What is a Prenuptial Agreement?

A prenuptial agreement is a contract between spouses that outlines the plan for distributing finances in the event of one partner's death or in case of divorce. These agreements are sometimes referred to as "premarital agreements" or, more commonly, abbreviated as "prenups."

Without such an agreement, deciding how to distribute assets and debts will be left to the divorce court. The court will make these decisions as a part of the divorce proceeding.

Bear in mind that a prenup is not the final word in a divorce. That said, if the agreement is executed properly, it will likely have significant weight in a divorce court's ruling. In most states, a prenuptial agreement is viewed as valid by the divorce court if it meets the following criteria:

It must be a written agreement, as oral agreements are not recognized in many divorce courts. The prenuptial agreement should be formal, and notarized, to minimize the risk of a court not recognizing the document.

It must be signed voluntarily by both parties. If the agreement indicates that one party coerced the other into signing, the court has the option not to honor it.

The prenuptial agreement must contain a fair and full disclosure of all assets of both parties. Concealing debt information may also lead to a dismissal of the agreement.

The agreement must be conscionable. In other words, it must not contain excessive benefits or penalties for one party or the other.

Finally, the prenuptial agreement must be signed by both parties in front of a notary public. Attorneys may draft the agreement, but the spouses are required to sign it.

These are the general requirements for a prenuptial agreement to be recognized in most divorce courts, but keep in mind that each state has unique requirements. A divorce lawyer should know what to include in a prenuptial agreement to protect your rights while keeping the agreement as recognizable as possible.

Who benefits from a prenuptial agreement?

This type of agreement may benefit people in any number of circumstances, including those who:

• Have significant assets
• Own a business
• Expect to receive an inheritance
• Have children or grandchildren from a previous marriage
• Are notably wealthier than their fiance
• Intend to pay for a spouse's education
• Have obligations to support other family members
• Are studying in a potentially lucrative field
• Forecast a significant income increase in the future

You may want to include the following components in a prenuptial agreement. This is not a complete list, and an attorney can help you fully assess your needs.

• You and your spouse's debt and asset division
• Protecting one party from certain debts
• Maintaining separate finances and assets
• Managing money, bill payment, handling credit cards, and tax filings
• Property distribution to children from earlier marriages
• Keeping certain items within a family

Prenuptial agreements normally do not outline non-financial matters, child support or custody agreements, and some can include a clause that allows the agreement to expire after a certain number of years of marriage, known as a "sunset clause"

It is recommended that any prenuptial agreement be prepared significantly in advance of the wedding. Consult a divorce attorney as you consider this option, and ask all the questions you need to determine whether a prenup is in your best interest.