Prenups help couples jump in the driver’s seat and take control of their money. Specifically, prenups allow couples to safeguard their separate property and assets and determine how newly acquired assets and liabilities will be treated during the marriage. However, the sky is not the limit when it comes to creating your prenup. Generally, a prenuptial agreement must be fair, and if it isn’t, the whole agreement could be invalidated. Ouch!
How do you avoid this? Well, let’s jump into what makes a prenup fair, what makes it unfair, and how you can make sure your prenup is, as well.
What makes a prenup fair?
Prenups must be fair. What does that mean, exactly? A fair prenup should safeguard and protect both parties respectfully. There should be a level of fair negotiation, financial disclosure, and prospective thinking for the future.
Reasonable fairness doesn’t mean things need to be 50/50. The agreement should respect both parties in a reasonable way. For example, leaving one person on food stamps while the other person sails off in their yacht isn’t exactly what a court would deem fair and conscionable.
Fair negotiation is another way to ensure a prenup is fair procedurally. For example, did one spouse present the prenup to their partner 2 minutes before walking down the aisle so they had no time to consider the terms? (This is typically referred to as duress or coercion). This isn’t a super fair way to allow both sides to negotiate.
Financial disclosure requires both parties to lay out their financial circumstances, including bank accounts, investments, retirement accounts, real estate, and financial obligations, in full and fair disclosure. This allows both people to negotiate the terms of the agreement with a full understanding of one another’s finances.
Fair prenups are prospective, meaning that they consider what circumstances may be like in the future. An arrangement that seems fair in the first year of marriage may not seem so fair twenty years down the road. So, drafting your agreement with the future in mind will ensure that the agreement is fair should a divorce ever occur.
Another way to account for changes over time is to include a “sunset provision”. This allows you to make certain changes in your prenup once you, as a couple, reach certain milestones. For example, maybe you want your entire prenup to terminate upon reaching 20 years of marriage. Sunset provisions can also reopen your prenup for negotiation down the road. This allows you and your spouse to consider whether the terms are still fair down the road.
What makes a prenup unfair?
An unfair prenup is just what you might imagine – one spouse gets pretty much everything while the other spouse is left high and dry. Many states have stepped in to prevent this from happening. For example, in many states, a waiver of alimony will not be enforced if doing so would make one spouse dependent upon the state for support.
Another fairness red flag is requiring the “losing party” to pick up the tab for both parties’ attorney’s fees following a contested divorce. Ouch! That can really add insult to injury. It’s especially unfair if one side is significantly wealthier.
This may go without saying, but keep in mind that both parties need to enter into the agreement without pressure, duress, or intimidation. Along those lines, the prenup should be executed well in advance of the wedding. Signing at the 11th hour is a big red flag for judges. If you’re having a lavish destination wedding with 500 guests, that creates a little extra pressure to come to an agreement and sign the prenup to avoid any embarrassment or waste of money if the wedding were called off. These are factors that courts consider when determining if a prenup is fair.
How to make YOUR prenup fair
When it comes to invalidating an unfair prenup, there are generally three big reasons why it occurs– the agreement is unconscionable, the parties didn’t properly disclose their finances, or one party signed under duress. Let’s explore these three categories of unfairness and determine how you can safeguard your own agreement.
- Unconscionable agreements. Unconscionability in terms of prenuptial agreements essentially means that the agreement is beyond unfair. What rises to the level of unconscionable can vary by state, but generally, a purely one-sided agreement, unethical demands, or illegal clauses would all fall within the realm.
- Failure to disclose finances. This is VERY important. You must disclose your financial circumstances to your partner—good, bad, and ugly. While certain states do allow waivers of financial disclosure requirements, tread lightly because waiving financial disclosure can quickly put you into the “unfair” category if each party isn’t aware of the other’s finances and the waiver wasn’t done properly.
- Coercion and duress. If one partner signs under significant pressure, they can later challenge the enforceability of the prenup. The same goes for signing under the influence or when mental capacity is lacking. For example, duress could be if one spouse presented the agreement hours before the wedding, hoping to coerce the spouse into signing without negotiating anything.
Here are some suggestions on how to take this information and incorporate it into YOUR prenup:
- Consider seeking legal advice. This can ensure that you fully understand your agreement and the implications of signing. The good news? You can book an attorney directly through the HelloPrenup platform.
- Don’t want a lawyer? Consider a waiver. If you don’t want to go through the hassle of dealing with a lawyer, you can include a waiver in your agreement declaring that both you and your partner had the opportunity to consult with a lawyer but knowingly chose not to do so. HelloPrenup also offers this waiver.
- Make sure you review and really understand your agreement. Thoroughly read it and understand all the language and terms. If there is something you or your partner don’t understand, clarify it before signing. (Here’s where an attorney might come in handy).
- Consider including a sunset provision. This can allow you to terminate or revisit the terms of your agreement down the road.
Final thoughts on fair prenups
Prenups are powerful tools for protecting property and assets, but they should protect both parties. Ensuring that your agreement is fair can provide peace of mind knowing that your prenup will hold up down the road, should you ever need it. By ensuring it is reasonably fair (not unconscionable), you properly disclosed finances, and you have not signed the agreement under duress or coercion, you should be in a very good position. Cover your ass(ets) with a prenup today!
Julia Rodgers is HelloPrenup’s CEO and Co-Founder. She is a Massachusetts family law attorney and true believer in the value of prenuptial agreements. HelloPrenup was created with the goal of automating the prenup process, making it more collaborative, time efficient and cost effective. Julia believes that a healthy marriage is one in which couples can openly communicate about finances and life goals. You can read more about us here Questions? Reach out to Julia directly at Hello@Helloprenup.com.
0 Comments