Introduction to Prenuptial Agreements
A prenuptial agreement is a written contract created by two people before they are married.[i] A prenuptial agreement is often referred to as a “prenup”. A prenuptial agreement typically includes a list of property that each person owns, a list of debts each person has, and a specification of what each person’s property rights will be after the marriage.[ii] Even though many people prenuptial agreements are used for people who are rich, or afraid of a person running away with their money – a prenuptial agreement can, and probably should be, used by everyone before getting married.
Who Will Benefit from a Prenuptial Agreement?
The answer is simple: everyone. Even though a marriage is meant to last a lifetime, not every marriage will make it that long. With a divorce rate close to 50% in the United States, divorces are incredibly common. Divorces can get really ugly and include a lot of arguing over many topics. A prenuptial agreement can help eliminate a lot of the arguing that takes place during a divorce proceeding; which is why everyone can benefit from having one.
There are many reasons why a person or couple will want a prenuptial agreement. To begin with, if there are children involved from previously marriages, it is important to protect them and their property rights in the future.[iii] Even though most people think that a prenuptial agreement is only relevant if the couple divorces, that is also a misconception. Children from previous marriages can have their inheritance rights protected through the prenuptial agreement.[iv] So, even if the couple never divorces, if the parent with a child from another marriage dies, the child will still receive their inheritance from the parent. This prevents the stepparent from taking away any inheritance rights the child would have.[v] Without a prenuptial agreement, or any other agreement to discuss the child from a previous marriage, anything could happen after the parent passes away. A prenuptial agreement protects against those mishaps.
What Can A Prenuptial Agreement Do?
A prenuptial agreement can provide a lot of stability to a marriage. Rather than arguing over money during the marriage, or property division during a divorce, a prenuptial agreement can already come to an agreement on those issues… before it becomes a problem.
A prenuptial agreement can provide clear financial rights and responsibilities during the marriage.[vi] This can include simple things like, the income from husband will pay for the utilities and the income from wife will pay for the mortgage. This can also include major things like, wife can only spend $100 a month on shoes or husband can only spend $100 a month on watches. A prenuptial agreement can set boundaries from spending habits, and set up agreements for how the bills will get paid. Considering that many couples fight over money, and many couples divorce because of those issues, having a prenuptial agreement in place to help decide those issues in advance could help prevent a lot of arguments.
A prenuptial agreement can determine how property will be divided in the event of a divorce.[vii] Every state has laws that define the assets of a martial relationship. States like Arizona, California, and Texas have community property laws in place.[viii] Community property laws are in place to determine the division of property that was acquired during the marriage.[ix] A community property state says that everything bought during the marriage is considered apart of the “community” and is often times just split 50/50 during the divorce proceeding.[x] Unless there is some other agreement in place, everything will be considered community property and is up for grabs for each spouse – even that big screen tv only the husband watches or the couch that only wife uses.
A prenuptial agreement can agree to how property will be split during the marriage – even in a community property state. The prenuptial agreement can state that items purchased by husband for his own use, will be granted to him during the divorce. In a community property state, like Arizona, unless there is an agreement like this in place either before or during the marriage, even items that one spouse buys for their own exclusive use is going to be considered community property.
The division of property during a divorce aims to keep both spouses in equal ground when they walk away from the marriage. For example, if wife gets the couch worth $1,500 then the husband will get the bed that is also worth $1,500. This is where individual property can come into play and cause a lot of issues. If husband has a $2,000 piece of property that he wants to keep because he exclusively used it during the marriage, but there was no agreement that the item was his – then wife is going to likely say, okay find take the $2,000 piece of property but now I need $2,000 worth of community property to make things even. With a prenuptial agreement, the spouses can agree that individual property will be taken out of the equation when dividing up the community property. So even though husband may have $10,000 more in individual assets than wife that cannot be used against him to make sure she has the exact amount leaving the marriage as well.
Depending on the jurisdiction where the divorce is taking place, a prenuptial agreement can place limitations on alimony payments.[xi] In the states that allow prenuptial agreements to discuss alimony payments, the prenuptial agreement can list a maximum amount that would be paid to the spouse and also the duration for the alimony payments. The prenuptial agreement could also list out various scenarios in which alimony payments could change. For example, the prenuptial agreement could list out that if one spouse stays home to care for the children, then alimony would increase in amount and duration versus if both spouses worked and they paid for daycare. The prenuptial agreement could also just simply include that there will be no alimony after the marriage. As long as the courts find that the prenuptial agreement was entered into voluntarily and is not completely unfair to one spouse, then the prenuptial agreement will be enforced upon divorce.
What a Prenuptial Agreement Cannot Do
A prenuptial agreement can lay the groundwork for a lot of scenarios during a divorce, but there are a few things that a prenuptial agreement can never do. And even if that prenuptial agreement includes these things, the court can just say that those provisions of the prenuptial agreement are not enforceable. The major thing that prenuptial agreements CANNOT decide in advance is anything to do with children. A prenuptial agreement cannot restrict child support, parenting time/child custody, or visitation rights of a parent.[xii] Child support is based upon the income of the parents, the parenting time each parent has with the children, and many other financial factors. However, the most important factor in determining anything with children is what is in the best interest of the children. A prenuptial agreement cannot see the future and it cannot create an agreement for children because there is just no one to know what will be in the best interest of the children further down the line. The court has to evaluate what the situation is at the time when a court decision about child support, parenting time, or visitation rights are being evaluated.
Depending on the state, the prenuptial agreement may not allow the spouses to agree to no alimony payments after the marriage.[xiii] Some states allow the couple to make the decision about alimony completely amongst themselves, while other states want to evaluate the situation when a divorce is actually pending.
A prenuptial agreement is also not the place to agree to rules about nonfinancial matters.[xiv] Nonfinancial matters that should not be included in the prenuptial agreement include: who is responsible for household chores – like laundry and cleaning; whether wife takes the husband’s last name; agreements about having and raising children – like the use of birth control, children’s names, child care responsibility and children’s education; how each spouse with act with their new in-laws; and whether either spouse can have a pet.[xv] Again, if these things of agreements are put into a prenuptial agreement, the court is going to just not enforce those agreements.[xvi] These types of concerns are things that should just be discussed and agreed upon by the spouses either before marrying, or during the marriage. Then the couple can come to an agreement and just stick to it. If you really need a binding contract to keep things like, who takes care of the children or where the children will go to school, then maybe the marriage is not working out as well as it should.
How to Create a Valid Prenuptial Agreement
Just because a couple wants to enter into a prenuptial agreement, it does not mean that any old agreement will be sufficient. The court is going to look very closely at the prenuptial agreement before the court even considers enforcing the prenuptial agreement in the event of a divorce. For that reason, it is important that the prenuptial agreement is executed properly and follows all applicable laws.[xvii] To begin with, it is important to have an attorney draft the prenuptial agreement. Even if one spouse is an attorney – or both spouses – a third party should be in charge of drafting the prenuptial agreement.
Next, it is important that each party review the prenuptial agreement with sufficient time before the wedding. Some attorneys will not agree to draft a prenuptial agreement if it is too close to the wedding, but that date is discretionary. Some attorneys will say that they will not draft if the wedding is two months away, while others will draft if the wedding is a month away. The reason for this is the attorney does not want either party to feel pressured into signing the prenuptial agreement. If a party does feel pressured, that could be raised later on during the divorce and the court may determine that it will not be enforceable.
Finally, it is usually recommended that each party hires separate attorneys to go over the prenuptial agreement and ensure that they are not put into a position they are not comfortable with.[xviii] Either way, if a divorce does occur, the court is going to look at the prenuptial agreement very closely so it is important that every precaution is taken to ensure the prenuptial agreement is not only executed properly – but it is fair to both spouses.
[i] See Prenuptial Agreements: Who Needs It and How Do I Make One? NOLO Legal Encyclopedia
[vii] See Prenuptial Agreements: What Does the Law Allow NOLO Legal Encyclopedia (Accessed August 23, 2016) http://www.nolo.com/legal-encyclopedia/prenuptial-agreements-what-law-allows-30283.html
[viii] See Community Property Overview Find Law (Accessed August 20, 2016) http://family.findlaw.com/divorce/community-property-overview.html
[xi] See Prenuptial Agreements: What Does the Law Allow NOLO Legal Encyclopedia (Accessed August 23, 2016) http://www.nolo.com/legal-encyclopedia/prenuptial-agreements-what-law-allows-30283.html
[xvii] See Prenuptial Agreements: Who Needs It and How Do I Make One? NOLO Legal Encyclopedia (Accessed August 23, 2016) http://www.nolo.com/legal-encyclopedia/prenuptial-agreements-overview-29569.html