If you're trying to decide whether or not to make a prenuptial agreement (also called a premarital agreement or just a "prenup"), you'll need to understand what this type of contract can -- and can't -- do for you.
A prenup may help if you have one or more of the following goals:
Keep finances separate. Every state has laws designating certain kinds of assets accumulated during marriage as marital property or community property, even if these assets are held in the name of just one spouse. If a couple divorces, or when one spouse dies, the marital or community property will be divided between them, either by agreement or by a court. If you want to avoid having some or all of your individual accumulations during marriage divided up by a court, you can do so with a premarital agreement.
Protect each other from debts. Some of us bring debts, as well as assets, to a marriage. If there's no prenup, creditors can sometimes turn to marital or community property to satisfy the debts of just one spouse. But if you want to make sure that saying "I do" does not mean saying "I owe," you can use a prenup to limit your liability for each other's debts.
Provide for children from prior marriages. A prenup is helpful (perhaps essential) if either of you has children from another relationship and you want to make sure that your children inherit their share of your property. In a prenup, one or both spouses can give up the right to claim a share of the other's property at death, perhaps in exchange for an agreed upon amount of property.
Keep property in the family. If your property includes something you want to keep in your birth family, whether it be an heirloom or a share in a family business, you and your spouse can agree that it will remain in your family, and you can specify that item in your prenup. This can even include property that you expect to receive in a future inheritance.
Follow through by making your estate plan. In addition to using your prenup to waive inheritance rights and state your intentions for passing on your property at death, it's vital that you prepare the estate planning documents -- a will, living trust, and so on -- that actually transfer your property as you intend. (See Nolo's Wills & Estate Planning Resource Center for more information.)
Define who gets what if you divorce. Without a prenup, state law will specify how your property will be divided if you ever divorce. These laws may dictate a result that neither of you wants. You can use a prenup to establish your own rules for property division and avoid potential disagreements in the event of a divorce. In most states, you can also make agreements about whether or not one or both of you will be entitled to alimony. Some states forbid or restrict agreements about alimony, however. (See "What You Can't Do With a Prenup," below.)
Clarify responsibilities during the marriage. In addition to the reasons listed so far, there are countless other uses for a prenup, depending on your circumstances. Here are some examples of other matters people include in their prenups:
There are some things you just can't -- or shouldn't -- do with a prenup. State laws differ as to what matters are considered off-limits. However, as a general rule, any agreement to do something that is illegal or against state-defined public policy will be considered unenforceable -- and may even jeopardize other valid aspects of the premarital agreement. Here are some things that you usually cannot do:
Restrict child support, custody, or visitation rights. No state will honor agreements limiting or giving up future child support. The same holds true of agreements limiting future custody and visitation rights. This is because state lawmakers consider the welfare of children to be a matter of public policy and do not enforce any private agreements that would impair a child's right to be supported or to have a relationship with a parent in the future.
Give up the right to alimony, in a few states. A handful of states similarly limit your ability to give up your right to alimony -- also called spousal support or separate maintenance -- if there is a divorce. Other states permit such waivers, so you will need to know what your state laws say if you are considering this kind of agreement. (You can find the law for your state in Nolo's book, Prenuptial Agreements: How to Write a Fair & Lasting Contract , by Katherine E. Stoner, Attorney-Mediator and Shae Irving, J.D.)
"Encourage" divorce. At one time, many courts viewed any prenup specifying how things would be divided up in case the couple splits as void and unenforceable because it promoted divorce. The modern approach allows such agreements, but judges in some states still take a hard look at them. If the agreement appears to offer a financial incentive for divorce to one party, it may be set aside.
Make rules about nonfinancial matters. For practical reasons, you should keep personal agreements out of your prenup. Here is a partial list of nonfinancial matters that sometimes find their way into prenups, but are better dealt with separately. Of course, the possible issues are endless and you may think of many that aren't mentioned here:
These kinds of nonmonetary agreements aren't binding in court, and in fact they could cause a judge to take your entire prenup less seriously. Rather than including personal matters in your prenup, you may find it helpful to simply make a list of your most important concerns and discuss them together. If you want to take it a step further, you can underscore your commitment by writing down your personal agreements in a separate document -- perhaps in a letter that each of you writes to the other, clarifying your intentions and wishes.
If you are considering a prenup, or are ready to make one, get Prenuptial Agreements: How to Write a Fair & Lasting Contract, by Katherine E. Stoner, Attorney-Mediator and Shae Irving, J.D. (Nolo). It provides everything you need, from deciding whether a prenup is right for you to negotiating and drafting the agreement.