Prenups are no longer just for the rich and famous. More and more people of all ages and incomes are entering into prenuptial agreements (or even post-nuptial agreements!) because of the wide range of benefits and protections these legal documents provide.
Protecting financial assets, family money, and business interests has always been the traditional motivation for a premarital agreement, and it’s still a common one. But thanks to shifting trends — like people marrying later in life, often after having accumulated savings, investments, business interests and debts — prenups are more important than ever. Especially with a heightened awareness of the possibility of divorce.
Here’s everything you need to know about prenuptial agreements, including the paperwork you’ll need, legal definitions, the cost of creating a prenup, and why you might want to get a prenuptial agreement, even if you’re not a millionaire.
What is a Prenup?
A prenuptial agreement, sometimes called an "antenuptial" agreement (yes that's a real word), premarital contract, or simply a “prenup” is a legally binding contract created between two individuals before they marry. These contracts typically describe each person’s premarital property, assets, and debts. But prenups can be more comprehensive than just outlining which assets will remain yours should the marriage end in separation of divorce.
Prenuptial agreements can also specify each partner’s rights and obligations if the marriage ends in death or incapacity, as well as providing legal standing for estate planning, student debt, and even spousal support.
That’s right, prenuptial agreements don’t just protect your pre-marital assets in the case of divorce. They can also determine the way heirlooms and valuables are distributed after death, and otherwise customize the legal bounds of a marital relationship. If you want the power to decide what happens to your individual assets, rather than leaving it to the courts and legal system, a prenuptial agreement can be a useful tool.
What is a ‘Postnup’? Post-Nuptial Agreements
A postnuptial agreement is basically the same thing as a prenup, except that it is signed after you are already married. These can come in handy if you didn’t have time or money for a prenup, for example, or if something significant has changed in your financial life. If one partner has been financially irresponsible, for example racking up gambling or credit card debt, a postnup could help protect their partner from being held responsible for it.
What is the Purpose of a Prenup Agreement?
Marriage legally grants a number of spousal rights and financial obligations, including those that pertain to:
- Real estate
- Property rights
- Wills and trusts
- Life insurance policies
- Health care proxy rights
- Children from a previous relationship (including their inheritances)
- Responsibility for debts
A prenup essentially lets you to modify the default legal rights and obligations of the marriage contract. This allows you and your future spouse to decide on how you would like these matters handled. Without a prenup, state law will determine what happens after a divorce separation or incapacitation, which may not be in accordance with your wishes.
For example, a family home may have been passed down from generation to generation, and upon your death, you would like it to go to your child from a previous marriage. Without a prenup, your surviving spouse may inherit rights to it. A prenup can ensure that it will go where you want it to.
Should You Get a Prenuptial Agreement?
Many couples find that addressing the hard financial conversations upfront can ensure better communication and a stronger marriage in the long run. If the marriage does eventually dissolve, working out these details with their prospective spouse during a time of peace and teamwork is much less stressful than trying to figure it out during a time of separation and contention.
Do You Need a Prenup?
While prenups can benefit many people, there are certain people who are highly likely to benefit from a prenup, such as individuals who:
- Are marrying later in life
- Have children from prior marriages
- Have a high net-worth
- Have established trust funds
- Have accumulated retirement accounts, savings or investments
- Hold property independently, or with a business partner
What Should be in a Prenuptial Agreement?
Prenuptial agreements must follow specific domestic relation laws and must include specific legal terminology to be valid. Specifics can vary from state to state, so it’s advisable to obtain a family law attorney, or divorce lawyer, to draft or review the contract to be sure it’s enforceable.
Prenups specify which property will and won’t be considered marital property (sometimes called community property). Prenups can identify and separate individual debts, so that one partner won’t be held responsible for the other’s student loan debts, for example. They can also include special considerations regarding spousal support, alimony or inheritances for children of prior marriages.
Can I Write my Own Prenuptial Agreement?
It’s inadvisable at best to attempt to create a prenuptial agreement without an attorney, and some states require that each partner has independent counsel in certain circumstances, such as when waiving spousal support or alimony rights.
Prenup templates found online can be risky as they are sometimes full of holes, and ultimately unenforceable. Remember, using an outdated or overly generalized template might not be legally enforceable in your state. If you do decide to draft your own agreement, be sure to obtain legal advice and have separate lawyers review them before signing.
How to Create a Valid Prenup
Prenups don’t follow traditional contract law; they follow their state’s domestic relation laws. Failing to meet all mandatory conditions for premarital contracts can invalidate them, so working with an experienced attorney or law firm is advised. Conditions include:
- Full disclosure of assets and liabilities
- The terms must be considered fair and reasonable
- Both parties must understand what they are potentially giving up, and enter the agreement voluntarily
Again, in many states, for a prenup to be valid, each spouse must be represented by independent legal counsel. Besides being required in some cases, this can demonstrate that each party understands their rights, and can strengthen the agreement.
It's important to point out that you should never discuss child support or child custody schedules in a prenup. They won’t be considered by the court, and including them may void the entire agreement.
Prenuptial Agreement Red Flags: When NOT to Sign
Although there are a number of benefits to prenuptial agreements, they aren’t right in every situation. Here are a few reasons why you might not want to sign a prenup.
You Can’t Afford It
Expect to spend at least $2,500 on a prenup agreement, although it can run upwards of $10,000, depending on its complexity and the cost of legal counsel where you live. Writing the contract yourself, or settling for a cheap but incompetent attorney, can do more harm than foregoing the agreement altogether.
You Prefer State Law to Dictate What Happens
Without a prenup, state law will determine what happens to marital assets. These laws vary by state, but they are designed to protect and support both spouses and children fairly. If they are in line with your wishes, a prenup may not be necessary. However, what is “fair” can be open to interpretation – which means it may come down to a judge’s decision.
It’s Pressured or Last-Minute
If prenups are presented just prior to the wedding, they may appear to be signed under pressure and may not hold up in the event of a marital dissolution. Be sure to address the conversation well in advance. Allow plenty of time – at least six months – to get everything in order well before the wedding. Ideally, start the conversation before, or just after, deciding to get engaged.
You are Adamantly Opposed to the Idea
If you and your partner are in agreement that divorce and prenuptial agreements are not an option, ultimately you have to make the decision that feels right for both of you. Be sure to discuss it up front to ensure that you are on the same page.
The Importance of Prenups
Regardless of whether or not you sign a prenuptial agreement, it’s important to talk with your partner about your finances, debt, and expectations when it comes to money. And if you and your partner determine it is the right choice for you, it will take some time to get all the prenup paperwork in order.
Keep everything you need in one secure online document organization system like Pillar and it will make signing and storing a prenup agreement a lot easier, allowing you to focus more fully on what really matters: living your life to its fullest with the ones you love.
Start your free 14-day trial today to find out if Pillar is right tool to keep your most important documents organized