Understanding the Limits and Benefits of a Prenuptial Agreement
Most people don’t intend for marriage to end in divorce. However, with an estimated fifty percent of first marriages ending in divorce–and more of second and later marriages ending in divorce–it’s important to consider those possibilities before you move forward with your marriage. For couples who have considerable assets before they go into their marriage, especially those whose new spouses might not have similar assets, a prenuptial agreement can have immense benefit.
Who Needs a Prenuptial Agreement?
A prenuptial agreement can be beneficial for many different parties, particularly those who want to be able to protect their existing assets as they move into a marriage. If you fall into one of these categories, you may want to consider discussing a prenuptial agreement with a lawyer before you get married.
- One or both spouses are bringing considerable assets into the marriage
- One spouse is considerably more wealthy than the other
- One spouse is planning to stay at home throughout the marriage, acting as a caregiver to children or elderly family members, and wants to ensure that they will be provided for in the future
- One or both spouses have specific family assets that they want to protect
- One or both spouses were married before and want to be sure that specific assets pass to their current children
- One or both spouses bring considerable debt to the marriage
Prenuptial agreements are not a sign of distrust in the marriage. Rather, they help lay out protections on both spouses’ assets and finances from the very beginning. Creating a prenuptial agreement can help strengthen your marriage and open the door to a more in-depth discussion of your finances, including your financial plans, in the event of a divorce.
What Can a Prenuptial Agreement Cover?
A prenuptial agreement can cover a variety of financial questions that could crop up due to a dissolution of a marriage. It helps line up how you will manage asset division if your marriage does not last. A prenuptial agreement can lay out:
How you will divide specific assets if you get divorced or if one spouse dies.
You may, for example, have a family home that you want to go to your children on your death, especially if you were married before and already have children; or you might want to ensure that your family home is protected and will remain your property after the divorce. You can also help protect retirement assets that you might already have collected or a business that you might own.
How you will handle dividing debts after your marriage.
Some debts are considered communal debt when you’re married. If you and your spouse purchase a home together, for example, that might be considered marital debt. On the other hand, if one of you comes into your marriage with considerable debt, you may want to lay out ahead of time how you will handle dividing debts after your marriage. Likewise, if you have a very unbalanced saver/spender relationship, you might want to lay out in your prenuptial agreement that any private debts incurred by each spouse will be that spouse’s responsibility upon divorce.
The terms of spousal support following the marriage.
Some prenuptial agreements may specifically determine that the spouse with greater assets and income will not be responsible for paying out spousal support if the marriage dissolves. Others, however, may help to protect a stay-at-home spouse who knows they will be devoting their energy to caring for the family prior to the marriage, and who wants to be sure that they can support themselves in the event of a divorce.
What a Prenuptial Agreement Does Not Cover
While a prenuptial agreement covers a variety of financial arrangements and challenges that you may face in the event of a divorce, there are some things it does not include–and things that, even if you try to put them into your prenuptial agreement, will not hold up in court.
Child support, child custody, or parenting time arrangements.
While your prenuptial agreement can govern future spousal support, it cannot govern the child support you can expect if you have children while part of the marriage. A prenuptial agreement also cannot lay out terms for parenting time or parental rights ahead of time. Ultimately, the court will make any decisions about issues related to children in the best interests of the child–and it’s impossible to fully predict the best interests of a child before that child even exists.
Unfair or extremely unbalanced terms.
Sometimes, the spouse with more assets may attempt to draw up a prenuptial agreement that is entirely unfair and unbalanced: one that only considers the needs of one spouse, rather than both spouses. For example, a prenuptial agreement might dictate that one spouse can keep most of the assets from the marriage as well as receiving considerable support from the other spouse, which the court might deem an unfair arrangement and refuse to uphold. A prenuptial agreement is not intended to create unnecessary financial strain for either spouse in the event of a divorce; rather, it is intended to set up a fair and equitable division of assets that you might bring to the marriage.
An agreement entered into under duress or fraud.
Sometimes, one spouse may heavily pressure the other to enter into a prenuptial agreement, including implying that the spouse will miss out on other opportunities or not receive any financial support if they fail to sign the agreement. Other times, the prenuptial agreement may unfairly or inaccurately represent one party’s interests, or the marriage arrangement may include fraud. In those cases, the courts may not uphold the prenuptial agreement.
If you and your spouse need a prenuptial agreement before you get married, working with an attorney is critical. An attorney can help you lay out fair, legal terms that benefit both parties and protect your existing assets in the event of a divorce. Do you need help creating a prenuptial agreement? Contact Betsy A. Fischer, LLC today at 504-780-8232.