A prenuptial agreement, also known as a premarital or prenup agreement, is a legally binding contract created by couples planning to get married. This agreement outlines how assets and liabilities will be divided if the marriage ends in divorce. Prenups are recognized as valid in all 50 states. When done right by family law attorney, a prenup can be an effective way to protect personal assets in case of divorce, according to family law attorneys.
What is a Prenuptial Agreement?
A prenup is a contract signed before marriage that details each spouse’s rights and obligations if they get divorced. It typically states:
- How property and money each person owns before marriage will be divided
- How assets acquired during the marriage, like a house or investments, will be split
- The rights each spouse has to alimony or spousal support
- How debts will be allocated between the spouses
The prenup often includes a schedule of each spouse’s individual assets and debts when entering into the marriage. Prenups can be as detailed or as general as a couple wants regarding financial matters in case of divorce.
Why Get a Prenuptial Agreement?
There are several reasons couples choose to create prenups:
- Protect personal assets and family wealth – A prenup allows spouses to protect assets they owned before marriage or inherited during it. This includes investments, businesses, real estate, retirement accounts, etc.
- Avoid fights over separate property – In community property states, most assets acquired during marriage are considered joint marital property unless agreed otherwise in a prenup. This contract lets spouses define separate property.
- Clarify financial rights and obligations – A prenup makes clear each spouse’s rights to assets, alimony, debts, property division, etc. if a divorce occurs. There are no surprises.
- Protect children from a prior marriage – A prenup can ensure a spouse’s separate property passes to their own children, not to their new partner.
- Avoid prolonged divorce litigation – Because a prenup outlines asset division upfront, it minimizes what’s in dispute during divorce. This can limit costly legal battles.
For individuals with substantial personal wealth or ownership in a family business, prenups are often essential to protect assets in case of divorce. Even couples without a lot of property often find value in defining their financial rights upfront through a premarital contract.
How Prenups Protect Assets
There are several ways a properly drafted prenuptial agreement can protect assets in case of divorce:
Define Separate Property
In community property states, most property acquired during marriage by either spouse is deemed marital property. This includes income earned, investments purchased, real estate, etc.
A prenup allows you to define separate property that will remain under your individual ownership if you divorce. For example, a prenup could state any inheritances or assets owned before marriage remain separate property not subject to division.
Limit Alimony Obligations
In many states, courts determine alimony awards based on the length of the marriage and standard of living established. A prenup may limit the amount and duration of spousal support payments if you divorce.
Opt Out of State Property Division Laws
Certain property division laws, like equitable distribution, mandate a “fair” split of marital property in divorce. A prenup lets you and your spouse agree upfront how property will be divided and opt out of default state laws.
Protect Business Assets
If you have partial or full ownership in a business, a prenup drawn by Edwards Family Law allows you to ensure it remains your separate property not subject to division or transfer upon divorce. This protects the business.
Prevent Contested Inheritances
Inheritances received during a marriage can become disputed marital property without a prenup. This contract preserves inheritances as your separate, non-marital property to pass down as you choose.
Define Asset Valuations
Property valuations often become a point of contention in divorce. A prenup can predetermine the values of certain assets which reduces what’s in dispute if you split.
Key Elements of a Valid Prenup
For a prenup to accomplish its asset protection goals, it must be properly executed. Under family law, both spouses must agree to the contract voluntarily and with full disclosure for prenups to be binding. Here are requirements for valid prenups:
- Made voluntarily – Neither spouse can be coerced or pressured into signing the prenup against their wishes.
- Full financial disclosure – Each spouse must share details on income, property, assets, and debts to ensure informed contract decisions.
- In writing – The prenup must be a written document signed by both parties to be enforceable. Verbal premarital agreements are not valid.
- Allowance for legal counsel – Both spouses should be encouraged to retain independent divorce lawyers to review the prenup before signing.
- Time before wedding – Courts typically require prenups be signed at least 30 days before the wedding so there is no duress.
- Fair at time of signing – The division of assets outlined should be reasonable for each spouse when the contract is signed, not just if a divorce occurs.
As long as a prenup meets state requirements, like those above at the time of creation, courts will usually uphold the contract if challenged in divorce proceedings.
Limitations of Prenuptial Agreements
While prenups offer substantial protection of assets in case of divorce, they do have some limitations:
- Must adhere to state laws – Prenup terms cannot violate state laws, like child support mandates. These state laws override the contract.
- Does not dictate child custody – Child custody and visitation remain under the court’s discretion as they do what’s in the “best interest of the child.”
- May be challenged if unfair – If a prenup is deemed “unconscionable” by a court, it may be overturned or modified.
- Not forever binding – Many states will void prenups after 5-10 years, especially if circumstances change substantially.
- No impact on third-party rights – Prenups don’t affect the rights of outside creditors to collect valid debts from community property.
- Must be updated – Prenups should be revisited whenever assets/finances change substantially, like a business launch or an inheritance.
While not an absolute guarantee, a prenuptial agreement prepared properly provides a strong degree of asset protection for spouses should divorce occur. It offers much greater protection than relying solely on state divorce laws regarding property division.
Consult a Family Law Attorney
Creating an ironclad prenuptial agreement requires working with an experienced family law attorney like Edwards Family Law in Atlanta. A lawyer can help tailor the contract to your unique goals and assets while adhering to requirements under state statutes. This ensures your rights are protected to the maximum degree possible if divorce happens.
Prenups involve complex legal and financial matters, so it’s wise for both spouses to retain their own divorce lawyer to review the agreement before signing. With proper professional help, a prenup can be an effective way to safeguard your financial future and provide peace of mind.