It’s always beneficial to keep things in writing whether you make confidential agreements or make huge financial commitments. This is because these agreements prevent you from getting hooked and betrayed by the parties involved.
Similarly, when it comes to making a marital bond with someone people are more concerned about their future nowadays and this is where a prenuptial agreement comes into play.
With the ever-increasing divorce rates in the United States, prenuptial agreements, aka prenups or agreements before marriages are reaching their heights.
But what is a prenuptial agreement? Or how to get a prenup? In today’s detailed guide, we will discuss everything that surrounds the prenup phenomenon and how this is going to be beneficial for you in the long run. So when someone asks what a prenup is, you would have every knowledge to share.
Therefore, stay hooked!
What are Prenuptial Agreements?
A prenuptial agreement or a prenup is essentially an agreement that couples make prior to getting married. In the agreement, they list out and typically put every asset and debt in writing that they have before getting married or making it a future liability for the other partner.
Other than the asset and debt, couples also look forward to the rights and properties that they would be sharing after marriage.
In most states, a prenuptial agreement is also called ‘antenuptial agreement’ and in some a ‘premarital agreement’. Oftentimes the word ‘contract’ is also used in place of ‘premarital’ or ‘prenuptial’. If a contract or agreement is made after marriage, then it would be called a postnuptial, marital, or postmarital agreement.
Typically state laws differ when it comes to having a prenuptial agreement in place. Depending on the state laws you may be obligated to provide certain rights to your spouse and the future family after getting married.
These state laws and rights will be later discussed in the article. Let’s first see who needs prenuptial agreements and why someone needs them.
Who needs a Prenup?
Contrary to people’s belief, a prenup is not just beneficial for the rich but for the couples who want to get into a relationship after a strong affection should know what they are heading towards. Plus, they protect the rights of both spouses to be either rich or not.
Some justifiable situations where it becomes efficacious to have a prenup include:
When both or one of the spouses is already married?
Oftentimes when people had extreme harsh or bitter experiences of divorce, they don’t likely remarry without validating what financial future they would possess. This is because they know the probable consequences of having a divorce if the other spouse gets a great deal after marriage so they don’t want to repeat the cycle.
Prenup agreements before marriage also prevent spouses from taking advantage if they get divorced and want to get back to their children from the previous marriage. Or people with a prior divorce experience may have a divorce judgment that may affect their future life. This is why a prenuptial agreement should be made when one of the parties is already married.
When any of the parties have children?
Sometimes a divorced party wants to conceal the financial assets of children received from the previous marriage. Through a prenuptial agreement, you can ensure that the other party will allow you to keep the property separate from the future assets and will agree if the party makes a living trust in the future to protect the rights of his/her children in an event when they lose their parents.
Additionally, if the previous parent dies, a prenuptial agreement may act as a will and protect the rights as well as prevent legal family disputes.
When a party is wealthier?
It is also seen that marrying a wealthy fiancé improves the other party’s lifestyle significantly. A prenuptial agreement makes sure that the parties are not marrying just for the sake of money.
Since a prenuptial agreement is effective for both parties, it is the wealthier party that asks for an agreement generally.
Making a life-changing decision may not be easier if parties are not honest at the time of being knotted. This is why protecting the future for both parties is important rather than ending the relationship bare-handed.
When a party has burdened with more debt?
A survey conducted by TD Bank in 2019 showed that 27% of millennials manage a secret financial burden from their partner called credit card debt. According to the family laws, debts that are incurred premaritally will be paid by the party who incurred them, no matter how much they are.
Similarly, debts incurred after marriage are equally allocated to both parties, regardless of who took it, putting the non-debtor spouse potentially at a disadvantage.
A prenuptial agreement can play its role for this part as well. For instance, if one party does not want to bear the burden of paying the debts incurred by the habits of spending of the other party even after marriage, then a prenuptial agreement would make sure that these scenarios are communicated.
A prenup can also ensure that the debts of one party cannot be paid from the joint accounts or joint property after marriage, or the premarital debts would not be paid from the joint funds.
When one or both the parties own business?
Having a business prior to marriage? It makes sense to have a prenuptial agreement in place then. This is because a divorce can ruin your family business as you can’t deny the share of your profit your spouse could have after marriage.
Plus, in the case where you share your business with some other people, like if you are part of your family business, then it can impact your future finances as well.
Through a prenup, you can limit your spouse or give the authority to the business, shares, and the investment made during the marriage will keep there even after marriage.
TIP: In forensic accounting issues, the cost of business evaluation and following legal litigation would become a hefty and expensive task. A prenup can save your time and finances as well.
When spouses want to keep space?
According to the experts, the right to keep the privacy of both parties
is acknowledged in a prenuptial agreement. Through this, the parties consent to each other that without the agreement of both parties, neither shall publish, disclose any information or provide any documentation to the public authority or any entity or post it on social media.
There are clauses in the prenups that are backed by confidentiality to prevent media exposure. Parties can also agree on the contract that they would resolve issues with the arbitration without making their flaws public.
When parties have an inheritance to protect?
Inherited wealth or the inheritance of future finances can be the two major reasons for making a prenup. In situations where a party receives property or assets in inheritance, then these will be his or her non-marital inherited property. Unless the owner of the inherited assets transfers it in the joint funds and makes it marital property.
To make the inherited property marital, the owner may open up a business or buy a property under both names.
If not, then to avoid the transmutation of the inherited property, parties need to keep their accounts separate and only in the name of the person who owns them. As said, prenups also play an important part in keeping the assets separate.
If one party plans to be at home parent?
A prenuptial agreement provides security to the parent if he or she plans to stay at home parent. By using prenups, it is made sure that they will be treated reasonably in the event of divorce as well.
A homemaker or a stay-at-home parent is actually foregoing career advancement or work in order to raise children which eventually puts them behind in the workplace that may hinder getting enough earning after divorce.
When a parent chooses this, couples agree on compensating and providing a portion of the property that ensures a safe and comfortable lifestyle even after the marriage ends.
If the parties negotiate in effective terms while making prenup, a stay-at-home parent would be able to have an annual contribution in IRA funds, monthly monetary contribution, and a life insurance policy.
Now that you know if you need a prenup or if you land on the above-mentioned circumstances making it beneficial to have a prenup, find out how to get a prenup.
What is a Prenup and How to get a Prenup?
To get a prenuptial agreement you need to follow these simple steps:
1. Decide if you want a prenuptial agreement
Anyone willing to marry or remarry can benefit from the prenups, not only the wealthier ones. Dividing assets and properties have been most often witnessed in middle-class families. When there are children and you are the homemaker left behind in the career advancements. Having a prenup in place can surely help you reduce mental and physical stress.
2. Hire an attorney
Your spouse and you should hire a separate family attorney in place that can represent your rights. One attorney can never represent both parties fairly, especially when there’s a legal binding in place. To have your prenup, ask for recommendations from family and friends. Or look for the local family law clerk’s office to find one. A family law attorney will look into your considerations legally and draft a prenuptial agreement according to the state laws.
3. Communicate with your spouse about Finances
Make sure that you talk with your fiance or to-be spouse about the finances, debts, credit rating, shared expenses, current assets, bank accounts, and everything else that concerns financials. Regardless of who maintains the bank accounts and finances households or who remains at home to raise children and look for home chores. These communications should be in place prior to going for a prenup so that you can avoid delays and getting into conundrums.
4. Make a list of assets and debts for each spouse
Make sure that you remain honest while planning a prenuptial agreement in place. Every party should disclose valid relevant information. Failing to reveal relevant information can make your prenup invalid in case it is challenged in court.
5. Draft the prenuptial agreement
So before you get into drafting a prenup for yourself, research and find out your state laws concerning the prenuptial agreements. From there you will get to know what clause your state allows you to add to your agreement and what you cannot. Make a thorough list of the assets and debts you want them to be identified when there’s a divorce event.
6. Define separate property
The property that you inherited or the family business that you want to keep separate from your marriage as mentioned earlier, you need to maintain a separate account for the purpose. Define in the prenup that you are keeping xyz. property separate.
Also, mention how the shared property will be distributed among spouses, family, and children after separation.
7. Be clear about the existing debts
Through a prenup, it can be defined that the existing debts of the parties or one of the parties can or cannot be paid with the joint funds. Else, it can also obligate a party to deal with the premarital debts on their own.
8. Define future financial support
If any party is planning to provide financial support even after separation which is also referred to as spousal support, should be defined in the prenup as well.
9. Decide about your marital home
Once you decide to be separated, look for the options for the shared property. How would you manage the marital home? Will it be sold? How would you share the amount received from the sale of the property?
10. Figure out how would you manage finances
It would be more beneficial to decide prior who will deal with the bills, and who would see the finances whether you are managing a shared account or have separate accounts. Decide how large investments will be made and how the debts will be paid.
11. Decide about Tax payments
Regardless of who owes, will you be filing your tax return separately or jointly? Decide who will be responsible for tax payment.
12. Decide the duration of the agreement
With so many things to add and reveal, it is important to give it an ending date as well. Add a sunset clause to give a timeline to your prenup. This is like a provision in your contract that defines that after a certain amount of time, the contract and the defined affirmations will be terminated. If there’s no specific stipulation regarding the ending date, your prenup agreement lifespan will be indefinite.
13. Keep the rights reserved
Make sure that your prenuptial agreement is valid and provides adequate rights to each party. A prenup can be disregarded and thrown out from the court if it does not protect the rights of both parties equally.
14. Make it official
You need to meet certain requirements while making your prenup official or legally valid:
- It should be in writing
- A prenup is agreed, dated, and signed by both parties
- Depending on the local family laws, you may need two to three witnesses to witness and sign the prenup agreement.
- The prenuptial contract should be notarized
- You need to make three copies of the agreement
Where should you look for when getting a Prenup?
A prenuptial agreement can easily be made online and you can ask a local family attorney to make one for you. For this, you and your to-be spouse should have separate attorneys so that your rights can be truly represented.
However, in cases, if you decide to make your prenup by yourself, make sure to get it reviewed by a prenuptial agreement lawyer.
The family court looks at the prenups more vigilantly so whether you hire a lawyer for making a prenup or make it yourself, make sure to communicate it with the concerned lawyer to make it legally sound.
The best way to avoid legal issues in your prenup is to work with a skilled lawyer. He will guide you through the process of dividing the assets and debts, maintaining and sharing the property, and the clause that should be added to use after separation.
An experienced lawyer or firm will do everything to make the process as painless as possible.
Look how the court will determine if your prenuptial agreement is valid and can be granted.
In order to have a prenup grant, the court will briefly discuss the finances that you mention in your prenup. The court will analyze how honestly you have mentioned and discussed them. The court will proceed with the case on the basis of your financial situation.
Spouses more often want to keep the assets and property they bought even after the end of the marriage.
For this, many states provide provisions on how you divide your assets bought during the marriage. States also require couples to divide assets evenly regardless of how much both earn even if the prenup is set in place or not.
The court will also like to know if you and your spouse want to have children in the future, how would you take care of them. Things that could include in care may include but are not limited to:
- With whom they will live
- Who will be responsible for paying for their expenses
- Who will have the custody if the parents separated
- How they will be raised, etc.
Children are the ones affected when parents get divorced. If you have a prenup in place, it will make things easier for them in the long run.
Your marital home will also be one of the considerations when the court evaluates your prenup. The court may ask (if you have not mentioned it prior) who will keep the house and who will have the assets? The spouse with the house intent to sell the house? If yes, then how will the process proceed?
Deciding on the future, it will help you avoid the common point where a disagreement can take place. You may also need to outline other physical assets such as vehicles and other major belongings.
How much does a Prenuptial Agreement Cost?
The cost of setting up a prenup will directly depend on the complexity of the case and the list of your assets. Plus, it is also based on the charges that your lawyer may take. Some lawyers charge hourly while others a flat fee.
Depending on the lawyers and agreement demands, the cost of the prenuptial agreement can vary from a few hundred dollars to ten thousand.
The lowest cost that you may expect from a lawyer is around $1,200 to $2,400 as of 2019 in the United States. According to the businessinsider:
“Typically, prenups cost around $2,500, but can cost more if you spend a while haggling out various issues.”
That’s an estimated cost of the case with no complex issues and without a long list of assets or children that may want to bring in the marriage. Couples with these complex issues living in the urban areas can expect their legal charges to go anywhere between $7,500 – $10,000.
The factors that affect prenuptial agreements cost include:
- The state you reside
- The intricacy of your agreement
- Experience and the reputation of the lawyer dealing with your prenuptial agreement drafting and finalizing
- The fees of the lawyer or the law firm
- The number of your assets
- The prolonged negotiations of lawyers from both sides
- The complex issues that make the case difficult
The lawyers evaluate every clause that you added or want to add in your prenuptial agreement for a court grant. The incomplete or illegal clauses can make your prenup invalid and you could lose all the effort you have done to make it through.
This is why it is suggested to have a family lawyer for your prenup agreement creation and have a better understanding of what your future holds for you
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