What is a Prenuptial Agreement?

A prenuptial (or “prenup”) agreement is simply a contract between two parties before they get married . The prenup is designed to allow each party to stipulate certain conditions and/or distinguish personal property (assets acquired before the marriage) from community property (assets acquired after the marriage). Prenups can also allow couples to provide for children from a previous marriage and protect assets in the event of death or divorce.

How Does a Prenuptial Agreement Work?

Without a prenuptial agreement, state laws govern how property and assets are distributed in the event of a death or a divorce. Under these laws, most states allow for some sort of community property distribution, meaning that the couple will equally share in the assets and debts acquired during the marriage. These assets can sometimes include property that was originally acquired before the marriage, as spouses tend to mix or “commingle” funds and share in responsibilities. A prenup can override these laws however, allowing the two parties to dictate how specific items or assets should be distributed.

You might choose to leave your home acquired before the marriage to your children instead of your spouse for example, or stipulate that your spouse be allowed to continue living in the home after your death until he or she remarries.

A prenup can also address any income that you receive during the marriage, limiting the amount that will be distributed as community property. You can stipulate that debts incurred remain with the individual parties and you can even create agreements regarding income tax filings, savings accounts, life insurance and the distribution of household bills.

What Will a Prenuptial Agreement Not Do?

While prenups are pretty flexible, there are some things they can’t address. In general, anything that’s not of a financial nature is best left out of a prenuptial agreement. Dividing up household chores for example or dictating how many children you will have. Prenups also can’t limit child support or visitation rights and in a few states, alimony cannot be waived.

In addition, a prenup must be fair to both parties and cannot encourage divorce. Any prenuptial agreement that is obviously to the benefit of one party over the other faces the risk of being set aside by the courts. Read more about What a Prenup Can (and Can't) Do.

Is a Prenup Right for You?

It used to be that prenuptial agreements were exclusive to the rich and famous. Celebrities and multi-millionaires used them to keep their wealth safe and separate from their new spouse.

This is no longer the case however, and prenups, necessary or not, are becoming more and more prevalent in even the most modest of households.

Couples with children from previous marriages can specify how those children will be provided for. Alimony can be outlined and personal property can be specifically divided. A prenup can prevent you from becoming responsible for your partner’s debts and even reimburse you for certain expenses (such as college tuition) in the event of a divorce.

Used correctly, a prenuptial agreement can protect you, your spouse and your children from lengthy and sometimes volatile court battles later on.

To decide if you need a prenup, ask yourself some questions: Do you own property that you prefer to keep in your birth family? Do you have assets acquired prior to the marriage that you want to keep separate from everything else? Do you have children from a previous marriage? Will you be putting your spouse through college or vice-versa? All of these factors are good reasons to consider creating a prenup. Look at your personal situation and think about what would happen in the event of a death or divorce. If you have concerns about how certain issues might be handled, a prenup might just be the solution for you. Read more about Do You Need A Prenup.

What if You’re Already Married?

You can still address all these issues using what is known as a “postnuptial agreement ”. A postnuptial is simply a prenuptial agreement that is being made after marriage, however keep in mind that the laws surrounding this type of arrangement is not well established.

If you decide to create a postnuptial agreement, you’ll need to outline what even prompted the document, such as a drastic change in your finances or a conflict that you both feel would be best addressed in a written contract. Read more about Postmarital Agreements.

Tags: prenuptial, marriage, children, finance, laws, child support, visitation, alimony, divorce