Prenuptial Agreements can be an invaluable investment to help couples navigate their way into marriage and, if needed, through the difficulties of a future potential divorce. It is essentially a written legal contract that determines how assets will be divided if a marriage is terminated, but a prenup also helps couples decide how assets and debt should be governed throughout a marriage.
A prenup can help take the sting out of any financial misunderstanding, or the divorce process as the couple has already negotiated and drafted a contract to agree to their terms of how their assets should be considered, before they got married. It can also circumvent the need for any nasty, drawn-out, or expensive negotiations or divorce litigation. Nobody likes that!
Prenuptial contracts can not only help to protect your assets but can be used to assign separate or marital property, as well as protect family inheritance and your children’s best interests, especially if you have children from a prior marriage. Moreover, it offers a sense of clarity and security from the outset of the union, diminishing any unnecessary conflict and offering more understanding and clarity to your marriage. Communication is key to a happy marriage!
Choosing against getting a prenuptial agreement can leave you at the mercy of the judicial system. Yes, the state governs your marriage. If you have opted against a premarital contract and you get divorced, then the state law will determine how your property is distributed upon divorce. And, you may not like it.
Effectively, there are two separate ways in which a state divides property.
- Community Property States: Generally in states that operate under this theory, the property you acquired, earned, or gained during the period of marriage may be subject to a 50/50 split, and the property you earned prior to the marriage, will be separate. Most, but not all community property states also consider inheritance to be separate property. But, keep in mind, this really depends on the individual state, so you cannot assume that inheritance will automatically be excluding from the marital estate just because you live in a community property state.
- Equitable Division States: Generally, in states that operate under this theory, marital property is reviewed and subjected to a ‘fair’ distribution or a distribution depending on factors determined by that state, between both parties but not necessarily on a 50/50 basis. This is down to the discretion of the state law and/or judge and often not as straightforward as you may imagine. Aspects such as individual circumstances, length of the marriage, earning capacity and personal requirements will be taken into account. Yes, it can get complicated!
If having a judge make decisions about your belongings and property seems unappealing, then you should actively consider a prenuptial agreement.
A prenup can and should protect and serve the interests of both parties. The common misconception is that prenuptial agreements are only used to safeguard the assets of the rich, wealthy, or famous. The reality is, we all have assets, liabilities, and property that we are entitled to keep should a marriage irrevocably fail. And, 50% of marriages do fail. Sorry.
Because we love our pop culture, here is a video on why we think Britney Spears, who has been married and divorced, and has plenty of assets, should get a prenup before she marries her now fiance:
A Fair Prenup
So, you have made the wise decision to commit to a prenup before committing to marriage. However, this doesn’t entitle you to set any criteria or conditions you wish!
For a prenup to be valid and enforced at the point of divorce it needs to be fair. So, what does that mean?
A fair prenup should respectfully safeguard and shield the assets of both parties. To achieve this, there must be a full and complete disclosure of all assets, debts, and liabilities when the contract is drafted. This includes all investments, real estate, and financial obligations. Before signing the contract ensure that both parties have disclosed their most recent financial records, stocks, bonds, bank statements, pension schemes, retirement plans, tax returns, and pay slips where applicable.
Circumstances invariably change, especially over the course of a long marriage, and therefore a fair prenup should also include a sunset clause. This means that a couple can determine an expiration or revision date for their prenup, thus prompting a revisit, refresh, and review to ensure the conditions are still relevant, suitable, and fair.
One essential basis for prenuptial contracts in most states is that the agreement must be conscionable and fair for both parties. This means that the agreement must be entered into and signed by two consenting adults. Neither party should be coerced, intimidated, or tricked into providing their signature but also the provisions of the agreement must not be disproportionate or unreasonable. For example, if one spouse receives the vast majority of assets and the opposing party receives a paltry amount.
A fair agreement will also make allowances for what would be considered reasonable in the future too. This means allowing foresight for the lifestyle the parties have developed since the contract was made, accustomed standards of living, and significant alterations in finances or circumstances.
It is worth remembering that not only should the agreement be fair, but the enforcement needs to be fair and just too, regardless of whether the union lasts just a few months, a few years or decades.
An Unfair Prenup
An unjust, and often unenforceable prenup, would derive from circumstances where one party is deprived of everything, perhaps even marital funds during the marriage, while the other party is awarded everything. Many states include in their UPAA or prenup statute the fact that certain prenup provisions, like a waiver of alimony for example, will not be enforced if doing so would leave one party depending on state resources in order to carry out the terms.
So, think of unfair prenup as one that would be an agreement that is heavily one-sided or favors a certain spouse, while depriving the other spouse of everything, rending them on public assistance.
Another unfair principle could include that the ‘losing side’ must pay all legal costs following a contested divorce. This could be deemed as fundamentally unfair, especially if one party is significantly more affluent than the other.
Foresight can also ensure fairness. Sometimes agreements determine that one party will receive a set income or amount following divorce. Unfortunately, if the prenup is enforced decades later, then the amounts may be wholly inadequate due to inflation or the rise in costs of living, or value of the assets at hand.
When formulating a prenup, couples are always encouraged to allow plenty of time for discussions, negotiations and the opportunity to hire an attorney. An inherent problem with last minute prenups is often there is not enough time to consider the fairness of the contract, to negotiate, and and permit adequate time for both parties to contemplate the idea of legal representation if they want it. Being organized and having ample time for those conversations prevents unnecessary stress and it also safeguards you and your partner against making an agreement under pressure, allowing you to make sure your agreement is reasonable and that you had adequate time to negotiate and hire counsel.
How To Ensure Your Prenup Is Fair
There are three main issues that can render a prenup null and void. This means that the contract has been drawn up and signed when the content, provisions, or circumstances are illegal or unfair in the eyes of the law. Remember, details differ by state, but we are going to list some obvious and broad reasons here:
To help ensure that your prenup is fair, you must ensure your contract is fully conscionable. Therefore, you should avoid any unreasonable provisions, unethical demands, illegal ultimatums, or mandates that someone do something, er, illegal.
Failure to disclose
For a prenup to be legally binding, there must be a full disclosure of finances, assets, and debts from both sides. Now, certain states allow for a waiver of finances, but keep in mind this is a slippery slope. A prenup can be deemed unenforceable if one or both parties failed to disclosure all of their finances.
Duress or coercion
If the contract was signed while one party was under duress or coerced into signing, then it can be deemed unenforceable. The same applies if one party lacked mental capacity or was under the influence of drugs at the time of signature.
Other ways in which to assure your contract is fair can include (but not limited to):
- Being comfortable with the language used. Make sure you understand clearly what the prenup will and will not do and that you fully comprehend what it will cover in the future.
- Seek legal advice and guidance from a family law attorney if you are unsure of anything in the agreement. This is an excellent way to ensure that your agreement encompasses fairness principles in the contract. It also helps ensure you understand wholly the implications of signing your prenup. A solid understanding of the terms can help ensure that the agreement protects both of your assets in the event of a divorce.
- If you choose not to use attorneys, include confirmation in the agreement, by a waiver of counsel, that both parties were given the opportunity to seek independent legal advice and chose not to.
- A sunset clause could be included to allow for the agreement to expire at a certain date. A prenup can be amended, revised, redrafted, or even canceled at any point during a marriage if both spouses agree. Usually, that agreement must be in writing in the same formality as the initial agreement.
What Can You Do If Your Prenup Is Unfair?
A prenuptial agreement is a legally binding document. Therefore, if signed willingly, you must honor the agreements made. If you are unhappy with the determined asset division stemming from the prenup, you may choose to modify that agreement with your spouse. However this change in the contract has to be agreed to by both parties, and certain states may or may not allow for this.
If you feel that your prenup is imbalanced because of lopsidedness, then, depending on the state, exceptionally disproportionate contracts could make the judge question the validity and fairness of the document. The terms, however, would have to be so unbalanced, one-directional, and unfair that one party would be left with nothing following the finalization of a divorce and would be left dependent on state resources.
Signing Under Duress
If you can prove that your prenuptial agreement is unfair on the basis that you signed it under duress, then it may become invalid and thrown out of court. Remember, provide coercion or duress is complicated.
A valid and fair prenuptial agreement requires both spouses to disclose all assets and liabilities before committing a signature, or have signed a waiver.
Related: What is Exactly is a Prenup?
Violating State Laws
For any contract, including prenuptial agreements, to be valid, they must not violate any state laws. If the judge finds that the document is in breach of the law, then the contract could be dismissed in its entirety. Examples of violations could include trying to enforce restrictions on custody or visitation of a child, or the motivation or encouragement for a spouse to undertake an illegal act as part of the premarital agreement.
It is important to safeguard your property, finances, and future through a prenuptial agreement. It can provide peace of mind as well as a safety net for any dependents or children you may have. However, rarely any aspects of the law are ironclad, which is why you need to ensure that your prenup is as close to watertight and fair as possible.
If you are interested in the option of a prenuptial agreement or want more information on how HelloPrenup works, then do not hesitate to say Hello at [email protected].