Whether to enter into a prenuptial agreement or not is a very personal decision. Each individual and couple is unique. Therefore, you should base your decision on your own unique circumstances. Review the pros and cons of prenuptial agreements and then read through the steps below to help you decide if a prenuptial agreement is right for you.
Pros of a Prenuptial Agreement
Some of the benefits of a prenuptial agreement include:
- Documenting each spouse's separate property to protect it as separate property.
- Supporting your estate plan and avoiding court involvement to decide property distribution.
- Distinguishing between what is marital and what is community property.
- Documenting and detailing any special arrangements between you and your spouse.
- Avoiding extended court proceedings, which result in the time of expensive divorce attorneys.
- Reducing conflicts during a divorce.
- Establishing procedures and rules for issues that may arise in the future.
- Assigning debt, such as credit cards, school loans, and mortgages, to the appropriate spouse to avoid both spouses sharing debt liability.
Many people fear that discussing these matters, or even bringing up the word prenuptial agreement, will cause turmoil in their relationship. Often times, just the opposite is true. One of the main irreconcilable differences leading to divorce is finances. Talking to your spouse ahead of time regarding finances, property, and marital asset management can avoid a lot of these disagreements. You both can get on the same page in the beginning so that the issue does not pop up and cause an argument later. Furthermore, discussing these issues nurtures healthy communication. Even if you and your spouse decide a prenup is not for you, discussing the mentioned issues is a very good idea.
Cons to a Prenuptial Agreement
Although nuptial agreements carry a lot of benefits, there are some downsides that you should consider before creating one.
- It's not romantic. If you fear that discussing a property and finance distribution and the possibility of a separation or divorce will dull your relationship in some way, then a prenup may not be right for you.
- The timing may not be right. The beginnings of a marriage are typically a time of marital bliss, when many of the issues involved in a prenup are not even a thought. You may be at a point in your lives where you don't yet know the answers to some of the issues in a prenup. The truth is these issues will come up eventually, whether during the marriage or if you divorce. If you think the timing of discussing these issues is bad, or you just don't have a basis for formulating decisions or answering questions, then the timing may not be right for you.
You can always wait until after you are married, when you may know a little more about the management of your household. An agreement made after you're married is called a "postnup". These are enforceable, but be sure to consult an attorney before creating one, because the legalities and enforcement of postnups do vary from prenups.
- There may be state laws that cover all of the issues you want to address, without a prenup. Different states have laws that determine how property is distributed in the case of a separation of divorce. These laws may be perfectly ideal for you. If so, there is no need of going through the trouble of creating a prenuptial agreement. On the other hand, there may be certain issues in your situation that are not covered by the law, and would nudge you towards clarifying the issue in a prenup.
- A prenup cannot include child support or child custody issues. The court has the final say in calculating child support. The court determines child support based on a "best interest of the child" standard, with several factors at play. A court would never uphold a provision of a prenuptial agreement that dealt with child support.
- A court can set aside any provisions it finds to be unfair or not in the interest of justice. For example, courts have set aside provisions that do not allow a spouse any share of the other's bank account, if the account holder contributed greatly to that bank account during the marriage. The most commonly set aside provisions are alimony agreements and alimony waivers.
- A prenup cannot include personal preferences, such as who has what chores, where to spend the holidays, or what school the children should attend. Prenuptial agreements are designed to address financially based issues. Judges grow uncomfortable when they see private domestic matters included in a contract, and will often view the document as frivolous, striking it down.
Analyzing your specific situation
Now that you have reviewed the pros and cons, think about your specific situation to decide if a prenuptial agreement is right for you.
Take The Prenuptial Agreement Questionnaire
- Do you own real estate?
- Aside from real estate, do you have more than $50,000 in assets?
- Do you earn more than $100,000 a year in earned income?
- Do you own any part of a business?
- Do you have more than one year's worth of retirement benefits?
- Do you have employment benefits such as stock options or profit sharing?
- Do you or your partner plan to go to school for an advanced degree, while the other works?
- Does a part of your estate name beneficiaries or heirs other than your partner?
If you or your partner answered yes to one or more of these questions a prenuptial agreement is in your best interest. If you answered no to all of them, a prenup is probably not needed, but could still be used to protect your current or future assets.