What you need to know about prenuptial agreements

A prenuptial agreement catalogs each person's property, assets and debts, and specifies each person's rights to that property if the marriage dissolves or if someone dies.¹ While prenups are best known for dividing assets at divorce, they can also be used as a type of will.² Consult an attorney to gage what is specifically best for you and your partner.

A prenuptial agreement isn't just for wealthy people, though it's often used to protect a person’s wealth from a partner if there is a divorce. Those who are just starting their careers might also execute a prenup; it can help clarify financial and property issues, including debt repayment, should the union end. That can help make a divorce process less expensive and less painful for both parties.

What is a prenup?

A prenup contract may include:³

• How to divide property if the marriage ends
• Spousal support agreement for payment amounts upon marriage dissolution
• Terms for what triggers certain payments (such as violations of lifestyle clauses that are added to the document — although a court may ultimately deem things like infidelity clauses unenforceable)
• Sunset clause allowing the agreement to expire after a specific period of time, such as after seven years of marriage
• Language that allows a person’s premarital debt to continue with him or her after the divorce

Prenuptial agreement pros and cons can be a touchy topic for some couples. When one partner requests a prenup, it can be interpreted as a sign of distrust by the other.⁴ It can be helpful to talk through prenup pros and cons with an attorney and possibly a premarital counselor or clergyperson. Each half of the couple using his or her own attorney also ensures all concerns are addressed.

State-to-state variations in prenup rules

Speak with an attorney about whether a prenup would be helpful in your situation. While all 50 states recognize prenups, they may have different rules. For example, some states have their own sunset provision laws that phase out or end a prenuptial agreement after a certain period of time or life event, such as a child’s birth.⁵ The couple can agree in writing to extend it, but these are important things to keep in mind while planning.

If you’re still asking yourself “Do I need a prenup?” here are some additional points to consider:⁶

• If you have assets (investments, real estate) before marriage that you want to retain ownership of
• If you own a business (to protect it from being controlled or sold to another party)
• If you have debts in your name (if you specify and agree in advance, the person who accrued the debts will still be responsible for them)
• If you earn significantly more than your partner
• If you plan to give up or scale back your career to raise children or to support your spouse’s career
• If you've earned retirement or employment benefits, including stock options or profit sharing
• If you have children from a prior relationship. A prenuptial agreement can protect assets to set aside for them (child support and child custody aren't covered in a prenup)

Making a prenup valid

While all 50 states honor prenuptial agreements, states can interpret them differently. For example, some states may require the following elements to be present for a prenuptial agreement to be valid, as noted by Forbes:⁷

• The agreement must be written, not oral
• The agreement must be entered into and signed voluntarily
• Both parties need to fully disclose their assets before signing the agreement
• The agreement must be fair to both sides
• Both parties must sign the written agreement, witnessed and recorded by a notary public

How to write up a prenup

It’s best to have a lawyer create the prenuptial agreement and for each person to have their own representation.⁸ Consider speaking through the terms as a couple before the attorney draws up the documents. That way, there aren’t any surprises, and it’s a more collaborative process.⁹

While you can find prenup forms online, not all of them align with state laws.¹⁰ You want to ensure that your prenup is valid and enforceable where you’re living. That’s another reason why it’s helpful to have a lawyer handle drafting the document. Start the process well in advance of a wedding date. Planning a wedding can be demanding, and dealing with sensitive legal documents like this can be emotional.

Options instead of a prenup

If you're asking, "Should I get a prenup?" the answer will depend on your desired level of comfort in protecting your assets. If you don't feel you need a prenup, there are other ways to protect your property and assets. You can speak with a financial professional or attorney about the best methods for you. Some people keep all or a portion of their premarital assets as sole and separate property, not mingling them with the couple’s community property.

A person can create a trust, open investment accounts or purchase life insurance to ensure their children or other beneficiaries receive monetary assets in case of divorce or loss of life. Speak with an advisor before you get married for more advice about your situation.