You don’t have to be rich to have a prenuptial agreement. Prenups are beneficial in almost every marriage because they require the couple to have honest discussions about their finances, including their values about money and expectations for their life together. For those bringing significant income, assets, and debt into marriage, or who have children from a prior marriage, a prenup is a must. Because prenups serve an important purpose, they should not be rushed. The parties should find and speak to an attorney about a prenuptial agreement before the wedding – ideally, three to six months in advance. Why is so much time needed? Here are a few reasons:
- Prenuptial agreements address many issues. A prenup defines what income, assets, and debts are “separate” as opposed to “joint” and how joint or marital property should be split in the event of divorce, separation, or death. The agreement can also set forth rights to spousal support during and after the marriage. For example, it can take into account a parent who stays home to care for children. The parties can also address how they will handle their day-to-day finances during the marriage and indicate their financial goals.
- Full financial disclosure is required. Before the couple can have a conversation about their finances and make decisions, both sides must fully disclose their finances. A prenup is only valid to the extent that information is provided to the other side. Reviewing this information takes time and may require financial and/or legal assistance to get a full understanding of the party’s financial situation and how to fairly split assets.
- Legal issues and terminology can be complicated. Married people have certain rights under the law as do those divorcing. An attorney is essential to explaining those rights and how the prenup is affecting them. The agreement also uses legalese that an experienced attorney must draft and/or review to ensure his or her client’s rights are protected. Importantly, each side should have his or her own attorney and not share one.
- It helps satisfy the court that the agreement is valid and enforceable. Judges look to see whether both sides have had ample time to review, negotiate, contemplate and understand the terms of the agreement and speak to an attorney before signing. If a party did not have sufficient time, the court may view that as potentially showing duress, especially if there is a substantial imbalance in how assets are split. If it seems like one side may have been pressured to sign, the agreement could be invalidated. The shorter the timeframe for a party to review it, the closer the court will look at the terms and consider whether one party was taken advantage of in the agreement.
As noted above, ideally, couples should contact an attorney at least three to six months in advance of the wedding to discuss their prenuptial agreement. The prenup can take one to two months to negotiate but there are discussions beforehand, and time needed to finalize the language afterward.
If you are considering a prenuptial agreement, please contact us to find out how we can help.