If you’re married, there’s a good chance you’re already familiar with what a prenuptial agreement is. If you’re divorced, it’s likely you’re perhaps too familiar with what it is. It’s also possible you plan on getting married soon and are interested in learning more, in which case read on for the prenup basics.
Essentially, a prenuptial agreement is a contract between two people before they get married. Generally, the agreement outlines how financial assets and responsibilities will be divided after a divorce. They may also outline terms for the duration of a marriage.
While each state has rules regarding prenups, they all hold that they must be “fair” according to the basics of contract law (capacity, duress, fraud, and undue influence).
Why Consider a Prenup?
There are a variety of reasons for entering into a prenuptial agreement. Perhaps you’re a wealthy individual and you want to keep your spouse honest (because who can you really trust?). It’s also possible that both individuals are older, in which case they may want to protect their assets for their children from a previous marriage.
A prenuptial agreement is made up of a list of each partner’s assets and entails which assets and debts go to whom in the event of a divorce, the rules governing assets and debts that are acquired during the marriage, and terms regarding spousal support such as alimony. Some agreements may even include personal clauses such as limits on a spouse’s weight gain, who gets the family pet, and what will happen in the event of infidelity or any other life events. However, no matter the stipulations of a prenup, the courts always consider what is in the best interest of the children.
The Messy Nature of Prenups
Prenups are often a sensitive topic because of their paradoxical nature: If you trust this person and are vowing to spend the rest of your life with them, why betray that decision by planning around the possibility of divorce? However, for better or for worse, divorces happen and prenuptial agreements often must be referred to.
Many prenups are disputed because an individual claimed she/he was coerced or the agreement was unfair for some other reason. Because of this, courts are usually suspicious of prenups signed on or just before a wedding day, so it is recommended to enter into an agreement around the time of the initial engagement.
In community property states, couples may decide that a prenup isn’t necessary. In these states, assets acquired before marriage are considered separate while the assets acquired in the duration of a marriage are shared.
While it’s never fun to consider the necessity of a prenup, the fact is that 40 to 50 percent of marriages end in divorce in the United States. If you’re getting married in a non-community property state and you have a significant amount of assets, you may want to consider your options. Something that has become more commonplace for married couples is the postnuptial agreement, which is the same as a prenup, it’s just entered into after the couple is married.
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https://www.investopedia.com/terms/p/prenuptialagreement.asp
https://www.investopedia.com/ask/answers/08/prenup-401k.asp
https://www.investopedia.com/articles/pf/06/prenuptialagreement.asp
https://www.investopedia.com/articles/personal-finance/070815/postnup-vs-prenup-how-they-differ.asp
https://www.investopedia.com/terms/c/communityproperty.asp
Neither NEXT Financial Group, Inc. nor its Representatives give tax or legal advice.
