Who Needs Prenuptial Agreements?

Many people ask the question, who needs a prenuptial agreement? A common misconception is that only wealthy individuals need a prenup or that they are only useful in times of divorce. However, in today’s day and age, with increasing financial sophistication and independence, a prenuptial agreement can benefit just about anyone – stay-at-home mothers, single parents, homeowners, business owners, professionals, and students. Also, they are extremely beneficial in ensuring estate plans work (regardless of divorce), such as ensuring a specific heirloom remains in the family.

In a very common example, if one spouse forgoes their job to stay at home and raise children, a prenuptial agreement can ensure that both parties share in such a financial decision (for instance, as raised alimony or a lump-some payment for lost income opportunity). It is highly recommended to engage the services of prenuptial attorneys in drafting and negotiating a custom prenup, especially because some state laws require both spouses to be represented by an attorney (or else the agreement is deemed void!).

Not only are prenups beneficial for just about anyone, they can address the most basic areas of married life, such as checking accounts, pre-existing debt, and car payments. They are also very beneficial when one spouse is expecting a rapid change in income based on their premarital efforts, such as attending medical school. On the other hand, they can be very useful when one spouse intends to incur a large amount of debt (e.g., business expense, graduate school enrollment, or car loan) and would like to protect the other spouse from sharing in the debt obligation.

Many individuals who own a residence obtain a prenup – and prenuptial attorneys usually always recommend a prenuptial agreement in such a situation. A prenup can ensure that the house remains the separate property of the individual who owned the house prior to the marriage. Also, the agreement can provide that after a certain duration of marriage (such as 5 years), the house becomes “community property,” or marital property. A prenup can even spell out which party may remain in the residence in the event of separation.

Understand that for a prenup to be enforceable, it must be “fair and reasonable” as adjudged by a competent court of law. Therefore, the parties are protected in that a prenuptial agreement can’t be completely one-sided or drafted to leave the other spouse with no assets. Any attempt to structure an agreement as one-sided will likely send one spouse running to the hills, and if not, it will likely be deemed null and void by a judge at the time of enforcement.

Because of the complexity of state law and the vast areas a prenup can encompass, it is critical to engage sophisticated prenuptial attorneys. For example, if the parties alter alimony in their prenuptial agreement, California law requires both parties to be represented by attorneys. Moreover, many states impose a “holding period” between the time the prenup is finalized and the time the parties execute the agreement – an experienced attorney can advise of these critical procedures. Remember, the costs of a divorce attorney can be dozens of times more expensive than engaging an experienced prenuptial attorney.