A prenuptial agreement, also dubbed a premarital agreement, is a legal step taken before couples proceed with their marriage plans. Similar to a cohabitation agreement, a prenuptial agreement is a contract entered into before a marriage or civil union. This agreement establishes each spouse's property and financial rights if they choose to disband their marriage.
Although it may seem unromantic to prepare for a divorce before you are even married, with more than half of all marriages in America ending in divorce, it's wise to consider a prenuptial agreement.
Prenuptial agreements are often used by parties entering their second or third marriages wherein the parties to the contract have substantial assets they want to guard in a divorce.
The Basics of a Prenuptial Agreement
While most states have their own rules regarding the requirements or basics of a prenuptial agreement, a few standard basics should be present for the contract to be deemed enforceable.
These requirements include the following:
- The Agreement must be fair and voluntary.
- Full disclosure of each party to the agreement's assets, liabilities, and debts must be disclosed.
- Waivers of retirement cannot be made in a premarital agreement.
- Child support cannot be binding under a premarital agreement (in most states, it cannot be waived in a premarital agreement either).
- Alimony can be handled under a premarital agreement.
- One attorney should not handle both parties unless both parties sign a conflict waiver.
- The requisite time frame for review from each state must be met.
What Makes a Prenuptial Agreement Invalid?
There are numerous reasons why a prenuptial agreement would be deemed null and unenforceable. If a prenuptial agreement is deemed unenforceable, the parties' assets will be split according to the dissolution of marriage laws within the respective state where the parties reside.
The following issues will possibly invalidate a prenuptial agreement:
- Not Properly Executed: Both parties must sign a prenuptial agreement to the marriage or civil union. If a prenuptial agreement is not signed before the parties enter the marriage, the contract may be unenforceable against either spouse. Also, some states require each party to be represented by separate lawyers and have a statutory timeframe to review the agreement before signing it. The reasoning for this is that it may be construed that a party was unduly pressured to sign the agreement under the threat that the marriage might otherwise not happen.
- Insufficient Time: Just as proper execution is needed, most states require a statutory timeframe for the parties to review the contract before signing. For instance, in California, the party against whom enforcement of the agreement is sought must have seven days from the date they were presented with the agreement to the date of signing the agreement for the agreement to be valid.
- Invalid Provisions: Further, most prenuptial agreements cannot be for an invalid purpose. An example of an invalid purpose includes if a party includes a clause in the agreement where child support obligations are waived if the marriage ends in divorce. Additional invalid provisions include sexual provisions (in some states) and any other provision that breaks the law. Nevertheless, it is likely that when reviewing the prenuptial agreement, the court will not invalidate the entire agreement but strike the invalid provisions within the agreement.
- False or Incomplete Information: A premarital agreement requires absolute full disclosure by both parties. Full disclosure includes details about BOTH parties' income, assets, liabilities, and debts to the agreement.
- Unconscionability: A prenuptial agreement that is unconscionable will not be enforced. Unconscionability is generally found where a premarital agreement states that one spouse receives all the property and the other gets all the debts. If the court finds unequal bargaining power resulting in substantial and grossly unfair results, the court will likely strike the prenuptial agreement as unconscionable.
What Should Be Included in a Prenuptial Agreement
Depending on the parties' financial and personal situations when they enter into the agreements, there are a variety of matters to consider and provide for in the prenuptial agreement they enter into.
Parties should consider the following issues before entering into a prenuptial agreement:
- Type of property: Parties should distinguish between separate and marital property, or community property, depending on your state. Prenuptial agreements should include provisions that determine how property will be divided in the event of a divorce.
- Debts: A prenuptial agreement can protect one spouse from the debts of another. Parties may limit their debt liability in a prenuptial agreement.
- Children: A prenuptial agreement may also provide children from a prior marriage or relationship. This includes the distribution of property in the event of a divorce.
- Property: A prenuptial agreement will also provide the distribution of a family heirloom. The contract can stipulate that a family heirloom, family business, or even a future inheritance remain in your birth family. Your spouse has no right to it in a divorce.
Who Needs a Prenuptial Agreement?
Anyone who is getting married may want to enter into a prenuptial agreement. Traditionally, those entering into their second or third marriages with substantial assets and wealth are often considered a prenuptial agreement.
What Happens If You Don't Make a Prenuptial Agreement
If you don't make a prenuptial agreement, your state's laws will determine how property will be distributed in the event of a divorce. Depending on your state, property acquired during the marriage is known as community property or marital property. State law may determine how the property you owned before marriage will be distributed.
In most states, a spouse usually has the right to do the following:
- Share equal ownership of property acquired during the marriage.
- Incur debts during the marriage.
- Share in the management and control of any marital or community property, including the right to sell or give it away.
A prenuptial agreement can make for clean distributions of property in the event of divorce. As many divorces can become disdainful, a prenuptial agreement can eliminate any arguments between the parties as all issues were already determined per the agreement.
Postnuptial Agreement
A postnuptial agreement is an agreement that is entered into by two spouses during the marriage. It is also known as a post-marital agreement. It is similar to a prenuptial agreement, but is entered into after the parties are already married. This type of agreement provides terms for the division of property and/or income in the event of a separation, divorce, or death.
These types of agreements are common if a spouse independently owns a large number of properties or has a large number of assets prior to marriage. They are also commonly used when one spouse acquires a particularly valuable property or asset after marriage.
Are Postnuptial Agreements Enforceable?
The majority of states in the United States recognize postnuptial agreements. The rules on these types of agreements vary from state to state. Some states, such as Minnesota, have laws that govern postnuptial agreements while other states, such as Pennsylvania, treat postnuptial agreements implicitly through contract laws. In the event that a state does not provide applicable law, the court will rely on case law to determine the validity of a postnuptial agreement.
Individuals may take the following steps to increase the likelihood the postnuptial agreement will be enforced by the court:
- Each spouse should obtain separate counsel;
- Each spouse should fully and truthfully disclose all property and income;
- The agreement should be in writing; and
- The agreement should not contain provisions regarding child custody and/or child support.
Which Is Better: Prenuptial Agreement or Postnuptial Agreement?
Neither is necessarily a better option, since they may be able to serve the same function. Prenuptial agreements are entered into before a couple marries. After marriage, the circumstances of the relationship may change. In many cases, a postnuptial agreement is a result of this change occurring after marriage.
Changes in the relationship may include one spouse receiving a promotion, stock options, and/or an inheritance. These events can have a dramatic impact on the financial status of a marriage.
Postnuptial agreements may also be used to amend a prenuptial agreement that already exists. It is important to note that in some cases, postnuptial agreements are subject to stricter examinations by a court because the individuals are presumed to have less bargaining power once married.
Do I Need a Postnuptial Agreement?
In many cases, a postnuptial agreement is created in order to provide terms of property division in the event the marriage ends. There are also other situations where a couple may create a postnuptial agreement, including:
- One spouse is a stay-at-home spouse;
- Requests from one spouse's business;
- An inheritance; and/or
- Disputes over money.
In the event one spouse decides to remain at home and raise children, they will be completely depending on the other spouse for their income. A postnuptial agreement may ensure that spouse's dependence during the marriage will not have a negative effect on their life if the marriage ends.
If one spouse is a business partner, other partners may want to ensure that a divorce will not cause unwanted ownership problems, such as the spouse being granted ownership rights in the company. It may also keep the spouse from obtaining profits or other assets from the company.
In the case of an inheritance, in-laws may wish to give property or assets to their children but not their children's spouse. Postnuptial agreements allow inheritances to be passed according to the wishes of the deceased.
Lastly, a postnuptial agreement may assist in disputes over money. Money is often a bitter dispute in a divorce proceeding and an agreement may ensure both spouses are treated fairly should the marriage end.
Why Can't a Postnuptial Agreement Include Child Custody or Child Support?
Although there are usually no laws that strictly forbid the inclusion of child custody or support terms in a postnuptial agreement, courts are required to decide those terms according to the child's best interest standard and not the terms of a postnuptial agreement. These agreements concern the best interest of the spouses, which is not always the same as the children's. However, alimony, also known as spousal support, is often addressed in these agreements.
Contesting a Prenuptial Agreement
If you have signed a prenuptial agreement and are now in the midst of a divorce, you should immediately contact a family law attorney. The family law attorney can review the prenuptial agreement signed and determine whether it is enforceable. If enforceable, the attorney can aid in protecting your rights and assets as you navigate through the difficult road ahead.
If you are trying to determine whether or not you need a prenuptial agreement, the choice is personal. However, an attorney may help you evaluate your options and concerns before entering the marriage.
Terminating a Postnuptial Agreement
Postnuptial agreements are like contracts, subject to certain rules, and may be terminated in certain situations, such as:
- If one party signs under duress, or is forced to sign against their free will;
- If one party does not provide complete disclosure of their assets; and/or
- If the agreement is unconscionable, or grossly unfair to one spouse.
How Can a Lawyer Help Me?
If you are planning to get married, you should consider consulting with a family attorney. Your attorney can help you understand if a prenuptial agreement is right for you and your future spouse. If you decide to create a prenup, your lawyer can help you draft the document.
It is also important to have an experienced family lawyer assist you with the drafting of a postnuptial agreement. An attorney will advise you regarding what terms should be included and draft an agreement that will be enforceable in court. An attorney may also represent you during any disputes arising from the agreement, including court proceedings, if necessary.
