Do’s and Don’ts of Prenuptial Agreements

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Prenuptial agreements are becoming more and more popular with couples as a way to help protect their financial situation, and to prevent an ugly divorce. 

No one plans their wedding day to include time to sign a contract to be used if they get divorced in the future, but maybe they should. Because practically, the future is uncertain. Do prenups make divorce easier? What are the dos and don’ts of prenuptial agreements? Let’s find out:

What are prenuptial agreements?

A premarital or prenuptial agreement is a legally binding contract that provides specific instructions during divorce proceedings at any time in the future. Prenuptial agreements are a special type of contract that two people enter into before getting married. That means to be valid, they have to follow certain rules. 

Just because you both agree to something doesn’t mean that a court will enforce that agreement later on. It records all of the assets, debts, and finances brought into the marriage by each person and states how they would be divided up in a separation. 

These agreements can also be used during the course of your marriage for a range of other issues that may come up.

When it comes to what does prenuptial agreement mean, many people believe that prenuptial agreements are an indication that one person is not really committed, which ultimately dooms the relationship. But in reality, a prenup puts all the cards down onto the table, which opens up communication to discuss issues and clarify any uncertainties. 

This is the type of honesty that would be likely to strengthen a relationship. Prenuptial agreements can be created at any time before or during marriages or de facto relationships and should be discussed and considered by all couples who decide to commit to each other.

Related Reading: Prenuptial Agreement vs. Cohabitation Agreement

Types of prenuptial agreements

So, what does a prenup look like? Check out the different types of prenuptial agreement:

1. Financial agreement done before marriage
2. Financial agreement done during marriage
3. Financial agreement done after divorce order
4. Financial agreement for entering into de facto relationship
5. Financial agreement made during de facto relationship
6. Financial agreement made after de facto relationship

Understanding goals of a prenuptial agreement

Before you understand the do’s and don’ts of prenuptial agreements, it is important that you are clear on the how does prenuptial agreements work. 

Prenuptial agreements have three primary purposes:

1. Protect assets of one or both spouses;
2. Prevent the need for a costly divorce process later on if the marriage should not work out; and
3. Deal with alimony.

A prenuptial agreement can be used to protect assets, especially in community property states, so that in the case of a divorce one spouse with significant assets does not risk losing half, or even more, of those assets.

These agreements can also work as a kind of pre-divorce settlement agreement. By setting out who gets what in the event of a divorce, the couple can avoid a long, costly, and contentious divorce proceeding.

Prenuptial agreements can also be used to deal with how alimony is dealt with after separation and divorce.

The role of the court in prenuptial agreements

Ultimately, it is up to the courts to decide what is acceptable in a prenuptial agreement and what is unacceptable. Agreements should be written with a few general principles in mind. Courts in most states are inclined to enforce prenuptial agreements as long as they meet three requirements:

1. The agreement is not overly coercive;
2. The agreement does not violate public policy; and
3. The agreement was fairly entered into.

If a court believes any of these issues are present it may ignore the agreement completely, or it may just refuse to enforce certain clauses.

What courts will not enforce

If the court believes that the agreement was entered into in a way that one of the parties was forced or compelled to sign the agreement, or if the court believes the agreement “punishes” one side too severely, it will refuse to enforce the agreement.

A court will also refuse to honor any clauses that deal with child custody or child support as a general rule. The court will find this is against public policy and will decide these issues independently of the agreement.

If a court gets the sense that one side benefited from an attorney and the other side was somehow taken advantage of, or didn’t also have legal representation, the court may find that it would be “inequitable” or unfair to enforce the prenuptial agreement.

Related Reading: Notarizing a Prenuptial Agreement – Mandatory or Not?

What courts will enforce

Courts generally will enforce prenuptial agreements that deal with divisions of the marital assets, even if the division is very one-sided. 

For example, if the prenuptial agreement divides the marital assets 90% for one spouse and 10% for the other spouse, a court will likely enforce this so long as both sides voluntarily agreed to the split, understood it, and this division doesn’t leave one side destitute.

Courts will also usually enforce clauses relating to alimony, as long as the support is sufficient to keep the other spouse from being a drain on public resources.

Prenuptial agreements allow couples to be creative when forming an agreement. The primary things to avoid are the appearance of unfairness or forcing one side to sign an agreement and any attempt to circumvent the court’s power to decide child custody and child support.

Check out this useful video on how the prenup works:

Why do you need a family law specialist?

The Family Court can overturn prenuptial agreements if they don’t meet the strict criteria required for them to be legally binding. The contracts must have been signed by both parties to indicate that they have both had some independent legal advice. 

There also needs to be a statement from a legal practitioner pointing out the rights of each party, including the prenuptial agreement cost, advantages & disadvantages, whether or not the agreement was necessary, as well as whether all of the agreement’s provisions are both just and equitable.

Such agreements have the added benefit of still being used as a legally binding document that survives after your death, allowing for the protection of any assets for the sole benefit of any children or heirs. This is also governed by section 90H of the Family Law Act of 1975 which makes them binding upon legal personal representatives of the estate.

Also Try: Is A Prenuptial Agreement Right For You?

Requirements for a prenuptial agreement

There are certain do’s and don’ts of prenuptial agreements along with precise requirements. Couples opting for a fair prenuptial agreement should make the full disclosure of their assets. So, how to make a prenup? 

As a solution for how to make a prenuptial agreement legal, the prenuptial agreement attorney should have the following:

• Copy of bank statements
• Copy for investment documents
• Business documents and their estimated value
• Tax disclosures
• Real estate documents
• Insurance policies
• Vehicle documents
• Any other financial documents submitted to the bank recently
• Copies of bills and debts

Do’s and don’ts of prenuptial agreements

If you have decided that a prenuptial agreement is right for you, it is important to understand what is and isn’t permissible in the agreement. Although these agreements can provide a great deal of flexibility in their construction, there are some rules about what can’t be included. Here do’s and don’ts of prenuptial agreements: 

– Do’s of prenuptial agreements:

• Discuss the specific state’s law that the agreement will be subject to
• Be aware of who will be responsible for premarital debts
• Discuss about items to be considered community or separate property
• Decide on financial responsibilities during the marriage
• Decide how the property will be divided/distributed at divorce
• Decide how the property will be distributed in the event of death
• Know about spousal support/alimony obligations (this varies by state)
• Know how disputes related to the agreement will be resolved
• Discuss sunset clause (this refers to the validity of the agreement being based upon being married for a certain number of years)

– Don’ts of prenuptial agreements:

• Discuss custody and visitation of minor children
• Include child support
• Include anything that is illegal or would be considered unconscionable
• Include anything that is deemed to encourage or trigger the divorce

Takeaway

Remember, courts have the ability to review and make decisions related to prenuptial agreements. Thus, it is important to seek out an experienced family lawyer when considering a prenup.