What is a prenup agreement and how to get one? If you own real estate, own or are a partner in a business, have stock options, or have over $50,000 in non-real estate assets…it might be good to have. Another consideration is protecting future assets. Ultimately, it is important to seek out the expertise of a lawyer who is skilled in prenuptial agreements.
Overall, prenuptial agreements can have positive upsides.
Here are some benefits of a prenuptial agreement:
- They can protect both parties.
- They can protect financial stability for your children.
- The can protect premarital assets.
- They lay out clear expectations of the parties.
- Everyone entering the marriage can leave it with what they came in with.
- It can reduce the chances of controversial divorces.
There are some very important considerations when it comes to getting a prenup with your future spouse.
1. Are you willing to corrode your marriage before it starts?
Think about this…whether or not for the right reasons, a prenup may be interpreted as a lack of good faith on your part and even worse…your expectation of divorce. Also, in essence, it could be interpreted as placing money and property over love and the future.
2. Are both parties entering the negotiation of the agreement on equal terms?
Most often, prenups tend to be coercive and one-sided. For example, two weeks before the wedding, the future husband proposes a prenup since he has 2 houses and is a 50% owner in a business…the soon to be spouse is not happy with it, but is in love with him and agrees to the terms to get married.
3. What consideration is being offered by each party?
When it comes to contracts, they are binding when each person to the contract gives something and gets something. This is known as consideration. In this situation, what often happens is one party has assets and property and the other doesn’t…thus, the party not having is giving away their rights based upon a mutual agreement to marry.
There are also some common mistakes that people make when executing prenups.
- Timing: It is not uncommon to postpone the signing of the prenuptial agreement at the very last minute. In a divorce, one party can successfully argue they were coerced into signing the agreement.
- Duress: When a party is pressured into signing the agreement or has no, or diminished mental capacity to sign the agreement, it will likely be invalidated by the court if challenged.
- Verbal Agreements: Prenuptial agreements should always be in writing. Absent very few and specific reasons, courts disregard verbal prenups.
- Wording: Agreements that are confusing, unclear, or ambiguous can be rendered unenforceable if challenged in court.
- Failing to Fully Disclose: If a party fails to disclose their assets, property, and debts, when the prenup is executed, the court may invalidate the entire agreement.
- Biased: When a prenup is biased towards one party (one-sided; unequal bargaining power) it can be deemed as unconscionable.
So, is a prenuptial agreement the right path for you? Ultimately, people get married to stay married. On the other hand, marriage can be seen as a contract between two people…with a prenup simply being a rider. Whether you choose to travel down this path is a personal decision.
Here are some reasons that often trigger the potential need for a prenup:
- When one of the partners is wealthier than the other.
- One or both partners own or are partners in businesses.
- Getting remarried.
- One party earns significantly more than the other.
- One partner has a significant amount of debt.
- One partner intends to quit their job to rear their children.
- One partner has an established estate plan they want to remain intact.