Your Prenup Companion

1. A Prenup Primer

• Our Assumptions
• How Prenups Work
• How to Make a Prenup

2.  Is a Prenup Right for You?

• What You Can Do With a Prenup
• What You Can’t Do With a Prenup
• Will a Prenup Work for You?

3.  Deciding on the Specifics

• Evaluate Your Situation
• Talk It Through
• Will Your Prenup Pass the Fairness Test?

4.  Understanding Your State’s Law

• Which Laws Apply to Your Prenup?
• Preparing to Review the Law
• An Overview of State Law
• Researching State Law
• Do You Still Want a Prenup?

5.  Assembling Your Draft Agreement: The Basics

• An Outline of Your Prenup
• Working on Your Prenup
• Choosing the Clauses for Your Prenup
• Next: Drafting the Introduction of Your Prenup

6.  Paragraphs 1–5: The Introduction

• Paragraph 1: Introductory Facts
• Paragraph 2: Effective Date and Term
• Paragraph 3: Legal Representation
• Paragraph 4: Disclosures and Waiting Period
• Paragraph 5: Definitions
• Next: Addressing Assets and Debts in Your Prenup

7.  Paragraphs 6–8: Assets and Debts

• Paragraph 6: Ownership of Premarital Assets
• Paragraph 7: Ownership of Assets Acquired During Marriage
• Paragraph 8: Responsibility for Debts and Expenses
• Next: Optional Paragraphs for Your Prenup

8.  Additional Provisions for Your Prenup

• Optional Paragraph 1: Estate Planning Matters
• Optional Paragraph 2: Property Transfers or Purchases of Insurance Upon Marriage
• Optional Paragraph 3: Provisions Applicable to Divorce
• Optional Paragraph 4: Other Matters
• Next Steps

9.  Closing Paragraphs and Sample Prenups

• Paragraph 9: Interpretation, Modification, Review, and Enforcement of Your Agreement
• Paragraph 10: Signatures, Acknowledgments, and Attorneys’ Certifications
• Assembling the Pages of Your Draft
• Sample Prenups

10.  Turning Your Draft Into a Binding Agreement

• Planning Ahead
• Finding Good Lawyers
• Preparing the Formal Agreement
• If Problems Arise
• Preparing an Abstract of the Agreement
• Signing the Agreement: Formalities and Fun

11.  Working Together

• Five Keys to Working Together Successfully
• A Suggested Approach to Working Together
• Communicating Effectively
• Negotiating Lovingly
• What to Do When Problems Arise

12.  After You’ve Made a Prenup

• Storing the Original Agreement and Copies
• Recording an Abstract or Memorandum of the Agreement
• Following Your Own Rules
• Completing Your Estate Plan
• Reviewing the Agreement
• Changing Your Prenup: Postnuptial Agreements
• Closing Thoughts

Appendixes

A.  How to Use the Downloadable Forms on the Nolo Website

• Editing RTFs
• Accessing the Summary of State Prenuptial Laws
• List of Forms Available on the Nolo Website

B.  Worksheets

• Worksheet 1: Financial Inventory
• Worksheet 2: Credit History and Spending Habits
• Worksheet 3: Financial Outlook
• Worksheet 4: Prenup Goals
• Worksheet 5: The Basics of Our Prenup
• Worksheet 6: Comparison of Prenup to Law

C.  Clauses for Building Your Prenup

• Your Prenup’s Title (Mandatory for All Agreements)
• The Ten Basic Paragraphs (Mandatory for All Agreements)
• Optional Paragraphs
• Financial Disclosures
• Abstract of Prenup

Index

Chapter 1
A Prenup Primer

The pages that follow take you step by step through the process of making a prenuptial agreement, from deciding whether to have one to preparing a final written agreement. This book has worksheets to help you assess your finances and goals, plus sample agreements and clauses that you can tailor to meet your needs.

To help you see how the prenup process works, we follow three couples through the entire process: Ted and Grace, Karen and Russ, and Steven and Freda. You’ll have a chance to see how they deal with each stage as they come to it, and you’ll be able to read selected parts of the agreement each couple signs. You’ll also see examples using other fictional couples that illustrate particular issues that might arise as you negotiate and draft your agreement.

This chapter covers how prenups work and what you can accomplish by preparing one. Before you get started, though, consider a few points that are essential to making a responsible, legally valid agreement.

Other Names for Prenups
In some states, a prenuptial agreement is known as an “antenuptial agreement” or in more modern terms as a “premarital agreement.” Sometimes the word “contract” is substituted for “agreement,” as in “prenuptial contract.” For the sake of brevity, we’ll stick with “prenup” in this book, but occasionally you’ll find us using one of the other terms if it’s appropriate.

 

Our Assumptions

A prenuptial agreement is more than just a legally binding contract. It is the material and financial counterpart to wedding vows.

When you marry, you make what you expect and hope will be a lifetime commitment to be there for each other in every way.

Unfortunately, prenups aren’t always negotiated in this spirit—but they should be. Your prenup should support and reflect the spirit of partnership with which you make your wedding vows.

This book makes certain assumptions about how you will approach your prenup. They are:

1. You want to be fair.
2. You are prepared to make full disclosure about your property and finances.
3. You are willing to communicate about finances.
4. You’ll each work with a lawyer.

Let’s look at each of these assumptions more closely.

Assumption 1: You Want to Be Fair

Almost every person who’s about to get married would claim that they want to be fair to their future spouse. But there’s often more to “fairness” than meets the eye.

A prenuptial agreement is fair when:

• its terms benefit both of you (it’s not one-sided), and
• it was negotiated in a balanced manner (neither party was subject to undue pressure or coercion).

As for the first of these criteria, you might discover that each of you has a different view of your respective situation. It might take some talking and a little compromising to come up with an agreement that seems fair to both of you.

Negotiating fairly means taking the time to make sure that both of you participate in making the agreement and that neither of you feels pressured into signing an agreement you’re not comfortable with.

A prenup that meets both criteria of the fairness test—its terms are equitable and you’ve mutually negotiated it—is most likely to stand the test of time in your marriage. An agreement that fails the fairness test will be at best a reminder of an unpleasant experience that you put away and hope to forget about. At worst, it can erode the trust between you and your betrothed, and it could even be the source of bitter and expensive court battles in a later divorce.

On the legal front, courts in most states will not enforce prenups that don’t meet both of these criteria. So paying attention to fairness also makes it more likely that a court will enforce your premarital agreement, if it comes to that.

CAUTION
A premarital agreement is a binding legal document. If you have reservations about a proposed agreement, don’t sign it with the hope that you can get out of it later. Although it’s true that courts sometimes disregard prenups on various grounds, don’t take any risks—you never know exactly what a particular court or judge might do.

Assumption 2: You’re Prepared to Make Full Disclosure

This assumption is closely related to the first. A premarital agreement is most likely to be viewed as fair—by you and by the courts—if it is based upon complete and accurate financial information. This means that you should both disclose everything you own (including approximate values) and all of your debts (including any obligations from a prior marriage, such as child support or alimony). Virtually every state requires that any premarital agreement be accompanied by complete written disclosure of both parties’ financial circumstances.

This book will help you figure out exactly what you own and what you owe. You can use the worksheets provided to prepare the written financial disclosures that will accompany your prenup.

Assumption 3: You’re Willing to Communicate About Finances

Although most people marry for love rather than money, marriage is a financial partnership as well as a spiritual, emotional, and physical union. Sooner or later, the two of you will need an understanding about how to handle your finances, even if it’s just day-to-day stuff like whether to have a joint bank account or who will pay the bills. This means that you’ll need to communicate well about money and finances.

If you intend to sign a premarital agreement, you must have complete and clear communications about finances before you sign. If your communications aren’t clear, it will be next to impossible to come up with a written document that truly represents a mutually negotiated agreement.

Bringing up the topic of money can be hard. Having a sustained conversation about it is even more difficult. At a time when romance is on your minds, talking about money can feel out of place. And just the thought of disagreeing can be enough to make you avoid the subject. Maybe it feels awkward to discuss old debts when you’re in the process of clearing them up and you’re confident that they’ll soon be ancient history. Or maybe it’s your partner who has the outstanding debts and you hesitate to bring up an embarrassing subject.

Whatever the reasons, money and finances can be a difficult topic for many of us to broach. If this is true for you, don’t be alarmed, but don’t let it be an excuse to delay the inevitable, either.

Read on for lots of tips on how to have good conversations about money, plus guidance on working with financial counselors, mediators, or other advisers.

Assumption 4: You’ll Each Work With a Lawyer

If you want to end up with a clear and binding premarital agreement, you should get help from two good lawyers—one for each of you. This advice might sound surprising in a self-help legal book, but it’s essential. Here’s why.

Our legal system views marriage as a matter of contract between two consenting adults. The terms of the “marriage contract” are dictated by the laws of the state where the married people live, unless they have a premarital agreement containing different terms.

The laws governing marriage contracts vary tremendously from state to state. This book provides some general information on each state’s laws relating to marriage and prenups, and gives you some tips on doing your own legal research. (See Chapter 4.) If you don’t want to take the time to learn the ins and outs of your state’s matrimonial laws, a lawyer who knows the law will be an important resource. The lawyer can help you put together an agreement that meets state requirements and says what you want it to say.

This explains the desirability of having one lawyer, but why two? If your prenuptial agreement ever ends up in court, expect the judge to scrutinize its terms. If you want your agreement to pass muster, having an independent lawyer advise each of you can be critical. While most states don’t mandate that each party to a prenup have a lawyer, the absence of separate independent advice for each party is always a red flag to a judge. Some states even require additional paperwork for couples choosing not to be represented. If the technical requirements aren’t satisfied, the prenup won’t be valid.

All of this assumes that you select and use lawyers who are not only competent and experienced in matrimonial law but who are also capable of supporting the two of you in negotiating and writing up a loving, clear, and fair agreement. You also don’t want to spend a fortune on lawyers doing background work you could handle yourselves. Finding the right lawyers can take some time, but it’s worth the effort. This book gives you some suggestions on how to find and work with good lawyers in a way that both cuts your costs and supports your relationship. (See Chapter 10.)

How Prenups Work

People have been making prenuptial agreements for thousands of years. Scholars tell us that the practice dates back to the ancient Egyptians and that prenups have existed for many centuries in Anglo-American tradition. In previous times, the parents of the bride and groom negotiated the agreement on the new couple’s behalf. These days, engaged couples do their own negotiating, although it’s not uncommon for family members to exert influence behind the scenes (especially when family money is involved).

Prenups are not just for the rich. While prenups are often used to protect the assets of the wealthy, couples of more modest means are increasingly using prenups. For example, a couple with children from prior marriages might use a prenup to spell out what will happen to their property when they die, so that they can pass on separate property to their children and still provide for each other, if necessary. Without a prenup, a surviving spouse might have the right to claim a large chunk of the other spouse’s property, leaving much less for the kids.

Couples with or without children, wealthy or not, might simply want to clarify their financial rights and responsibilities during their marriage. Or they might want to avoid potential arguments if they ever divorce by specifying in advance how their property will be divided. Prenups can also be used to protect spouses from each other’s premarital debts and can address a multitude of other issues as well.

Exactly what you decide to do with your prenuptial agreement depends on your particular circumstances and wishes. But before getting into the specifics of what you want to accomplish with a prenup, it’s wise to have a basic understanding of what you’re doing when you make this type of contract. To put it briefly, you’re deciding how you each want your property to be treated—during your marriage, when you divorce, or when one of you dies—rather than letting your state’s law make these decisions for you.

A Note for Same-Sex Couples
Now that same-sex couples can marry in every state, all of the laws that apply to prenups for heterosexual couples also apply to same-sex couples—even if the state’s law doesn’t make this explicitly clear. Some states’ laws are still behind the times and might refer to “him” and “her,” or “husband” and “wife.” But no matter the terminology, the laws apply the same to all married couples.

 

Making Your Own Rules

If you don’t make a prenuptial agreement, your state’s laws will determine who owns your marital property and what happens to it at divorce or death. State law might even have a say in what happens to some of the property you owned before you were married.

TIP
Good to know. Property that is acquired by either spouse during marriage is known as either marital or community property, depending on the state. See Chapter 4 for an in-depth discussion of marital property and the laws that might apply in your state.

Under the law, marriage is considered a contract between spouses, and with the contract of marriage comes certain automatic property rights for each spouse. For example, in the absence of a prenup stating otherwise, a spouse usually has the right to:

• share ownership of property acquired during marriage, with the expectation that the property will be divided between the spouses in the event of a divorce and will transfer to a surviving spouse at death
• incur debts during marriage that the other spouse might have to pay for, and
• share in the management and control of any marital or community property, including the right to sell it or give it away.

So what do you do if some of these laws—called marital property, divorce, and probate laws—aren’t to your liking? Enter the prenup, which (in most cases) lets you decide for yourselves how your property should be handled.

As part of making your prenup, you’ll review your state’s laws. You’ll compare your own preferences about property ownership, division, and distribution with the state’s rules. If state law already provides for what you want, there might be no need to make a prenup. But if you find that the law won’t meet your needs, you’ll probably want to go ahead and craft your own agreement. (In Chapter 4 and on the book’s companion page, we discuss state laws in more detail and tell you how to find the laws for your state.)

TIP
Head off disputes by making a prenup if your state’s law is unclear. When you familiarize yourself with the laws of your state, you might feel that they’ll work just fine for you. But the law isn’t always clear or predictable. Going without a prenup can increase the likelihood that there will be contentious and expensive court battles at the time of a divorce or even after death. Often, the law says something that seems straightforward at first glance, but it turns out that there’s room for argument on the finer points. If you agree in advance on a fair approach to things like separate versus shared ownership of property and inheritance rights of the surviving spouse, you can save yourselves and your inheritors the risk of legal expense, uncertainty, and acrimony by making a prenup.

Making Sure Your Prenup Is Valid

Traditionally, courts scrutinized prenups with a suspicious eye, because they almost always involved a waiver of legal and financial benefits by a less wealthy spouse. In the days when married women had far fewer legal rights than today, many courts believed that a woman was at too great a disadvantage when negotiating with her prospective husband. Even more unacceptable legally was a prenup that spelled out the couple’s rights in the event of a divorce. Prior to 1970, such an agreement was considered unenforceable in all states because it was seen as a way to encourage divorce. As divorce and remarriage have become more prevalent, and with growing equality between the sexes, courts and legislatures are increasingly willing to uphold premarital agreements. Today, every state permits them, although a prenup that is judged unfair or otherwise fails to meet state requirements will still be set aside—and some state laws are stringent about prenup procedures such as waiting periods. Because courts still look carefully at prenups, it is important that you negotiate and write up your agreement in a way that is clear, understandable, and legally sound. As you progress through the steps in this book, we’ll show you how to avoid the pitfalls that could invalidate your agreement.

 

What a Typical Prenup Covers

Most prenups begin with a brief description of each party’s circumstances —such as age, occupation, and any children. And prenups almost always include disclosures of both parties’ finances—that is, assets, liabilities, and incomes. (These disclosures are usually attached to the end of the prenup as separate lists.)

Beyond that, the contents of the prenup vary, depending on the needs of the couple. Many prenups include:

• A declaration that each spouse’s separately owned property will remain their sole and separate property during the marriage. (Sometimes this refers only to assets owned before the marriage, but it can also include property acquired during the marriage, especially gifts and inheritances.)
• A confirmation that each person is responsible for their own premarital debts.
• A waiver of the surviving spouse’s legal right to claim a share of the other spouse’s separate property at death.

Here are some other typical but less common inclusions:

• A provision that all property acquired by a spouse during marriage will be their separate property, and that there will be no marital property to be divided in a divorce or upon death.
• A waiver of property rights, sometimes in exchange for one or more of the following:
• a sum of money (either right away or according to a specified timetable)
• life insurance coverage, or
• establishment of a trust for the spouse who is giving up rights.
• A plan for dividing property in the event of a divorce.
• A requirement that each spouse sign documents after the marriage reaffirming any waivers contained in the prenup. (This usually applies to waivers of rights to retirement benefits or an interest in real estate.)
• A description of how household expenses will be paid.
• An automatic termination clause specifying that the prenup will terminate on a certain date in the future—often called a “sunset clause.” Alternatively, a schedule for adjusting the terms of the prenup as time passes.

Some prenups also include provisions that are enforceable in some states but not in others. The most notable examples are waivers of alimony if there is a divorce or legal separation, and the so-called “bad-boy” (or “bad-girl”) clause requiring financial compensation if one party is caught cheating on the other. (These aren’t very common, but a few states still allow them.)

In addition to the typical provisions, many prenups contain terms that are tailor-made to the couple’s circumstances. For example, there might be an agreement that the couple will own a home in certain percentages or a promise to take turns supporting each other while obtaining an education.

Finally, every prenup contains standard clauses that go into almost all legal agreements. Lawyers often call these clauses “boilerplate” (a newspaper term referring to preset or syndicated features). The boilerplate in a prenup would most likely include clauses naming the lawyers who represented each party, a statement about who prepared the agreement, the agreement’s binding effect on the couple and their inheritors, which state’s law will apply in any legal dispute over the agreement, and other terms relating to the legal interpretation or enforcement of the agreement.

All of the above discussion is just to get you started thinking about the issues that might be involved when you set out to make a prenup. In Chapter 2, we dive into much more detail about what a prenup can —and can’t—do. And in Chapters 5 through 9, we provide plenty of sample clauses that you can include in your contract.

How to Make a Prenup

From getting started to getting married, there are eight basic steps to making a prenup. Here’s an introduction to the steps you’ll learn about in this book.

Step 1: Start Early

Begin planning for your prenup as soon as possible—at least three months before the wedding. If you wait until the last minute, you might not have time to decide what you want and get everything in writing before the wedding. (An agreement signed after the wedding is a postnuptial—or postmarital—agreement and is covered by more stringent legal rules. See Chapter 12.)

Plan to sign your prenup about a month before the wedding. The closer you get to that all-important day, the greater the risk that your agreement won’t stand up in court later—you might miss a legal waiting period, or the court might find that there was undue pressure on one of the spouses to get it signed before the marriage.

Before signing, you should allow a couple of months—or longer, if you can—for piecing together the details of your agreement, getting it reviewed, and putting it into final form for signing. Although it’s possible to plan and finalize a prenup in less than three months, moving too fast will add unneeded stress and could doom your efforts to create a clear and fair agreement.

CAUTION
Timing is everything. While it is important to get an early start on your prenup, it is possible to be too early. You want all of your information, including your financial disclosures, to be current when you sign your contract. As a rule, you should start working on your prenup no less than three or four months before your wedding and no more than eight or nine months before. If you end up postponing your wedding date after signing a prenup, take the time to update the prenup in writing before you marry.

Step 2: Decide Whether You Need a Prenup

If you’re reading this book, you might have already decided that a prenup is what you want. Even so, it doesn’t hurt to take a little time to examine your situation (together, if possible) to figure out whether a prenup is what you need. Chapter 2 is devoted to this step.

Step 3: Agree on the Specifics

Once you’ve decided to go forward, the next step is to figure out exactly what your agreement should say. This involves doing some list making and some soul searching, both separately and together. Clear communication is essential to success in this endeavor, and it doesn’t hurt to know a little about constructive negotiating, too. Chapter 3 explains how to decide on the specifics of your agreement, and Chapter 11 offers tips on communicating and negotiating.

Step 4: Create a Draft Agreement

As Chapter 3 explains in detail, you’ll almost certainly be better off if you have your final prenuptial agreement written up by a lawyer. A good lawyer can ensure that you put together a contract that meets the requirements of your state and says exactly what you want it to say. In fact, as we explain later, you will greatly improve the odds that your prenup will stand up in court if each of you has a separate lawyer review and sign off on the agreement.

Taking the time to write up a draft of what you’ve agreed on before you meet with your lawyers can have significant cost savings. By working out the details early on, you and your partner will be in sync on the fine points before you ask a lawyer to prepare the final agreement. You’ll also minimize the risk of having a lawyer put together a one-sided agreement that doesn’t reflect what either of you wants, wasting time and legal fees. You can use your draft to check the lawyer’s work, making sure nothing’s been missed or misunderstood. Of course, if you elect not to use a lawyer to write up the formal agreement, then your draft will eventually become the document you sign.

Chapters 5 through 9 provide a format for your draft prenup, with sample clauses covering the most common situations and suggestions for customizing your agreement.

Step 5: Write Up the Formal Agreement

After you’ve made a draft agreement, each of you should read it carefully to see whether you need to make changes to it. Once that’s done, you’ll either prepare the formal document yourselves or hire a lawyer to help you; the best way to proceed is to hire separate lawyers for each of you. Chapter 10 takes you through the process of finalizing your prenup, including suggestions for finding good lawyers and tips on how to work with them.

Step 6: Ask Your Lawyers to Review the Agreement

After the formal agreement is prepared, the next step is to have your separate lawyers review the agreement to confirm that it’s legally sound.

Step 7: Sign the Agreement

Signing the agreement should be something you remember without regret. Plan to sign at a time when you can pay attention to the moment. If the agreement will be notarized, you’ll need to arrange to sign when a notary is available. You might also have to contend with your lawyers’ schedules, so it’s important to plan ahead. You might even want to make a ceremony out of the event or plan a little celebration afterward—just the two of you. After the hard work you’ve done getting to this point, do what you can to make signing the agreement a relaxed and positive experience for both of you. (Chapter 10 provides more details about signing your prenup.)

Step 8: Enjoy Your Wedding

Your wedding day promises to be one of the happiest moments of your life. When you get there, put away this book, file away your prenup, and enjoy the day. Our best wishes will be with you.

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