totaled $10.6 million. William’s separate property totaled $8.7 million, and their joint marital property totaled $1.9 million. Both parties lived in paid-off houses and cars, and other than credit card payments, they had no other debt. The lower court ended up splitting the marital estate of $1.9 million 70/30 in Sheri’s favor and letting William keep his $8.7 million plus 30% of the $1.9 million).
Sheri argued that the prenup was overly harsh and one-sided. But the court disagreed. The court said she was not left in poverty or requiring public assistance. Even though there was a large disparity in the outcome (William walking away with his separate property of $8.7 million and Sheri walking away with $1.26 million), it wasn’t enough to constitute an unfair prenup in the court’s eyes.
Moral of the story? Just because there is a discrepancy in how much each party is awarded doesn’t mean it’s automatically unfair and will be thrown out by a court!
Pamela and David
This couple got married twice (yes, they got a divorce… reconciled, and then got married to each other…AGAIN). Cute! Until they filed for their second divorce to each other. Maybe three times a charm? Probably not…Before their second marriage, they executed a prenup that said each of their separate property would remain separate, and only property acquired under joint title or designated as joint property would be split up in the event of a divorce. This prenup allowed Pamela to receive a car, furniture, some personal items, and cash in an amount that reflected the length of the marriage. At the time of the second divorce, this amount equaled up to $650,000.
At the time of marriage, David’s net worth from his business and other assets was around $5 million, and Pamela’s was around $190,000. Pamela argued that the circumstances (from the signing of the prenup to the divorce) had changed so much that it was unfair. She further explained that David’s net worth grew substantially ($24 million more). She also never pursued a career of her own because she was a homemaker.
The court’s decision? FAIR! They upheld this agreement because Pamela and David already had a great financial disparity before the wedding, and her position did not suffer. She was still receiving $650,000, plus a car, furniture, and personal items, and she was still eligible to receive alimony (i.e., maintenance) from David. Lesson to be learned? A great financial disparity in divorce between parties is not enough to show unfairness. It should be “oppressively unfair,” as this court described it.
The bottom line on crafting a fair and balanced prenuptial agreement
The takeaway from this should be that crafting a fair and balanced prenuptial agreement involves having open discussions and healthy negotiations to create an agreement that is fair for both parties. The agreement should not be overly one-sided, and generally, each party should have at least one benefit in their favor stemming from the agreement. As you can see from the cases above, having a great financial wealth disparity can quickly make prenups become unfair, especially if the lower-earning spouse isn’t taken care of, but that doesn’t mean things need to be 50-50. Go into the process with a collaborative approach, and you’ll be well on your way to a fair and balanced prenuptial agreement. Happy planning!
Nicole Sheehey is the Head of Legal Content at HelloPrenup, and an Illinois licensed attorney. She has a wealth of knowledge and experience when it comes to prenuptial agreements. Nicole has Juris Doctor from John Marshall Law School. She has a deep understanding of the legal and financial implications of prenuptial agreements, and enjoys writing and collaborating with other attorneys on the nuances of the law. Nicole is passionate about helping couples locate the information they need when it comes to prenuptial agreements. You can reach Nicole here: Nicole@Helloprenup.com
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