Nearly one million divorces happen every year in the US. According to a survey carried out by the American Academy of Matrimonial Lawyers in 2010, three out of 4 lawyers said there was an increase in the demand for prenuptial agreements over a period of five years.
A prenuptial agreement is a contract that a couple needs to sign before they get married. It stipulates how marital debts and assets will be divided in the event of a divorce. It also indicates what each party brings into the marriage and the assets acquired during marriage. Prenuptial agreements help minimize confusion, stress, and high legal fees in the event of a divorce or death. It is highly recommended for:
- Couples with children from another marriage
- Those entering another marriage
- Couples with big age, debts, businesses, and income differences
Benefits of Signing a Prenuptial Agreement
- Minimize conflicts – In the event of a divorce, a prenuptial agreement will make it easier to distribute assets. It makes the divorce process faster, less traumatic, and more respectful. It can also help to speed up the court process, because it gives the court a clear picture of what the couple initially intended. Additionally, couples can state in the agreement how every asset will be divided among their children, helping protect their future inheritance.
- Debts – A prenuptial agreement enables the couple to have a clear distinction of their debts. It separates the marital debt from individual debt and it protects the debt-free spouse from assuming the debt responsibility of the other.
- Protection of property – A prenuptial contract is important since it helps to distinguish between spouses’ separate property and marital property. During a divorce, marital property is divided equally but separate property is not subject to division.
- Transparency – This form of agreement also helps promote transparency among spouses regarding each other’s financial situation. It gives a full disclosure of the assets and debts of each party, making each party aware of their partners’ spending and budgets. It also enables the couple to plan for their financial future.
- Spouse protection – In the instance of there being an agreement for one partner to leave their career to take care of kids, this agreement ensures compensation in the event of a divorce. A prenuptial agreement also limits the amount of spousal support paid by another spouse during divorce.
Disadvantages of Signing a Prenuptial Agreement
- Change of circumstances – Most couples sign a prenuptial agreement without anticipating the future. Due to life uncertainties, the agreement may get impacted, thus a need for updating it. These situations can arise due to sickness, career change, or children. Sometimes, the agreement can even be rendered useless.
- The validity of the agreement – The court will scrutinize every detail of the prenuptial agreement in order to establish the validity and enforceability of the contract. It can be rejected if it is established that during the making of the agreement, there was non-disclosure of some assets, absence of representation, fraud, or duress.
- Planning for a divorce before marriage – Prenuptial agreements are enforced when either a party dies or the marriage is dissolved. Many people view signing a prenup as accepting failure in the marriage before attempting it. Trust issues may arise as a result of a prenuptial agreement, leaving the spouses vulnerable to a divorce.
- Child support – The court is the final decision maker when it comes to matters regarding the children’s support and welfare. A prenuptial agreement should not involve child custody and support matters. The court will disregard an agreement that includes child support.
- Not necessary – Sometimes, couples may bring up this uncomfortable conversation, only to realize their state laws do not permit prenuptial agreements for certain issues. It is imperative that couples first look into the enforceability of prenuptial agreements within their jurisdiction.
A prenuptial agreement, if done well, is useful in the event of a divorce. Signing a prenuptial agreement is a personal decision that should be based on the individual’s specifics and circumstances. If you and your future spouse are weighing the pros and cons of signing a prenup, give us a call to set up a consultation with one of the members of our team.