What is a prenuptial agreement, and do I need one?
Getting engaged is an exciting time in anyone’s life, often steeped in romance and anticipation for the upcoming nuptials. But it’s crucial you don’t let your joy overtake practicality — at least not for too long.
Marriage ties you to your partner legally and financially. And conversations about money before your wedding can help you start your life together off right. And one of those questions is whether you need a prenuptial agreement.
Your first instinct may be to balk at the idea, but they aren’t just for rich people protecting their wealth. Sometimes, they can help you protect your partner or kids. So before you decide whether a prenup is right for you, learn what it is, how it works, and when you need one.
What Is a Prenuptial Agreement?
A prenuptial agreement (also called a prenup, antenuptial agreement, or premarital agreement) is a written contract that engaged couples use before they get married to separate their assets and financial responsibilities.
What you can address in your prenup depends on your state and the assets, debts, and dependents you bring to the marriage.
A Prenup Can Address:
- Personal and marital property, like real estate
- Personal and marital debts
- Alimony or spousal support
- Personal and shared finances, like bank accounts and inheritances
A Prenup Cannot Address:
- Child custody and child support
- Alimony waivers or spousal support waivers
- Financial incentives for divorce (like saying one partner will pay the other a sum of money in the event of a divorce)
- Illegal activity
Some couples are tempted to use prenuptial agreements to impose personal preferences using lifestyle clauses. For example, it might define how much weight one partner can gain, how often a future spouse must clean the house, or even how many social events they must attend each month. But they aren’t always legally binding.
Each state has different laws regarding lifestyle clauses, but even when they’re valid, they’re often extremely difficult to enforce.
For your prenup to be legally binding in the event of a divorce, it’s best to keep it focused on the financial aspects of your marriage.
Why Get a Prenup?
Many engaged couples shy away from prenups because they believe their only value is if you get divorced. And who wants to think about getting a divorce before they’re even married?
But prenups provide many benefits to couples in all stages of a relationship, including engagement and marriage — and yes, in the case of divorce. And there are many reasons a prenup may be beneficial for all couples.
It Outlines Financial Rights & Responsibilities
Before you get married, it’s essential to talk about how you plan to divide bills, whether you’ll have shared or separate finances, and how you’ll handle existing debts.
It’s vital to be on the same page about your financial situation before you get married, as it’s much harder to separate your assets and debts after the wedding.
For example, if your future spouse has significant credit card debt and you don’t want to end up paying for it, a prenup helps ensure you’re not responsible for covering their payments.
The same goes for assets. If you have a family property you inherited before your marriage, like a house, and you want to maintain sole ownership, a prenup helps ensure it can’t be classified as community property.
Having these conversations and discussing financial expectations and responsibilities before marriage goes a long way in building a solid foundation of communication and understanding. Both are vital in a successful and healthy relationship.
It Helps Avoid Arguments in Marriage
Contrary to popular belief, prenups aren’t just a safety net for married couples who get divorced. Prenups are also ideal for defining each partner’s financial responsibilities as part of a happy and loving marriage.
During a marriage, prenups act as a way to reinforce any financial agreements and divisions you made before getting hitched, helping you to avoid money arguments — or at least resolve them a little more easily.
Having a prenup gives you something to reference when financial conversations arise, such as how to handle separate property one of you inherits or split up your mortgage payments on a new home.
It Helps Avoid Arguments in Divorce
Divorce is expensive and stressful. No happy couple wants to think about what will happen if the marriage ends, but it’s prudent to plan for different possibilities. In a way, a prenup can serve as a romantic gesture in that you care for your spouse enough to avoid lengthy divorce proceedings if you happen to grow apart.
Since a prenup addresses the division of property and assets between a married couple, it gives divorce lawyers and separating spouses a roadmap of how to move forward in the best interests of each party. That saves time and money and helps reduce animosity.
Who Needs a Prenup?
Since prenups are customizable and can address various financial situations, from property rights to marital assets like vehicles, businesses, and even artwork, they’re relevant to virtually all couples who intend to marry, regardless of their circumstances.
However, they’re vital for couples in certain specific circumstances.
People With Significant Wealth or Assets
If you’re significantly wealthier than your partner (or the other way around), a prenup helps keep your assets from before the marriage separate.
For example, if you inherited a substantial amount of money before marrying your spouse, a prenup ensures it remains legally your personal property and not shared property. If you were to get a divorce, your spouse would not be entitled to any of the money protected under the prenup.
Money isn’t the only thing you can cover, either. You can use a prenup to separate any noteworthy assets before you get married, including property, vehicles, businesses, and family heirlooms.
Many celebrities and financially successful people use prenups to safeguard premarital assets.
People With Children From a Prior Relationship
If you have children from a prior marriage or relationship, you have expenses you may not want to share with your spouse. Alternately, if they have children from before you met, you may not want to share the costs associated with raising kids, like child care, child support, education, clothing, and groceries.
Prenups let you define how you will address the financial responsibilities associated with step-children and can spark conversations about your expectations about those costs and responsibilities.
For example, will you help pay for school supplies? Who will be responsible for providing the children with health insurance? What about vehicle maintenance, cell phones bills, or bedroom furniture?
However, you can’t use a prenup to define child custody or support outside the responsibilities for preexisting child support payments during your marriage. Most states require the court to make decisions based on the child’s best interests, sometimes irrespective of blood relationship, depending on state law.
Another benefit of having a prenup is that you can use them to alter your inheritance rights. When you get married, you automatically have mutual inheritance rights. That means that when either of you dies — unless otherwise indicated during estate planning — the surviving spouse is entitled to at least a portion of the deceased spouse’s estate.
If you have children from a prior relationship, you may wish to waive or restrict those rights so the entirety of the estate goes to any dependents. You can outline that decision in your prenup, ensuring your children receive their full inheritance.
It can also help if one spouse dies without a will. If that happens to your spouse, their estate may go entirely to you. If you waived that right in your prenup, you can use it to demonstrate that their belongings or assets should go to other beneficiaries, like their children.
People With Significant Debt
While many couples use prenups to protect assets, you can also use them to protect one spouse from another’s significant debt. And it works both during the marriage or if the relationship ends.
A prenup keeps debt collectors from pursuing one spouse for the other’s debt and can help protect their credit score if their partner’s late on payments. It also prevents creditors from accessing shared bank accounts and seizing shared assets like vehicles.
If either you or your future spouse has substantial personal debt, a prenup offers financial protection during the entirety of your relationship.
Prenuptial agreements are also a good choice for business owners, whether they’re sole proprietors, own a business with family members, or head a major corporation. In most cases, business owners use prenups to prevent their spouses from claiming part of the business in the event of a divorce.
But you can also use them to separate business-related financial responsibilities, like debts, bills, and taxes.
If you’re a business owner, you may wish to create a prenup before you get married to maintain ownership of the business you’ve worked so hard to build.
If you’re marrying someone who owns a business, signing a prenup ensures you aren’t obligated to pay any expenses related to the business, even if it experiences financial trouble.
People Who Have Been Married Before
If you’ve been married before, you may wish to get a prenup this time around for a few reasons.
First, they help you have conversations about money upfront. If that’s something you didn’t do before your first marriage and financial issues contributed to the breakdown of your relationship, having these discussions now can prevent arguments later.
Second, if you were widowed, they can separate your deceased spouse’s property from that of your new spouse. For example, if you inherited a life insurance policy or home, you may wish to keep it independent of any marital property, especially if it may be part of an inheritance for your kids.
Third, if you’ve been through a messy divorce before, chances are you don’t want to have to do it again. Having a prenup laid out in advance keeps divorce proceedings straightforward and removes some stress.
Requirements for a Valid Prenuptial Agreement
Although they can vary from state to state, a prenup must generally meet several standards to be enforceable.
It Must Be in Writing
Verbal agreements are notoriously hard to enforce. For your prenup to be legally binding, it must be in writing, signed by both parties, and witnessed. While most states don’t require your prenup to be notarized, you can still choose to do so if you want to add to the validity of your document.
It Must Be Fair
Although prenups work to separate and define the financial obligations of two people in a marriage, those divisions must still be fair to both parties.
For example, if one spouse is extremely wealthy and the other is not, it would be unfair to expect the lower-income spouse to contribute the same amount to a mortgage on an expensive home.
It Must Be Voluntary
Prenups are invalid if created through coercion or under duress. That means both you and your spouse need to enter into your prenup willingly and of your own volition. You can’t bribe, threaten, or otherwise force your partner to sign a prenup.
It Must Be Accurate
All the information you include in your prenup must be accurate at the time of its creation. That means you need to provide full disclosure about your financial situation, including both your assets and debts.
If you aren’t transparent about your finances, you risk invalidating your prenup entirely. So take your time and make a complete list of everything from bank accounts and credits cards to loans and property and have your partner do the same.
It Must Be Legally Sound
A prenup can’t dictate that you or your spouse do or participate in anything illegal. Anything you put in your prenuptial agreement must follow state law to be legally binding.
It’s also crucial to note that it’s easy to invalidate a prenup by:
- Making a simple mistake
- Being unable to disprove one spouse was coerced into signing
- Including invalid clauses (like lifestyle clauses)
If you’re unsure about including a clause in your prenup, speak to an attorney for legal advice.
Prenuptial Agreement FAQs
Before signing a prenup, you need to know exactly what you’re getting into. The answers to these frequently asked questions can help you make an informed decision.
Couples use prenups for various reasons. Some partners want to protect their finances from an overspending spouse, while others want to outline how they plan to approach financial inequality in their marriage.
Whatever your reason for making one, think of it as a mix between a budget and a form of insurance. It encourages you to have detailed and open conversations about money. And while you don’t anticipate divorce any more than a car accident, you still protect yourself in case the worst happens.
The same goes for your marriage. Getting a prenup isn’t a way of saying you don’t have faith the marriage will last. Instead, it’s a way to protect you both if life throws you a curveball.